C2: AUDITING AND ASSURANCE

Topic: PUBLIC SECTOR AUDITING

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 To be covered
• Introduction
• The CAG
• Public vs. private sector audit
• Mandates of the CAG
• CAG Appointment and criteria
• Tenure and removal of the CAG
• Powers of the CAG
• Internal Auditor general and his functions
• Value for money audit
• INTOSAI

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 Introduction
• Public sector - concerned with provision of services
mainly by the gvt for the sake of improving social and
economic well being of the citizens
• In most countries elements of public sector includes
provision of servises such as..
..millitary, public transport and care of public roads,
public education, public health, street lighting etc
• Private sector consist of privately owned corporations
aiming at profit and non-profit such as sole trade,
partnerships and charities

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 Introduction
Public sector criteria
• Provision of public goods
• Funding provided by the government
• Reports directly to the government
• If there is BoD, if the government controls appointment
of majority
• For share companies, government is a major
shareholder
• Employees being members of public service and
subjecting to public service rules
• Audited by the government auditor – (CAG)

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 Introduction
Public sector auditing is the independent
examination of and expression of an opinion
on FS of the…
…government, judiciary, state owned
entrprises (SOEs), department, agencies and
any other party receiving taxpayers money…
…usually by CAG in accordance with all
relevant laws and regulations of the country
and auditing standards.

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 The controller and auditor General (CAG)

• The CAG- is the person holding the office of

Controller and Auditor-General provided for in
section 78 of the constitution
• Appointed by the President of URT
• Prepares annual audit report of public sector
in English & swahili
• May engage an expert or specially qualified
person in undertaking his functions

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 The controller and auditor General (CAG)-NAO
• s.20 of the PAA provides for the establishment of
National Audit Office (NAO) headed by the CAG
• The CAG shall employ, appoint, promote and control
discipline of officers/employees he consider
necessary
• Should be guided by laws governing employment in
the public service.
• The CAG shall on advice of relevant authorities
determine remuneration of officers appointed.
The NAO shall:
a) Be the supreme audit institution in Tanzania
b) Conduct the types of audits
c) Perform functions, carry on responsibilities and
exercise powers of the CAG
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 Public sector audit vs. private sector
audit
Factor Private sector audit Public sector audit
1. Auditor’s Relatively less as may be
Generally higher as they
selected by the mgt of the
independence: coy, (on behalf of the are appointed by the
government
owners)

Relatively wider as it also

2. Scope of Concentrate on FS audit to
considers value for money
audit give reasonable assurance
and performance audits

report to the
report to the
3. Reporting Parliament and
shareholders
general public

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 CAG Mandate (Responsibilities, functions
and scope-article 136: URT constitution)
1. Authorise the use of money to be paid out of
consolidated fund upon being satisfied
2. Ensure that the authorised money has been spent for the
purpose connected and incured in accordance with the
authorisation.
3. Audit and report on the accounts, FS and FM of the URT
gvt i.e.
i. Ministries
ii. Independent departments
iii. Executive agencies
iv. Public authorities and other bodies
v. Donor funded projects
vi. Local government authorities
vii. Judiciary
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4. responsible for examining, inquiring into,
auditing and reporting on the accounts of:
a. all Ministries, Independent Departments of Government,
Agencies (MDAs) and their accounting officers;
b. local Government Authorities and their accounting officers;
c. all persons entrusted with the collection, receipt, custody,
issue, sale, transfer or delivery of any stamps, securities,
stores or other public properties
d. all public authorities and other bodies;
e. any public authority or public body which receives funds
from the Consolidated Fund or from public monies for a
public purpose
f. any public authority or public body which is authorized by
law to receive money for a public purpose; and
g. any public authority or public body required by law to be audited by the
CAG.
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5. As his function, The CAG shall on behalf of
the national assembly, examine, inquire into
and audit the accounts submitted to him as
required under the Public Finance Act, Local
Government Finances Act and any other
written laws and perform any other functions
which he is authorized to perform
…In exercising his functions or inquiry,
examination and audit of accounts, the CAG
shall satisfy himself that:

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shall satisfy himself that:
a. all accounts have been kept in accordance with generally
accepted accounting principles as required by relevant
laws;
b. all reasonable precautions have been taken to safeguard
the collection of revenue and the receipt, custody,
disposal, issue and proper use of public property, and that
the laws, directions and instructions applicable thereto
have been duly observed.
c. all expenditure of public monies has been properly
authorised and applied to the purposes for which they
were appropriated and that the laws, directions and
instructions applicable thereto have been duly observed
and provide an effective check of the assessment and
collection of revenue; and
d. economy, efficiency and effectiveness have been achieved
in the use of public resources.
6. Value for money (3E’s) have been achieved in the
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 CAG Appointment and criteria
• Appointed by the President of the URT
• Has to be among citizens of URT by birth
• President shall consider professional
qualifications, experience and leadership skills
• Upon appointment, CAG shall subscribe to the
oath before the President
• CAG shall hold the office on such other terms
and conditions as provided by written laws.
PAC 2008 S.4(i)-(iv).
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 Tenure and removal of the CAG
• The CAG shall hold an office for fixed term of five
years and eligible for renewal only once
• When can the CAG vacate the Office?
1. Upon attaining the age of 65
2. Resigns on accounts of medical grounds
3. By giving six months notice to the president
• When the CAG post becomes vaccant, the
President shall appoint the person within 60 days

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 Tenure and removal of the CAG (Cont.. )

• The President shall appoint a qualified person

to act as a CAG if:
1. The absence due to incapacity of the CAG
may last more than 3 months
2. The CAG is suspended from the office in
connection with proceedings for his removal
3. The office of the CAG becomes vacant for any
other reasons.

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 Tenure and removal of the CAG
• If the President considers the question of removal:
• Shall apoint a tribunal with chairman and not less than
2 members..
..chairman and half of members have to be judges of
high court or court of appeal in any common wealth
country
• Tribunal shall investigate and submit a report on
whether or not the CAG should be removed on
grounds of inability or misbehavior or any grounds
• The president may suspend the CAG during
investigation
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 Powers of the CAG (PAA s. 11)
• Power to call: any public officer for explanation
or info
• Examination power-to summon and examine any
person as he may determine..
• Appointing power-to authorize any eligible
person to act on his behalf
• Searching power-seeking proffessional advice of
attorney general or other qualified person
• Acceptance power-to accept as correct or rely
upon certificate of any other person as he thinks
fit…
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 Powers of the CAG (PAA s. 11) cont..
• Service request power- to acquire services of
any other person IRO audit issues
• Discharge power-determining whether to
carry out an investigation
• Recommendation power-to recommend on
– Preventing or minimising unproductive exp
– Maximising the collection of public revenues
– Submitting proposal for better mgt of public mony

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• Independence and status power-to plan, act,
conduct and recommend with fully autonomy
and with high status before public
• Immunity power- immunity such that no legal
action or proceeding shall lie against CAG
• Information access power-unrestricted access to
info
• Expert engagement power-engage an expert or
specially qualified person
• Power to select audit standards and code of
ethics-to be applied by his office/NAOT. May be
guided by ISAs or other stds

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 Powers of the CAG (PAA s. 11) cont..
• Audit fee power-to charge audit fee on any
person or body. In determining fee, shall have
regard on:
1. The nature and extent of services provided
2. Requirements of auditing standards
3. Qualification and experience of auditors
4. Any other matter CAG deems fit
❖ Shall NOT apply to the accounts of central
governments and local governments authorities.

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The Internal Auditor General (IAG)
• Public Finance Act, CAP 348 s.37 states that
there shall be IAG under the ministry
responsible for finance
• The IAG shall be appointed by the President
from amongst qualified persons in
accountancy, auditing and financial matters…
…under terms specified in the letter of
appointment

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 Functions of the IAG
• Developing internal audit policies, rules, stds,
manuals and guidelines
• Review and appraising compliance to the laws,
regulations, standards…
• Ensuring control and proper accountability of public
monies and property
• Scrutinize and compile audit reports from MDAs
and prepare a summary of major audit
observations and recommendations and submit the
same to the paymaster general for further action
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 Functions of the IAG
• Undertake continous audit risk management
• Develop and supervise implementation of internal
audit stratergy
• Develop, implement and review annual audit
proogramme
• Liase with the CAG, AG, accounting officers and
profesional stds setters.
• Enhance capacity of audit committees
• Evaluate the effectiveness of audit committees in
MDAs
• Facilitate the dvt of internal audit cardle

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 Functions of the IAG
• Review of budgets with a view to promote compliance with
national goals and pbjectives
• Establishing and operating internal audit officers necessary
for effective performance of IAG functions
• Prepare audit reports and advising the gvt on ensuring VFM
on public expenditure
• Make a follow up on agreed audit recommendations
• Undertaking special and investigative audits
• Participate in hearings and render advice to relevant
parliamentary oversight commettees
• Review, monitor evaluate and recommend on systems of
gvt revenue collections for proper accountability

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 Value for Money (VFM) Audit
• The principle of value for money implies that
efforts must be made to ensure available
funds are spent in the provision of services in
a way that maximises the benefit to the users
of the services.
• focuses on three Es namely, economy,
efficiency and effectiveness in any activity

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 Value for Money (VFM) Audit
3E’s in VFM
• Economy: Implies the principle of prudence i.e.
the least possible cost should be incurred to fulfil
any need.
• Indicators of economy:
➢ Decisions are made with cost consciousness,
➢ delay in decision due to rise in mkt prices,
➢ delay in payment of obligation without
justification,
➢ significant savings

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 Value for Money (VFM) Audit
3E’s in VFM..
• Efficiency: Implies the maximisation of output
input ratio i.e. the output per unit of input should
be maximised.
• Indicator’s:
➢ resources used for approved activities,
➢ qualified staff with motivation to work harder,
➢ achieving goals in minimum time,
➢ resources allocated on time
➢ measures to reduce bureaucracy implemented
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 Value for Money (VFM) Audit
3E’s in VFM..
• Effectiveness: Focuses on the achievement of the
desired objectives through the spending of available
funds.
• Indicators..
➢ achieving intended results,
➢ avoiding excessive waste,
➢ eliminating duplicate procedures,
➢ proper utilization of idle capability
– It considers what the proper role of the organisation
should be.

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 Value for Money (VFM) Audit
Advantages of VFM
• Improves the accountability process
• Provides means for measuring the extent to
which corrective action has been
implemented
• It provides broad and systematic review of all
significant activities, systems and controls
• Improves management of the org if
recommendations are implemented
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 Value for Money (VFM) Audit
Challenges of VFM
• There exist no universal measures for
outputs.eg customer care
• Objectives of audit and measure of efficiency
vary with the type of work being audited
• Quality might be sacrificed to achieve
economy and efficiency.

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 INTOSAI
• INTOSAI is an abbreviation of The International
Organisation of Supreme Audit Institutions.
• It is a global association of SAI (Supreme Audit
Institutions) among the UN countries,
• founded in 1953
• members are the Chief Financial Controller /
Comptroller General / Auditor General Offices
of nations.

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 INTOSAI
• Plays a major role in auditing government
accounts and operations
• Supports its members by providing
opportunities to share information and
experiences in auditing
• Provides a forum for governmental auditors
from around the world to discuss issues
• Issues international guidelines for FM in public
sector and other areas

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