Risk Assessment
| What do auditors do? | Why do they do it? |
|---|---|
| Agree terms of engagement | Terms of engagement are communicated & agreed to ensure a clear understanding of responsibilities of the parties, the objectives of the audit, access to information and the reports to be provided. |
| Plan the audit | An understanding of the auditee is obtained for risk assessment purposes & an audit plan is prepared. |
| Perform risk assessment procedures | A risk assessment is performed to determine the number and type of procedures to perform. |
Risk Response
| What do auditors do? | Why do they do it? |
|---|---|
| Perform procedures in terms of risk assessment | Procedures are performed to obtain evidence that the financial statements & annual performance report do not contain material misstatements and that key legislation has been complied with. |
Reporting
| What do auditors do? | Why do they do it? |
|---|---|
| Compile management letter (not published) | The management letter is given to the those charged with governance on completion of the audit. It details the findings from procedures performed, identifies the root causes of these findings and makes recommendations for improvement. |
| Prepare audit report (not published) | The report is published in the auditees’s annual report. It informs those responsible for oversight, the public and others of material misstatements in the financial statements, material findings on the usefulness and reliability of the performance report, material non-compliance with key legislation in specific focus areas, and the deficiencies in internal control that were identified during the audit. |
What is an audit in the Public Sector?
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:
- Providing assurance that the financial statements are free from misstatements that will affect the users of the financial statements
- Reporting on the usefulness and reliability of the information in the annual performance report
- Reporting on material non-compliance with key legislation
- Identifying the key internal control deficiencies that should be addressed to achieve a clean audit.
Performance audits may also be performed to determine whether resources have been procured economically and are used effectively and efficiently.
What is Clean Audit?
A clean audit relates to three aspects:
- The financial statements are free from material misstatements
- There are no material findings on the annual performance report
- There are no material findings on non-compliance with key legislation