Auditing the auditors

The findings of a recent study report, prepared by the World Bank's Financial Management Unit for South Asia, show an unacceptable lack of professionalism and accountability in our national audit system. Much of the current audit work, says the WB study report, is about fraudulent behaviour and recovery proposals sans relevant information.
It points out that an auditor must obtain information to be used to identify the risks of material misstatement due to fraud; to evaluate an entity's controls; and to determine whether these have been implemented.
Sound auditing practices also require auditors to inform the concerned management of any fraud and failure in internal control that led to the fraud; and also to identify any action taken in this regard.
The idea, of course, is to help corporate entities under audit to improve their control systems and processes. That being a specialised job, there is an obvious need for better training of the audit staff.
Indeed, the Auditor General's (AG) Office has taken some appreciable steps in that direction, but a lot more remains to be done, including upgrading and modernising the activities of the Audit and Accounts Training Institute.
The WB report further reveals how certain things move, if at all they move, at a snail's pace. Also evident from its account of the situation is a glaring lack of transparency and accountability in the working of the audit department. A three-year corporate audit plan, in the works for quite some time, is yet to make its debut.
Even more surprisingly, the AG's Office is still to unveil its report for the year 2004. Since it is not subject to any outside performance evaluation, the AG's Office seems to find itself under no real pressure to better its efficiency standard. It may have its own explanation to offer, but so much delay in the announcement of the annual report can easily lend itself to the interpretation that the delay is deliberate.
For, people tend to be concerned about more immediate issues rather than those related to past practices. Whatever the reason for the slackness, it is about time the AG's Office put its act together to release its annual reports in a timely fashion. It is also important to bring it under independent scrutiny. WB has made a number of suggestions in this regard.
But the most important and effective one is that the AG's Office should be accountable for its performance, and report to the national legislature. Notably, there has been a strong demand from certain quarters to have the annual audit report examined by outsider auditors.
Such an exercise may be desirable, but difficult to undertake given the high costs of consultancy fees involved. In any case, it is important to present the annual audit reports before the legislature for review and scrutiny by the public representatives.
And when they are easily available, independent experts too can have their say on the subject. Such a public accountability process is the best bet to bring about betterment in the quality and efficiency of annual audit reports as well as the general functioning of the AG's Office.