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P U B L I C

F I N A

N C I A L

A D M I N I S T R A T I O N

Chapter 8

AUDITING

Lecture by:

Miss Farhana binti Yaakub

Chapter Outcomes

After studying this chapter, you should be able to:

i.

Explain the objectives and types of audit

ii.

Understand the roles of auditor general/

iii.

Differentiate between the internal and external audit

iv.

Identify the functions of Public Accounts

Committee

v.

Identify the audit process.

vi.

Understand the Audit Act 1957.

Chapter Outline

8.1

Definition

8.2

The Objectives

8.3

Types of Audit

8.4

Roles of Auditor-General

8.5

Internal and External Audit

8.6

Annual report of the Auditor General

8.7

Roles of Public Accountants Committee

8.8

Audit Act 1957 (Amendment 1978)

8.1 Definition

A process by which a competent, independent

person accumulates and evaluates evidence

about quantifiable information related to a

specific economic entity for the purpose of

determining and reporting on the degree of

correspondence between quantifiable information and established criteria.

(Arens et al., 1999)

Ensuring the activities and events of an organisation comply with predetermined

standard.

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8.2 Objectives

To determine any embezzlement from

the estimation being

planned

Accuracy of financial transaction

To declare any

wrongdoings in

relation to the principles, orders, rules and regulations

Efficiency and effectiveness of public servant responsibility

To declare the elements and factors which fail to lead for effectiveness, efficiency and economical utilization of the government resources

Determining the financial status and operation of government bodies

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8.3 Types of Audit

FINANCIAL

To determine whether the annual financial statement

shows a true

and fair view of the financial

position

COMPLIANCE

Includes the

inspection and evaluation on activities of Ministries /

departments

or agencies

PERFORMANCE

Involves studies and evaluation of specified programmes or

activities of

Ministries / departments & government

agencies

8.4 The Auditor General

Y. Bhg. Tan Sri Dato' Setia Haji Ambrin Bin Buang Feb 2006 - Current

Sri Dato' Setia Haji Ambrin Bin Buang Feb 2006 - Current Is Department the head of
Sri Dato' Setia Haji Ambrin Bin Buang Feb 2006 - Current Is Department the head of

Sri Dato' Setia Haji Ambrin Bin Buang Feb 2006 - Current Is Department the head of

Is

Department

the

head

of

Auditor

General

Is appointed by the YDPA on advice by the PM and after consultationFeb 2006 - Current Is Department the head of Auditor General with the conference of Rulers

with the conference of Rulers -

Article 105 Federal Constitution

Responsible directly to the YDPAthe conference of Rulers - Article 105 Federal Constitution The person entrusted to ensure audit is

The person entrusted to ensure audit is done properly and independentlyand after consultation with the conference of Rulers - Article 105 Federal Constitution Responsible directly to

The Auditor General

ROLES of Auditor General

1 To audit and report on the accounts of the Federal and States (Article 106
1
To audit and report on the accounts of the Federal
and States (Article 106 of the Federal Constitution)

To enhance the standard of public accountability

by reporting and providing an assurance to

Parliament and State legislatures

2
2
an assurance to Parliament and State legislatures 2 3 Duties of AG according to Section 5,
3
3

Duties of AG according to Section 5, Audit Act 1957

are to examine, enquire the following:

5, Audit Act 1957 are to examine, enquire the following: a) The accounts of accounting officers

a) The accounts of accounting officers of the federation and of the states

The Auditor General

ROLES of Auditor General

b)

The accounts of any separate fund (e.g.

Islamic religious revenue) established in a

c)

d)

e)

state of the Federal Territory under Article 97 (3) of the Federal Constitution

The accounts of any public authority of body

if it is so provided by law in any case

The accounts of any other body, including a company registered under the Companies Act

1965

The accounts of any other public authority if the minister of finance is satisfied that the public interest requires that the account of the authorities shall be examined

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8.5 Internal & External Audit

Establish by government agencies itself. Full time employees / internal staff Assist the management to
Establish by government
agencies itself.
Full time employees /
internal staff
Assist the management
to improve & update
the operations.
Independent bodies
(National Audit
Department)
To fulfill needs at third
party
Article 105 & 106 of
Federal Constitution.
Safeguard the
Yearly basis – annually.
organisations assets.
Special department /
unit and functions.
Report to higher
department or higher
level
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Internal & External Audit

ROLES & FUNCTIONS ROLES & FUNCTIONS Adherence to Audit the Financial organisational rules. Statement &
ROLES & FUNCTIONS
ROLES & FUNCTIONS
Adherence to
Audit the Financial
organisational rules.
Statement & Budget.
Provide information to
the management.
Direct responsibility to
YDPA.
Review of operating
Prepare a financial
procedures.
report & to submit the
proposal to be analysed
Avoid wastage, fraud,
inefficiency,
by the Public
Accounting Committee.
ineffectiveness.
Increase the accuracy
data.
To ensure the
accountability through
the compliance with
financial provisional
law.

8.6 Annual Report of AG

Express the Auditor General conclusion regarding

how the audited activities or events have complied

with the applicable predetermined standards.

Reports are often referred to a s the auditor’s

opinion.

All accounts of government have to be prepared and transmitted to Auditor General for his

examination, audit and preparations for report

(Section 9 (1) Audit Act 1957) & (Section 16 of Financial Procedure Act 1957).

Annual Report of AG

Annual Reports of Auditor General is submitted to:

i. YDPA & Conference of Rulers (Federal Level)

ii. Yang di Pertua Negeri (State Level)

iii. Any time submission upon urgent matters

arising.

Audit Act 1957:

SECTION 9(4) - If financial statement is not

been received after 7 months after the close of financial year, AG may submit a report to Parliament / State Legislative Assembly.

Audit Act 1957:

Annual Report of AG

SECTION 9(6) AG may make recommendations

and comments upon all matters relating to public account, public moneys and stores

SECTION 9(6) - AG may submit a certificate and

observations on sepacial funds such as zakat, fitrah and baitulmal.

SECTION 9(7) AG may present his certificate

and observation upon those accounts to the

head of those authorities on any matter that

required his opinion

8.7 Public Accounts Committee

Established in November 1951.

Is one of the parliamentary committee and it is

also established at state level.

Comprises between 6 to 14 members

Is to assist the House of Representative in inquiring into financial matters of the government.

This committee is empowered by:

a) Standing Order 77 (5) of the Standing

Ordinance b) Section 10 of the House of Parliament Ordinance 1951

FUNCTIONS

To ensure government expenditure comply to parliamentary process

Recommendations will be produced and actions will be taken, punishment or surcharge, over misuse of public fund

To maintain high standards of

public accountability in all

matters

Public Accounts Committee

To consider , adopt and investigate findings from auditor General Report

To monitor that public officials exercise the spending of money in the most effective and efficient manner

To check any events or activities that the committee feel need to be checked/or any issues that bring up by “Majlis Dewan Rakyat” to be checked by them.

Auditor General Report is vital document to facilitate functions of PAC. Inquires will be made over Civil servants that responsible over department expenditure

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8.8 Audit Process

8.8 Audit Process AG will audit the annual account of Federations and State Submit it YDPA,

AG will audit the annual account of Federations and State

Submit it YDPA, King & Rulers of each State

Submit to parliamnet & state

Legislature Committee

Deliberated by the Public Account

Committee at both level

8.9 Audit Act 1957 (Amendment 1987)

Section

3

TERMS AND CONDITIONS OF SERVICE OF

AUDITOR GENERAL

The Auditor General shall be deemed to be an officer of the general public service of the Federation

Section

4

REMUNERATION OF AUDITOR GENERAL

Specified under the First and Second Schedules.

All payments made under the First and Second Schedules shall be

charged on the Consolidated Fund.

Section

5

DUTIES OF AUDITOR GENERAL

To audit the accounts of the federal, states, public authorities or any other accounts as instructed by YDPA (eg. Private entities and statutory bodies)

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Audit Act 1957 (Amendment 1987)

Section

6

NATURE OF WORK

Ascertaining and ensuring whether:

a) All reasonable precautions have been taken to safeguard the collection and custody of public money.

b) Payments were made in accordance with proper authority , properly charged and supported by sufficient vouchers or proof of payments.

c) Due care has been taken into account to ensure proper use, control, maintenance and disposal of all public stores.

d) All accounts and other records have been and properly and

faithfully maintained.

e) Moneys have been applied accordingly, for which they were

appointed or authorized and the related activities have been managed in an efficient manner with due regards for economy

and avoidance of waste or extravagance.

f) The provisions of the Federal Constitution and of the Financial Procedure Act 1957 and any other written law have been complied with.

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Audit Act 1957 (Amendment 1987)

Section

7

POWERS OF AUDITOR GENERAL

a) Has the power to call upon any person for explanation and information.

b) Has access to all records, vouchers, documents, cash,

stamps, securities, and properties subject to his audit.

c) Also include the delegation of his power by authorizing any person he deems competent to conduct an audit on his behalf, and obtaining the advice of a law office upon any legal matters.

Audit Act 1957 (Amendment 1987)

Section

8

SECRECY

Neither the Auditor General nor any other person shall divulge or communicate except in the course of duty to another person performing duties under this act.

Section

9

AUDIT REPORT

The Minister or the Menteri Besar or Chief Minister of a State shall, as soon as a statement required under section 16 of the Financial Procedure Act 1957, has been

prepared, transmit the statement to the Auditor

General.

End of Chapter 8

THANK YOU