The Auditor-General is an independent officer of the Australian Parliament whose responsibilities include financial statements audits, performance audits and other assurance activities. In delivering against this mandate, the Auditor-General is assisted by the Australian National Audit Office (ANAO). The Annual Audit Work Program is designed to reflect the ANAO’s strategy and deliverables for the coming year.


Auditor-General’s Mandate

The Auditor-General is an independent officer of the Australian Parliament whose responsibilities, as set out in the Auditor-General Act 1997 (the Act), include:

  • auditing the financial statements of Commonwealth entities, Commonwealth companies and their subsidiaries;
  • auditing annual performance statements of Commonwealth entities in accordance with the Public Governance, Performance and Accountability Act 2013 (PGPA Act);
  • conducting performance audits, assurance reviews, or audits of the performance measures, of Commonwealth entities and Commonwealth companies and their subsidiaries;
  • conducting performance audits of Commonwealth partners as described in section 18B of the Act;
  • providing other audit services as required by other legislation or allowed under section 20 of the Act; and
  • reporting directly to the Parliament on any matter or to a minister on any important matter.

As an independent officer of the Parliament, the Auditor‑General has discretion in the performance or exercise of his functions or powers. In particular, the Auditor‑General is not subject to direction in relation to: whether or not a particular audit is to be conducted; the way in which a particular audit is to be conducted; or the priority to be given to any particular matter. In the exercise of his functions or powers, the Auditor‑General must, however, have regard to the audit priorities of the Parliament, as determined by the Joint Committee of Public Accounts and Audit (JCPAA). 

The Act constrains the Auditor-General’s independence in conducting:

  • a performance audit or an audit of performance measures of a government business enterprise unless it is requested by the JCPAA;
  • a performance audit of a Commonwealth partner that is part of, or controlled by, a state or territory government unless it is requested by the responsible minister or the JCPAA; or
  • an audit of the annual performance statements of Commonwealth entities unless requested by either the Minister for Finance or the responsible minister (this means that the Parliament does not receive assurance, as a matter of course, on performance statements included in annual reports as it does over financial statements where an independent audit report is mandatory).

In delivering against this mandate, the Auditor-General is assisted by the Australian National Audit Office (ANAO). The ANAO’s purpose is outlined in its Corporate Plan 2016–20. The ANAO’s work is governed by the auditing standards established by the Auditor‑General. These incorporate the standards made by the Auditing and Assurance Standards Board as applied by the auditing profession in Australia. In accordance with these standards, performance audits and financial statements audits are designed to provide a reasonable level of assurance.

Through the delivery of an integrated range of high‑quality audit reports and opinions that are timely, cost‑effective and conducted in accordance with the Standards, the ANAO aims to meet the needs and expectations of the Parliament, the Government, audited entities and the community. In doing so, the ANAO aims to add value to public sector performance and accountability.

ANAO Strategic Planning Framework

The Annual Audit Work Program is a key part of the ANAO’s strategic planning framework. The composition of the program is guided by the ANAO’s commitments to the Parliament, as outlined in its Portfolio Budget Statements 2016–17 (PBS) and through its Corporate Plan 2016–20 that outlines how the ANAO will deliver on its purpose.

Annual Audit Work Program

The Annual Audit Work Program is designed to reflect the ANAO’s strategy and deliverables for the coming year. It aims to inform the Parliament, the public and government sector entities of the planned coverage for the Australian Government sector by way of financial statements audits, performance audits and other assurance activities. The program’s development takes into account the views of the Parliament, entity management and other stakeholders.

A continuous and integrated approach to planning audits is adopted by the ANAO on a whole-of-organisation basis. Key risks are identified across the public sector, with these risks informing the financial statements audit planning and potential performance audit coverage. Audit coverage is also based on a consideration of potential audit benefits, parliamentary and public interest, and the timing and resource requirements of audits.

This Annual Audit Work Program outlines the:

  • financial statements audits and other assurance activities—which are provided for under the Act and that will be finalised during 2016–17; and
  • performance audits—presenting information on performance audits in progress and a rolling program of potential performance audits and assurance engagements for each portfolio. The performance audit program also includes cross-entity and whole of system performance audits that will involve a number of entities.

In 2016–17, the ANAO expects to complete:

  • the audit of the Australian Government’s Consolidated Financial Statements;
  • 246 mandated financial statements audits of entities; 
  • 46 other assurance activities, which includes audits by request under section 20 of the Act (largely related to financial statements and compliance audits);
  • two reports on the results of financial statements audits;
  • a minimum of 48 performance audits (including cross-entity and whole-of-system audits); 
  • the Major Projects priority assurance review; and
  • three better practice guides and other reports. 

Financial Statements Audits

The preparation of audited financial statements is a key element of the financial management and accountability regime in the Australian Government sector. Financial statements audits provide an independent examination of the financial accounting and reporting of public sector entities. In undertaking these audits, the ANAO also considers each entity’s governance structures and related supporting processes in areas such as audit committees, internal audit and fraud control planning. The results inform the planning for both financial statements and potential performance audit coverage.

Once the planning, interim and final audit phases have been completed, the Auditor-General, or the Auditor-General’s delegate, provides an independent auditor’s report on the financial statements to the responsible minister. The audit reports will be issued in August–September and planning for 2016–17 audits will commence from November–December.

The Auditor-General also presents two reports to the Parliament each year that summarise the results of the financial statements audits of public sector entities and report any moderate or high risk audit findings. The first report—Interim Phase of the Audits of Financial Statements of Major General Government Sector Entities—is generally tabled in June each year.  This report typically comprises the portfolio departments and other entities that account for at least 95 per cent of the revenues and expenses of the General Government Sector. The report summarises the interim phase of the audits of these entities, encompassing a review of the governance arrangements related to entities’ financial reporting responsibilities, and an examination of relevant internal controls, including information technology system controls.

The second report—Audits of the Financial Statements of Australian Government Entities—is tabled in December each year. This report contains the results of all financial statements audits completed across the Australian Government sector, including the Australian Government’s Consolidated Financial Statements, together with a description and the implications of each moderate and high risk audit finding.

Performance Audits

A performance audit is a review or examination of the operations of an Australian Government sector entity to provide the Parliament with assurance relating to the administration of entities and programs, including where they involve a Commonwealth partner. A performance audit also assists public sector managers by identifying issues and promoting better administrative and management practices. Performance audits include an examination of one or more of:

  • economy (minimising cost);
  • efficiency (maximising the ratio of outputs to inputs);
  • effectiveness (the extent to which intended outcomes are achieved);
  • legislative and policy compliance; and
  • ethics.

This Annual Audit Work Program delivers coverage across a wide range of entities and portfolios, either as entity-specific audits or as part of broader cross-entity and whole‑of‑system audits. In addition, the program gives appropriate emphasis to the core business activities of entities that underpin effective program and service delivery and addresses the key risks to the achievement of entity purposes.

Other Assurance Activities

Other assurance activities generally consist of audits or reviews undertaken by arrangement with the audited entity—and can also be undertaken in response to requests from stakeholders, including parliamentarians, parliamentary committees, community groups and members of the public. Once inquiries by the ANAO have been concluded, the findings from these individual assurance activities may be handled through the issue of a formal report or by correspondence. The Auditor-General can also present a report for tabling in the Parliament on any matter.

A significant assurance activity that is undertaken each year by the ANAO is the priority assurance review of major Defence equipment acquisition projects, including the production of the Major Projects Report. Increased transparency and accountability in relation to the progress of Defence major projects has been an ongoing focus of the Parliament—and in response to this focus, an annual program was established by the ANAO in 2007–08 to review and report to the Parliament on the status of Defence major projects. The Major Projects Report includes information relating to the cost, schedule and capability delivery performance of individual projects as at 30 June each year. The 2015–16 Major Projects Report will cover 26 projects.

Delivering the Annual Audit Work Program—areas of strategic focus

Critical to the ANAO’s success in the delivery on its purpose is the ability to anticipate and respond to changes occurring in its operating environment, which is outlined in the ANAO’s Corporate Plan 2016–20, when developing the Annual Audit Work Program.

As with previous years, the delivery of a program of performance audits, together with the knowledge and insights gained through the ANAO’s financial statements audit work, has also informed the identification of topics for inclusion in this year’s program. The audits conducted by the ANAO over recent years have identified examples of sound public administration across a range of activities. These audits have also highlighted common recurring issues and shortcomings. In particular, the ANAO’s audit coverage of the Australian Government sector has highlighted the importance of:

Avoiding the pitfalls and the costs of ‘reinventing the wheel’…

Those entities that look outward to learn from the experiences of others are better positioned to capitalise on tested approaches and avoid the cost and risks associated with establishing new capability and/or administrative processes. The ANAO’s financial statements and performance audit programs have identified limited examples of entities looking beyond their organisations to learn from others, particularly in the key areas of grants administration, procurement management and the delivery of regulatory activities. Given the varying levels of experience in these key areas across the public sector, there should be a strong incentive for entities to engage with more experienced entities to leverage off their knowledge and expertise.

Getting the basics right…

Maintaining visibility over key responsibilities, delivering accountable decision-making through sound record-keeping, establishing a strong IT control environment to protect data holdings, and appreciating the importance of quality assurance over data and financial reporting underpin the delivery of entities’ day-to-day responsibilities. The ANAO’s recent financial statements and performance audit coverage has found that there is greater scope for entities to increase their focus on getting the basics right.

For examples of areas for improvement, see:

Maintaining effective governance over third-party or joint service delivery…

While engaging third-parties (both within and outside of government) and working with other public sector entities to deliver services often makes sense for entities, particularly those services that involve specialist expertise or delivery networks, these arrangements can present governance challenges. In particular, clear responsibilities and accountabilities are required to ensure that outcomes are achieved and risks are effectively managed. The ANAO’s recent performance audits have identified further room for improvement in relation to the governance of third-party or joint service delivery arrangements.

For examples, see:

Embedding a risk management culture…

The adoption of a risk management culture enables entities to move beyond a compliance approach to effectively engage with risk in the delivery of government policies and programs. Viewing their day-to-day activities through a risk lens enables entities to better balance risk exposure with the lowering of transaction costs—both for the entity and for third parties—and the targeting of limited resources to those areas presenting the greatest risks. The ANAO’s recent financial statements and performance audit programs have identified varying levels of maturity in risk management practices across the public sector.

For examples of more mature approaches to risk management, see:

For examples of areas for improvement, see:

Knowing what you are trying to achieve and whether you are…

Under the Enhanced Commonwealth Performance Framework, a clear expectation has been placed on entities to measure and report on policy/program impact or effectiveness. Specifically, the new framework has been designed to encourage entities to tell a ‘rich story’ over time, which allows like activities to be compared across organisational and program boundaries. In general, the ANAO’s recent performance audits have identified performance monitoring and reporting as a key area for improvement.

For examples, see:

The ANAO is positioning its financial and performance audit program in response to its operating environment, as well as issues identified in prior work. The 2016 program will focus on the delivery of contemporary auditing services that reflect the changing nature of public administration, while exercising the full range of powers under the Auditor-General’s mandate.

Financial Statements Audits

A key focus of the ANAO is to increase the utility of the financial statements of Australian Government sector entities through improvements in their accessibility and timeliness. Under the PGPA Act, Commonwealth entities must prepare annual financial statements as soon as practicable after the end of the reporting period—and the Auditor-General must examine the financial statements and give the audit report to the responsible minister as soon as practicable. The ANAO is committed to assisting entities to table their annual reports, which include their audited financial statements, in a more timely manner and within the timelines set by government policy. In addition, the ANAO is working with audited entities to streamline the financial statements to improve their readability and transparency. In parallel, the ANAO is also restructuring its audit reports for 2016 to make the key elements more prominent, and thus more accessible to stakeholders.

The design of the ANAO’s financial statements audit methodology underpins the audit approach—supporting the effective and efficient targeting of risks and the identification of value-adding recommendations and audit insights. The efficiency and effectiveness of the 2016–17 financial statements audit program will be enhanced through the following initiatives:

  • exploring the use of new data tools that can deliver both efficient audit assurance and considered analysis of financial transactions and processes; and
  • expanding the communication of insightful audit findings, conclusions and recommendations founded on knowledge gained from audit work; improving the engagement with public sector entities, including through ANAO forums such as the recently established Chief Financial Officers’ Forum; and redesigning parliamentary and audit committee communication.

Potential Performance Audits

A key focus of the performance audit program will be the design and commissioning phases of programs—both for services to be delivered by the public sector and those intended to be delivered by the private/not-for-profit sectors. The resulting emphasis on the robustness of entities’ design activities and advice to government, including the extent to which appropriate cost-benefit analyses and modelling is used to inform decision‑making, will bring greater attention to this important activity within the public sector.

The ANAO will look to broaden its coverage beyond the current focus on non-corporate entities, to include a greater focus on corporate entities, government business enterprises and Commonwealth partners—noting that the Auditor-General is constrained in self-initiating audits of government business enterprises and of Commonwealth partners that involve a state or territory.

Audits can play an important role in identifying weaknesses in public administration that have the potential to put at risk the achievement of objectives or to adversely affect their efficient achievement. Accordingly, the ANAO’s approach over the coming years will be to increasingly direct audit effort earlier in the implementation phase of programs. These audits will provide entities with an early ‘health check’ of their implementation activities—and will serve to strengthen program arrangements with the aim of improving the likelihood of successful outcomes. This is particularly the case for large, complex public sector information and communications technology projects, which have historically exhibited poor outcomes—delivering less than planned functionality at far greater cost and time than was intended at the outset.

The ANAO’s performance audit program going forward will also move beyond the historically strong focus on the examination of the effectiveness of public sector program delivery—that is, the extent to which objectives have been achieved or more commonly whether processes have been complied with—to include greater consideration of how well resources have been deployed to achieve results. This is in line with the expectations of both the community and of successive governments that the public sector will strive for greater efficiency in its operations—ultimately delivering greater value for taxpayers’ money. It also reinforces the requirements on public officials under the PGPA Act to promote the proper use and management of public resources, with proper use defined as efficient, effective, economical and ethical use.

This expansion of the ANAO’s audit coverage will inevitably be reliant on the quality of performance information retained by public sector entities, for example to underpin assessments of the efficiency and economy of operations. The ANAO plays an important role in advising the Parliament, through the JCPAA, on the implementation of the reforms to the performance management framework following the introduction of the PGPA Act. One aspect of this role includes undertaking audits to provide feedback on and influence the development, implementation and operation of an effective performance framework.

Other Assurance Activities

To complement the role that financial statements and performance audits play in improving public administration, the ANAO will look to expand the use of limited assurance engagements over the coming years to respond in a more timely manner to matters of concern brought to the attention of the Auditor‑General. These include requests received from Parliamentarians and members of the public to examine a specific aspect of public administration.

Along with the examination of new areas of public administration, a key role for the ANAO is to maintain a watchful eye on entities’ implementation of recommendations arising from earlier audits. The ANAO will seek an annual update from entities on the implementation status of both ANAO and Parliamentary recommendations. This update will complement the ANAO’s monitoring of the implementation of recommendations through attendance at entity audit committees and the conduct of targeted follow‑up audits.

Delivering High Quality Audit Services

Quality in the delivery of financial statements audit, assurance audit and performance audit services is critical in supporting the integrity of audit reports and maintaining the confidence of the Parliament, public sector entities and other key stakeholders. The ANAO has established a system of quality control and quality assurance designed to provide assurance that it complies with applicable professional standards and relevant regulatory and legal requirements, and that the reports issued are appropriate in the circumstances. The Quality Assurance Framework is based on the auditing standard ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, Other Assurance Engagements and Related Service Engagements. The framework consists of policies and procedures that promote an internal culture based on the recognition that quality is essential in the conduct of audits.

Contributing to National and International Auditing Capability

As a member of the Australasian Council of Auditors-General, the ANAO collaborates with council members to advance public sector auditing in all states and territories of Australia, New Zealand, Fiji and Papua New Guinea.

Internationally, the ANAO has close links with the International Organisation of Supreme Audit Institutions and its regional working groups. Through these organisations, the ANAO assists with the development of auditing standards, professional practices and exchanges of experience for the benefit of both the ANAO and the international auditing community. These close links also assist the ANAO to keep abreast of international best practice in public sector auditing.

Through a partnership agreement with the Department of Foreign Affairs and Trade, the ANAO is actively participating in Australia’s international aid program to assist and support the Indonesia and Papua New Guinea audit offices to build institutional capacity and facilitate the sharing of auditing knowledge across all offices. The partnership supports the Australian Government’s sectoral aid initiative to develop effective governance institutions. Under the program, the ANAO contributes to strengthening the financial statements audit and performance audit capacity and the joint sharing of auditing knowledge and practice, including through the deployment of senior ANAO staff and through twinning arrangements.

In the coming year the ANAO will continue to meet its national and international obligations, with a focus on building audit capacity within the region.

Communicating with Stakeholders

Effective communication remains an ongoing focus for the ANAO, given the important role that it plays in providing assurance to the Parliament and improving public sector administration. In this context, the ANAO is building a contemporary communications capability to underpin the production of accessible and engaging audit products that are valued by stakeholders. The ANAO Communications Strategy outlines the ANAO’s approach to internal and external communications—focusing on priorities, promoting success, driving reform, and strengthening skills and digital capabilities.

A key focus of the strategy is to fully exploit the benefits of digital engagement, both internally and externally. The expanded adoption of digital work practices and communication approaches not only delivers more efficient operations, but also allows the ANAO to better tailor the communication of key audit messages. Over the last year, the ANAO has adopted digital workflow to streamline administrative practices and has re-designed its website to significantly enhance engagement with external stakeholders. The new website functionality allows external stakeholders to better follow the ANAO’s progress in the delivery of its financial statements and performance audit programs and also provides tailored access to the broad range of the ANAO’s work.

In addition to the expanded adoption of digital work practices and communication approaches, the ANAO has redesigned the style and format of its financial statements and performance audit reports to enhance accessibility and more clearly communicate the key audit messages.