2. The global body for professional accountants Overcoming the challenges of implementing IPSASs & audit landscape Chris Ridley (ACCA Public Sector Global Forum) 24 May 2013

3. The global body for professional accountants About ACCA ACCA is a global body for professional accountants, supporting 154,000 members and 432,000 students We provide services through a network of 83 offices and centres We have members working in the public sector in 135 countries.

4. The global body for professional accountants Why are accounting standards important? Information for controlling and reporting use of resources; Information to improve quality of decision making. Need for comparable data behind move to IFRS and IPSAS in many countries.

5. The global body for professional accountants Important first steps: Legal cover (Government Resources & Accounts Act 2000); Defining accounting policies; Designing chart of accounts.

6. The global body for professional accountants Personal view on some lessons learned: Long lead time (dry run accounts); Most effort - Statement of Financial Position (assets & liabilities); Reconciliation to cash; Linking resource inputs to operational outcomes in the accounts.

7. The global body for professional accountants Right people with right skills: At outset too few accountants; Move to make all public sector Finance Directors qualified; Important to get right mix of numeracy and professionally qualified individuals embedded in business.

8. The global body for professional accountants Whole of Government Accounts Sets out public sector assets and liabilities at 31 March each year; Enables Parliament and public to better understand and scrutinise how taxpayers money spent; 1,500 organisations covered; Audited first time 2010-11. http://www.hm-treasury.gov.uk

9. The global body for professional accountants Why audit is important The financial crisis and its aftermath has brought audit into the spotlight like never before In both the public and private sectors there is a need for increased accountability and better governance Audit should be focusing on the wider picture not just the balance sheets and profit statements – the wider value that a business brings to the public and society Audit is key to helping to promote public and investor trust Audit can make a difference for organisations promoting sustainable growth and fostering strong ethics

10. The global body for professional accountants Audit structures Supreme Audit Institutions (SAIs) - 191 SAIs around the world (INTOSAI) - Body, scope and responsibilities underpinned by legislation - Primary duty to form an opinion on the government’s accounts - Independent of the Executive – not always the case but should be Internal audit - Objectives are fully aligned with organisational objectives, and are widely understood - Activities contribute to the overall assurance available to management and gaps are identified

11. The global body for professional accountants Scope of external audit Financial audit and assurance Follow the same auditing practices as in the private sector, standards and ethical codes Undertake similar procedures to gain assurance about underlying internal controls and procedures Governance In some countries auditors are expected to give a view on whether governance statements are robust – performance management, business plans etc. Governance statements can provide an early warning signal of business failure Attention to governance will provide a ‘Big picture’ view

12. The global body for professional accountants Scope of external audit Value for money Concern with whether public money delivers economy, efficiency and effectiveness (value for money) in the public sector Concern with probity, legality and compliance in the public sector in most countries Prevention of fraud and corruption Level and extent of fraud and corruption around the world is significant Auditors have a responsibility to conduct their audit work so that they have a reasonable expectation of detecting material misstatement or error which may result from fraud

13. The global body for professional accountants External & Internal Audit Compared External auditInternal audit Reports toThe legislature.The board and senior management who are within the ministry’s governance structure ObjectivesAdd credibility and reliability to financial reports from the Ministries to Parliament by giving an opinion on their reports. Provide members of the board and senior management with assurance that they can use to fulfil their duties to the ministry and its stakeholders by evaluating and improving the effectiveness of governance, risk management and control processes. CoverageFinancial reports, financial reporting risks and Value for Money. All categories of risk, their management, including reporting on them. Responsibility for improvement Duty to report problems and make recommendations for improvement. Fundamental to the purpose of internal auditing – but done so as not to undermine the responsibility of management: advising, coaching and facilitating.

14. The global body for professional accountants Audit challenges Achieving the ‘big picture’ view Increasing complexity e.g. financial reporting Internationalisation Facilitating public trust and confidence Adding value to businesses Continuing to develop contemporary auditing practices which are fit for the public and private sectors Spotting the early warning signals in relation to business failure