Trust in audit and unleash its potential
With corporate audit grabbing the headlines for the wrong reasons Adrian Crompton, the Auditor General for Wales, provides his perspective on the state of public sector audit in Wales.
Corporate failures and accounting scandals seem to have been hitting the financial pages with ever greater frequency in recent years. You can hardly open a newspaper without stories about Carillion, BHS, Patisserie Valerie and others vying for attention.
And one theme that crops up repeatedly is that trust in audited company accounts is perhaps at an all-time low. As the MP Rachel Reeves, recently put it in a speech [opens in new window] to the UK Parliament’s Business, Energy and Industrial Strategy Committee: “We are looking at a complete breakdown in trust among the public and investors in the integrity of company accounts.”
The Government has responded by commissioning a number of high-profile reviews, including The Kingman Report 2018 [opens in new window] on the Financial Reporting Council (the UK’s audit regulator and standard setter); a Competition and Markets Authority report [opens in new window] on the private sector audit market; and The Brydon Review [opens in new window] which will look at what more can be done to ensure audits meet public, shareholder and investor expectations.
Arrangements over local public audit in England have also come under the spotlight
In recent weeks the Smith Institute Report 'Spending fairly, Spending well' [opens in new window], has called for a system-wide review of how public money is planned, spent and monitored in England. The Smith Institute Report followed hot on the heels of a report by the ICAEW [opens in new window] which also identified potential areas for improvement in the local public audit regime in England.
So where do we stand in Wales?
Six months in to my role as Auditor General for Wales, my view is that public sector audit is in good shape and, in many ways, modelling an example for others to follow. Let me explain why I think this:
My remit: As Auditor General, I have extensive powers to follow the public pound across all parts of the Welsh public sector and to hold Welsh public bodies to account, in the way that the Smith Institute Report recommends for England.
Quality of accounts audit: at the Wales Audit Office (WAO) we voluntarily contract with an external regulator – the ICAEW’s Quality Assurance Department (QAD) - to annually review the quality of our accounts audit work. Year-after-year QAD tell us that our work is robust and of a good standard.
Trust: My extensive conversations with public sector Chief Executives across Wales, and our 2018 stakeholder survey, tell me that our work is consistently trusted and valued. This is testament to the effort we put into building appropriate professional relationships with all of our audited bodies.
Impact: A review commissioned by my predecessor, Huw Vaughan Thomas, on the impact of our work, concluded that it at least matched international good practice across many areas and, in some areas, was leading the way.
All of this is possible because of the talented and committed people at the WAO who support my work and in whom I place great trust.
While I’m confident that public sector audit in Wales is in a healthy place, we cannot afford to be complacent or stand still.
So we’re already looking at:
- new ways to enhance our engagement with the people of Wales;
- new technologies to improve the efficiency and effectiveness of our work; and
- how we ensure we are a model public sector organisation in the 21st century.
And we must strive to go further. We must look to fully unleash our potential as auditors so that we can continue to be a trusted commentator who can:
- assure the people of Wales that their money is being well managed
- explain how it is being used; and
- inspire and empower the public sector to improve.
Caroline Gardner, Audit Scotland’s Auditor General, recently blogged on this topic. You can read it here [opens in new window].
About the author
Adrian Crompton became Auditor General for Wales in 2018. As head of the Wales Audit Office, he oversees the annual audit of some £20 billion of taxpayers’ money and is appointed on an eight-year term.