- 10 Marks
Question
a) Sewerage Corporation was established by an Act of Parliament to provide water to Rural Communities. The team of auditors from the Ghana Audit Service demanded to verify the performance agreements made by the company with the state. The Managing Director refused on the grounds that the auditors were over-stepping the scope of their work.
The auditors also discovered that the corporation has not established an Audit Committee (AC), as required by the Public Financial Management Act 2016, Act 921. Management’s response was that AC was not established because it did not see its importance even though it is required by law.
Required: i) Comment on the action of the Managing Director on the performance agreement. (5 marks) ii) Advise the Managing Director on the need to establish an Audit Committee (AC). (5 marks)
Answer
According to the constitution of Ghana (1992), the Auditor General shall have access to all books, records, returns, and other documents relating or relevant to those accounts.
The Audit Service Act (2000) requires the Auditor General to express his opinion on whether the accounts presented by statutory corporations are fairly presented in line with:
- Applicable statutory provisions
- Stated accounting policies of the Government
- Generally accepted accounting standards
The Auditor General reports on the following:
- The profitability, liquidity, stability, and solvency of the corporation and also the performance of the shares of the corporation on the capital markets, where relevant
- Whether there was any delay in payment of the government portion of any declared dividend, if any, into the Consolidated Fund
- Any significant cases of fraud or losses and the underlying causes
- Any internal control weakness noted
- The general corporate performance indicating:
- Achievement against set targets and objectives
- Whether the finances of the body have been conducted with due regard to economy, efficiency, and effectiveness having regard to the resources utilized.
In this case, the Managing Director is wrong since the constitution provides that the Auditor General shall have access to all books, records, returns, and other documents relating or relevant to those accounts.
Secondly, by demanding the performance agreement, the Auditors want to fulfill their role to ensure that general corporate performance is in agreement with set targets and objectives.
(5 marks)
ii) The need to establish an Audit Committee (AC)
An AC is mandated to:
- Ensure the implementation of the recommendations in all audit reports of every MDA and MMDA.
- Follow-up Auditor-General and Public Accounts Committee’s recommendations as well as recommendations in internal audit reports.
An AC must ensure that the head of the MDA/MMDA:
- Pursues the review and implementation of matters in all audit reports as well as financial matters raised in the reports of internal Monitoring Units in the institution, body, or organization.
- Annually prepares a statement showing the status of implementation of recommendations made in all audit reports as well as the Auditor-General’s reports which have been accepted by Parliament and any other related directives of Parliament:
- The statement shows remedial actions taken or proposed to be taken to avoid or minimize the recurrence of undesirable features in the accounts and operations of the institution, body, or organization, and the time frame for action to be completed.
- The statement referred to above shall be endorsed by the relevant Minister and forwarded to Parliament, Office of the President, the Director-General of Internal Audit Agency (IAA), and the Auditor-General within six months after Parliamentary decisions on the Auditor-General’s reports.
In relation to internal audit, the AC shall:
- Review and advise on the strategic and annual internal audit plans;
- Monitor the performance of Internal Audit Units against its annual internal audit plans and strategic plans;
- Monitor the implementation of agreed audit recommendations.
(5 points for 5 marks)
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