TO: Auditor-General
FROM: Deputy Auditor-General
DATE: 6th April 2023
SUBJECT: RECOMMENDATION FOR FACTORS FOR PERFORMANCE AUDIT REPORT AND FOLLOW-UPS

I refer to your request on the above dated 2nd April 2023, intending to develop a format for performance audit reports and follow-ups to address issues noted from the review of previous audit reports.

My recommendations seeking to address the issue are structured as follows:

1. Factors governing the content of performance audit reports
2. Modes and merits of follow-ups

The recommendations are based on research from Accounting Standards and manuals. The reference materials are listed at the end of this report.

Factors governing the content of performance audit reports:

• Comprehensiveness: A report should include all the information needed to address the audit objective and audit questions while being sufficiently detailed to provide an understanding of the subject matter and the findings and conclusions.
• Convincing Structure: The report should be logically structured, presenting a clear relationship between the audit objective, criteria, findings, conclusions, and recommendations. All relevant arguments should be addressed.
• Timeliness: The report must be produced in a timely manner to allow management to address any deviations from their operations to enable them to achieve their objectives. This includes ensuring the audit work is reviewed on time, the content is proofread, and the figures are accurate.
• Clarity: The report should clearly answer the audit questions or explain why this was not possible. It should put the audit findings into perspective and ensure congruence between the audit objective, audit questions, findings, and conclusions. It should be clear, concise, and constructive, contributing to better knowledge and highlighting necessary improvements.
• Objectivity: The report should include information about the audit objective, audit questions and answers, the subject matter, criteria, methodology, sources of data, any limitations to the data used, and audit findings.

Modes & Merits for follow-ups:

• Follow-Up on Previous Findings: Auditors should follow up on previous audit findings and recommendations wherever appropriate. This should be reported to provide feedback to the legislature, together with the conclusions and impacts of corrective actions.
• Independent Examination: Follow-up refers to the auditors’ examination of corrective action taken by the audited entity, or another responsible party, on the basis of the results of a performance audit. This independent activity increases the value of the audit process by strengthening the impact of the audit and laying the basis for improvements to future audit work.
• Encouraging Seriousness: Follow-up encourages audited entities and other users of reports to take the reports seriously and provides the auditors with useful lessons and performance indicators. It focuses on whether the audited entity has adequately addressed the problems and remedied the underlying situation after a reasonable period of time.
• Objective Review: When conducting a follow-up of an audit report, the auditor should concentrate on findings and recommendations that are still relevant and adopt an unbiased and independent approach.
• Consolidated Reporting: Follow-up results may be reported individually or as a consolidated report, which may include an analysis of different audits, possibly highlighting common trends and themes across a number of reporting areas. This contributes to a better understanding of the value added by performance auditing over a given time period or subject area.

(10 marks)