General Principles for Conducting a Performance Audit

The mandate and role of the Audit Office

The Auditor-General for the ACT is a statutory position created by the ACT Legislative
Assembly under the Auditor-General Act 1996 (the Audit Act). The Auditor-General is
responsible to the ACT public, through its elected representatives in the Legislative
Assembly, for the audit of all ACT public sector agencies.
The Audit Office supports the Auditor-General in carrying out the functions of the Office.
The Office undertakes audits of management performance and the financial statements
of public sector bodies. The aim of these audits is to promote accountability and provide
independent assessments to the Legislative Assembly, including on whether the ACT
Public Service and its resources are effectively and efficiently managed.
The Audit Office operates principally under the Audit Act. The Audit Act defines the
Auditor-General’s mandate, responsibilities, powers and reporting requirements.
The Audit Act also establishes the independence of the Auditor-General, prescribing that
the Auditor-General:

• is an independent Officer of the Legislative Assembly (subsection 6A(1));

• has complete discretion in the exercise of her functions (subsection 7(1)); and
• is not subject to direction by anyone in relation to whether or not a particular
audit is to be carried out, the way in which a particular audit is to be carried out,
or the priority to be given to any particular matter (subsection 7(2)).
In this respect, the Auditor-General has complete independence in determining the
performance audit program, including what to audit, how to audit and what to report.
Through its performance audits, the Audit Office seeks to enhance ACT Public Sector
performance and accountability. In this respect, the objectives of the Office are to
undertake a program of audits to produce independent reports with the purpose of:

• promoting a well informed electorate by ensuring that Legislative Assembly

members, as the elected representatives of the people, are provided with
accurate, complete and relevant information about the management of public
sector resources; and

• promoting the economic, efficient and effective use of public resources by

providing the Legislative Assembly, Executive and public sector officials with
independent advice relating to improving the management of those resources.
The objectives of a performance audit
The objectives of a performance audit are twofold. The first objective is to provide the
Legislative Assembly with an independent assessment of the quality of management of
public resources. The second objective is to assist public sector managers by identifying
and promoting better management practices.
Section 11B of the Audit Act provides that a ‘performance audit, of a person, body or
thing, means a review of any aspect of the operations of the entity.’
In this respect, performance audits may address any matter related to public
accountability for the administration of the Territory.
Performance audits typically evaluate the economy, efficiency and administrative
effectiveness of ACT Public Sector entities. This can include an examination of
governance issues, such as risk management and other control structures, a review of the
use of human, financial and other resources, information systems, performance
measures, reporting and monitoring systems, probity and legal compliance. .
The performance audit mandate stops short of reviewing the merits of government policy
decisions. The scope may, however, incorporate information leading to policy decisions,
an assessment of the extent to which policy objectives have been met, and an assessment
of the results of policy implementation both within the administering body and
externally.

Conducting a performance audit - basic principles

Achieving the key objectives of the Audit Office requires a commitment to maintaining
the trust and confidence of audited entities and those who rely on the performance audit
work of the Office. In doing this, the Audit Office will:

• conduct performance audits in accordance with professional standards and

accepted better practice;
• demonstrate the highest standards of ethical and personal behaviour;
• approach performance audits in a fair and constructive way;
• provide accurate, reliable assessments and sound advice; and
• conduct and report performance audits in a manner that builds strong
relationships.

Professional standards and accepted better practice

All performance audits will be conducted in accordance with the principles, procedures
and guidance contained in Australian Auditing Standards relevant to performance
auditing. These standards prescribe the minimum standards of professional audit work
expected of performance auditors, whether they are staff of the Audit Office or
contractors engaged under section 9D of the Audit Act.
In meeting these standards, performance audits will apply sound auditing methodologies
and techniques and adopt better practices, as reflected in the Performance Audit
Methods and Practices (PAMPR) manual.
In accordance with auditing standards, audit reports will generally provide reasonable,
but not absolute, assurance. What is ‘reasonable’ in any given situation will depend on
the facts of that situation and will be determined by what evidence could reasonably be
expected to be gathered and what conclusions could reasonably be expected to be drawn
in the particular situation. In relation to the conclusions drawn against the audit
objectives, a reasonable level of assurance is provided by designing procedures so that in
the auditor’s professional judgment, the risk of an inappropriate conclusion is reduced to
a low level through procedures such as inspection, observation, enquiry, confirmation,
computation, analysis and discussion.
Absolute assurance is not attainable as a result of factors such as limitations on the use of
testing, the inherent limitations of the internal controls in agencies and the fact that
much of the evidence available to the auditor is persuasive rather than conclusive in
nature. The level of assurance will, to some extent, also be influenced by the degree of
precision associated with the subject matter itself.

Standards of ethical and personal behaviour

Performance auditors, whether they are staff of the Audit Office or engaged contractors,
will comply with:
• the ethical conduct obligations of public employees set out in the Public Sector
Management Act 1994 and expanded upon in the Public Sector Management
Standards; and
• the Audit Office’s values.

The Audit Office’s values are:

• Independence – impartial and evidenced-based reporting is our most powerful
influence
• Integrity - we are honest, truthful and fair
• Professionalism - we fulfil our obligations
• Respect - we seek to understand and be trusted by our stakeholders
• Learning and innovation - we strive to realise our full potential

Performance auditors who are members of professional bodies, including the

professional accounting bodies, will also comply with the code of professional conduct
established by those bodies relating to ethical conduct obligations.

Fair and constructive audits

Performance audits will be conducted with impartiality and objectivity, and in a manner
that recognises the principles of natural justice and procedural fairness.
Performance audits reports will present a balanced perspective, place primary emphasis
on business critical matters requiring attention, and identify workable opportunities for
administrative improvement.
Performance audits will be reported on a timely basis, although this will depend on the
complexity of the audited subject matter.

To the extent possible, performance audit work will be organised to allow entity staff to
participate in audits with a minimum of disruption to their regular, ongoing duties.

Accurate and reliable assessments

Performance audits will provide reliable, evidence-based assessments and advice,
ensuring all audit criteria or performance standards, findings and conclusions, and advice
for improvement are well-founded and supported.
Performance audits will, wherever possible, offer sound, practical recommendations for
improving performance.
Opinions and conclusions will be identified clearly and based on sufficient evidence,
testing and review processes.
Performance audit staff and contractors will have the knowledge and competence
required for the audit, including an appreciation of the business of the entity sufficient to
identify and understand significant events, transactions and practices.

Building strong relationships

Auditors will be honest and forthright in all dealings with those audited and those who
rely on the work of the Audit Office. Auditors will maintain the confidentiality of
information obtained in the conduct of audits, except when the disclosure is necessary to
perform duties under the Audit Act.
Auditors will communicate openly throughout an audit with management responsible for
the matters under review by:

• meeting with management at the start of an audit to establish a communication

plan for the audit, to discuss the terms of the audit, including the objective and
scope of the work, the audit criteria and to establish a communication plan for
the audit;
• meeting with management during the audit to discuss observations, analysis and
interim conclusions, and invite comments and explanations;
• endeavouring to resolve, at an early stage (before drafting the audit report)
differences of opinion of facts, interpretation of facts or conclusions to be drawn
from them; and
• meeting with management to discuss the draft report, including observations,
analysis, conclusions, recommendations and the audit opinion.

A report will be prepared, based on the audit evidence obtained, setting out the facts,
findings, and conclusions against the objectives and the audit conclusions.
Management will have an opportunity to provide a formal response for inclusion in the
final audit report.
To the extent possible, performance audit work will be organised to minimise disruption
to the regular duties of management and staff of the audited agency.

Approved

Dr Maxine Cooper 6 August 2014

Dr Maxine Cooper, Auditor-General Date