NATIONAL AUDIT

DEPARTMENT SEMINAR

2017 Fulfilling the National Audit

Department’s Mandate Through Quality Financial Audit

By KHALID KHAN BIN ABDULLAH KHAN

Deputy Auditor General (Finance)

NATIONAL AUDIT DEPARTMENT MALAYSIA

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Session Objectives

• To highlight the important role of the NAD in furnishing independent, unbiased and reliable information to Parliament to ensure public accountability; and

• To share lessons learnt from our outsourced audit for improvement in the audit management.

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NATIONAL AUDIT DEPARTMENT (NAD) MANDATE

• Article 106 and 107 of the Federal Constitution

• Audit Act 1957:

“ Para 7 (3) The Auditor General may authorize any person he deems competent to conduct on his behalf and under his direction…”

To audit the accounts prepared by the Federal Government, State

Governments, Statutory Bodies and Government Companies

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NATIONAL AUDIT DEPARTMENT (NAD) QUALITY POLICY

• Quality and professional auditing and reporting in conformity with the ISSAI

• Continuous improvement in its Quality Management System and to review the organisation’s Quality Objectives

in meeting stakeholders’ expectation

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NAD ENGAGEMENT WITH FAS (Private Audit Firms)

69 FAS

118 BBP

144

PBT

131

BBN

To clear backlog of accounts

To encourage cross- fertilisation

To obtain professional perspective

To gain mutual benefits from the working relationship between NAD/FAS and develop internal staff to work alongside with professionals

As of 2016

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AUDITING AND GOVERNANCE

OVERSIGHT

• Evaluate whether federal statutory bodies are doing what they are supposed to do

INSIGHT

• Provide an independent assessment of federal statutory bodies’ programmes, operations and results

FORESIGHT

• Identify trends and emerging issues and challenges. Application of relevant audit methodologies, tools and providing advocacy roles in services wherever needed

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METHODOLOGY AND TOOL MODEL

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Substantive Approach

Systems Based

Approach

Risk Based Approach

AUDITING PROCESS IN FINANCIAL STATEMENTS

Audit Planning Memorandum (APM) due on 30th January every year

Entrance Conference

Submission of financial statements due on 30th April every year

Submission of the audit working papers by FAS

Exit Conference

Auditors’ Reports (btw Mac-August)

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1

2

3

5

4

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• The requirement to prepare the APM is in accordance to ISSAI 1300 (Planning an Audit of Financial Statements)

• NAD sent a letter on 15th December 2016 to 42 FAS

• 87 APM received by 30th January 2017

• 9 FAS exceeded the deadline ranging from 1 to 8 days

AUDIT PLANNING MEMORANDUM (APM)

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AUDIT PLANNING MEMORANDUM (APM)

0 5 10 15 20 25 30

Audit Programme Not Provided

Insufficient Info on Accounting Policy

Lack of Explanation on CAATs

Other Significant Matters

Contact Person

Number of Incidences

27

26

18

16

15

31%

29.9%

21%

19%

17.3%

AUDIT PLANNING MEMORANDUM (APM)

• 18 elements specified in the APM checklist. • The 5 highest non-compliance elements:

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ENTRANCE CONFERENCE

• A medium to inform the entities, the objective and scope of the audit to be conducted as outlined in ISSAI 1300 (Planning an Audit of Financial Statements)

• Facilitate and coordinate the working relationship between parties during the audit

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SUBMISSION OF THE FINANCIAL STATEMENTS

• Due date set by MOF : 30th April 2017

• 6 agencies submitted their financial statements after the due date set by MOF - the introduction of the new accounting standards

• FRS/MFRS (22 agencies) ; MPERS (78 agencies) and MPSAS (45 agencies)

• MOF encourages agencies to adopt

MPSAS by year 2020

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AUDIT WORKS

• Late commencement of audit works in 81 agencies ranging up to 47 days

• Based on contract, audit work must be completed within the stipulated period i.e. 1, 2 or 3 months after receiving the financial statements

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SUBMISSION OF THE WORKING PAPERS

• 26 FAS involving 46 working papers were submitted exceeding the deadlines ranging from 1 day to 61 days due to:

– Conversion to the new accounting standard

– Late submission of GAI from component

auditors

• Issues arising from NAD’s review of working papers:

– Working papers were not well supported by the supporting documents

– Management letters incomplete and not well explained

– No evidence of impairment testing done

– Working papers with no evidence of check done by the partner

– Samples selection were not clearly defined

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PRE-EXIT/EXIT CONFERENCE

• Pre-Exit Conference allows auditor to clarify audit issues and giving agencies ample time to resolve issues

• Exit Conference to discuss on material, significant and recurring audit findings

• To get feedback and clarification from entities on issues raised

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AUDITOR REPORT 2016

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NATIONAL AUDIT DEPARTMENT MALAYSIA

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