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Criteria for Selecting Individual Audit Topics
From the rolling program of potential performance audit topics and other ad-hoc requests from stakeholders, the selection and conduct (including timing, scope and method) of a performance audit is at the discretion of the Auditor-General. In choosing which audits to undertake a number of factors are taken into account, including the:
- potential benefits;
- financial materiality;
- risks to reputation and service delivery; and
- extent of previous audit and review coverage.
A preliminary estimate of an audit’s potential benefits can often be made at the strategic planning stage. Potential benefits can take many forms and include improvements in: service/program delivery, administrative and financial efficiencies, accountability and transparency, and performance assessment.
Financial materiality is based on an assessment of the total value of one or more of: annual expenditure, annual revenue and assets and liabilities, in the proposed area of audit. As a general rule, total values less than $100 million would be considered as being low in financial materiality, values in the $100 million to $500 million range would be medium, and values above $500 million would be considered to have high financial materiality.
A further input into the selection of audit topics is an assessment of risks to reputation and service delivery. This requires consideration of the visibility of the proposed audit topic and is related to the social and economic aspects of the activity and the importance of its operations to Parliament and the public. The ranking of potential audits, therefore, has regard to the degree of Parliamentary and public interest in the outcome.
Coverage refers not only to previous ANAO coverage but also to other independent reviews of the activity that have been, or are proposed to be, undertaken. Such reviews may include internal audits, evaluations conducted by external consultants or examinations undertaken by Parliamentary Committees. As a general rule, a higher ranking would be warranted where a Parliamentary Committee has requested a follow-up review, a previous review indicated that a follow-up should occur or a previous review has identified significant issues.
Stakeholder requests and additional topics
In addition to the rolling program of performance audits, other areas for audit that were not planned for can arise. From time to time, the Auditor-General receives requests from stakeholders, including the Parliament (through the JCPAA) or individual Members of Parliament and Senators, for information or reviews of particular areas. If, in the Auditor-General’s opinion, a request warrants further examination it can be handled through various mechanisms including a formal report, a review or correspondence.
Further, given the constantly changing nature of public administration, new areas of program delivery are always emerging and, can present new risks. Therefore, the Program is required to be necessarily dynamic in response to the environment and additional areas of audit, not outlined in the Program, may be undertaken.