The Auditor-General of South Africa (AGSA) is an independent chapter 9 institution established as per the Constitution of the Republic of South Africa, Act 108 of 1996 in support of democracy.
The functions of the AGSA are described in section 188 of the Constitution and further regulated in the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA).
The Auditor-General (AG) is a person that is appointed by Parliament for a fixed term of between five and ten years to run the AGSA. The AG is the head of the organisation and accountable for the administration.
The Deputy-Auditor-General (DAG) is the head of administration of the institution, performing duties in terms of sections 32 and 43 of the PAA. He/she is responsible for the overall performance of the organisation and is directly accountable to the Auditor-General. The DAG is the Accounting Officer for the organisation.
The Constitution guarantees the independence of the AGSA from government and stipulates that the AGSA is subject only to the constitution and the law
The AGSA is accountable to the National Assembly in terms of section 181(5) of the Constitution and section 3(d) of the PAA and has to report on its activities and performance of its functions in terms of section 10 of the PAA at least once a year.
The Standing Committee on the Auditor-General (SCoAG), established in terms of section 10(3) of the PAA, oversees the performance of the AGSA on behalf of the National Assembly.
The AGSA is a self-funding organisation that bills its auditees (government institutions) based on time worked at public tariffs.
The AGSA may audit any institution that is authorised in terms of any law to receive money for public purposes.
The financial statements of the AGSA are audited annually by external auditors.Read More...
THE THREE ASPECTS WE AUDIT
1. The audit of financial statements
The financial statements submitted for auditing must be free from material misstatements. Misstatements refer to incorrect or omitted information in the financial statements. Examples include the incorrect or incomplete classification of transactions, or incorrect values placed on assets, liabilities or financial obligations and commitments.
The objective of an audit of financial statements is to express an audit opinion on whether the financial statements fairly present the financial position of auditees at financial year-end and the results of their operations for that financial year.
We can express one of the following audit opinions:
Apart from auditing the financial statements, our other reporting responsibilities include auditing auditees’ reporting on their predetermined objectives and auditing auditees’ compliance with legislation.
2. The audit of reporting on predetermined objectives
Legislation requires auditees to report against their predetermined objectives and to submit such annual performance reports for auditing. The objective of our audit of predetermined objectives is to determine whether the reported performance against auditees’ predetermined objectives in the annual performance report is useful and reliable in all material respects, based on predetermined criteria. This means that the reported performance information must be valid, accurate and complete.
Since the 2005-06 financial year, we have been phasing in the auditing of predetermined objectives and explaining to leaders within all spheres of government the importance of lending credibility to published service delivery information through the auditing thereof. Since the 2009-10 financial year, we have included a separate audit conclusion, based on the results of the audit on predetermined objectives, in management reports. However, these conclusions have not yet been elevated to the level of the audit report.
3. The audit of compliance with legislation
Legislation sets out the activities that auditees are charged with in serving the citizens and stipulate any limits or restrictions on such activities, the overall objectives to be achieved, and how due process rights of individual citizens are to be protected. Auditees are subject to legislation such as the Municipal Finance Management Act and the Municipal Systems Act, of which the objectives are proper financial management and performance management, transparency, accountability, stewardship and good governance.
The Public Audit Act requires us to audit compliance with legislation applicable to financial matters, financial management and other related matters each year. Material instances of non-compliance are reported in the audit report. To enhance accountability, auditees must identify and fully disclose any unauthorised, irregular as well as fruitless and wasteful expenditure incurred. In most part, such expenditure is incurred as a result of non-compliance with legislation.
4. Irregular, Unauthorised and Fruitless & Wasteful Expenditure
Usually there are three kinds of problems when it
Comes to spending that the auditors might flag or
what the Auditor-general terms the "UIF" factor.
is for unauthorised spending: that is, spending that goes
over budget or wasn't used for the purpose intended. This
can be as a result of admin errors or accidents.
is for irregular expenditure, which is spending that was
incurred "without complying with applicable laws and
regulations". This may be caused by procedures not being
followed. stands for fruitless and wasteful expenditure, which is
when pointless spending that could have been avoided,
is uncovered. This can be simple things such as not paying
suppliers in time and incurring interest. also, the following abbreviations apply.
DM = district municipality
LM = local municipality
ME = municipal entity
Usually there are three kinds of problems when it Comes to spending that the auditors might flag or what the Auditor-general terms the "UIF" factor.u
is for unauthorised spending: that is, spending that goes over budget or wasn't used for the purpose intended. This can be as a result of admin errors or accidents.i
is for irregular expenditure, which is spending that was incurred "without complying with applicable laws and regulations". This may be caused by procedures not being followed.f
stands for fruitless and wasteful expenditure, which is when pointless spending that could have been avoided, is uncovered. This can be simple things such as not paying suppliers in time and incurring interest.
also, the following abbreviations apply.MET = metropolitan municipality
The public sector auditor assesses the stewardship of public funds, implementation of government policies and compliance with key legislation in objective manner.
The scope of the annual audit performed for each auditee is prescribed in the Public Audit Act and the general notice issued in terms thereof. It includes the following:
Performance audits may also be performed to determine whether resources have been procured economically and are used effectively and efficiently.
Due to the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some, even material, misstatements in reported information may not be detected, and the completeness and the accuracy of the information reported are not guaranteed.
Due to the focus on specific areas in key legislation, the audit does not provide assurance that all applicable legislation has been complied with. Although possible fraud may be identified during the audit, this is not the main purpose of the audit. The audit does not provide assurance that service delivery has been achieved, only that the annual performance report is useful and reliable.
A clean audit relates to three aspects:
Matters reported by external and internal auditors should receive timeous management attention, internal controls should address the following key areas:
Financial and performance management
The functions of the Auditor-General are reflected in section 188 of the Constitution and further regulated in the Public Audit Act, 2004 (PAA). Section 188 of the Constitution, 1996 states that the Auditor-General must audit and report on the accounts, financial statements and financial management of all national and provincial state departments and administrations and all municipalities. The mandate for Performance Auditing in South Africa was established in the Exchequer and Audit Act 1975, two years prior to the establishment of the same practice in Canada. However, it was only during 1986 that the first performance audit was carried out in South Africa at the then Department of Education and Training. The mandate to carry out and report on performance audits was further strengthened by means of the Auditor-General Acts of 1989 and 1995.
An independent auditing process to evaluate the measures instituted by management to ensure that allocated resources are procured economically and utilised efficiently and effectively and, if necessary to report thereon.
Performance auditing encourages learning and change within the public sector by providing new information and drawing attention to various challenges. It contributes to improvement and reform in public administration, providing the government with recommendations based on independent analysis. Thus, it adds value to the traditional functions of SAIs.
Performance auditing plays an important role in keeping the legislative well informed about governmental actions and the outcome of its own decisions. It increases public transparency and accountability, providing objective and reliable information on how public service perform.