Demonstrating independence

Making sure that potential conflicts of interest for audit team members are identified and managed helps to strengthen the integrity of performance audits. The ANAO requires its staff to make an independence declaration before they start working on an audit.

We found a few instances in one audit file where people had not made this declaration before starting to work on the audit. In most cases they signed shortly after starting, or there was a reason for a longer delay, such as the Christmas and New year holiday period. Other people had a minor, or more peripheral role on the audit, including technical support. We did not identify any risks with these delays.

We did not find any instances where someone failed to make the required declaration.

We suggest that the ANAO continue to remind staff to make an independence declaration before they start working on an audit, and encourage audit leads to check these the relevant declarations have been completed as required.

Addressed by existing follow-up action

To address an existing observation raised in the Internal Audit report on ANAO’s Audit Manual compliance, PSG is scheduled to provide a reminder to PASG staff on independence policy requirements as part of the March 2026 Technical Update. This will include reiterating the requirement for the completion and review of independence declarations prior to audit team members participating in an audit.

In progress

Designing and performing test procedures

The ANAO requires that audit teams document their planned audit procedures, including the nature, timing, extent and rationale for each procedure. In one audit file, we found that, although planned audit procedures were documented, they did not include the level of detail we expected to see.

We understand that there was a difference between the requirements that applied at the time the audit was carried out, and the test program we used for our review.

We suggest that the ANAO ensures that the requirements for documenting planned audit procedures are clarified, and clearly communicated to staff.

1. PSG will communicate the areas of improvement arising from the peer review to PASG staff and reiterate the policy and guidance requirements relating to documentation of planned audit approach and changes to the planned audit approach.
2. PASG’s Executive Leadership team will communicate to staff their expectations on the use of test program to document panned audit procedures.

In progress

Providing evidence to support findings

It is important that all audit findings are supported by evidence obtained from the audit or from public sources. This helps ensure that content is factually correct, and supports the reliability of published audit reports.

The ANAO requires that all content in its Report Preparation Papers and/or the draft Section 19 report is supported by endnotes, linking to the underlying analysis or source evidence. In one audit file, we found some paragraphs added later in the drafting phase, with no supporting evidence. These paragraphs were descriptive and did not change the overall audit conclusions. We were later provided with evidence to support most of the content.

We suggest that the ANAO reinforce that audit teams must demonstrate that all content is supported by relevant evidence and that this must be recorded via endnotes.
 

PSG will communicate the areas of improvement arising from the peer review to PASG staff and reiterate the policy and guidance requirements relating to cross-referencing of findings in the Report Preparation Papers and Section 19 report to audit evidence.

In progress

Documenting audit procedures

We identified some issues with documenting audit procedures.

We suggest that the ANAO consider improved ways of consistently documenting:

• whether planned test procedures have been implemented; and
• when procedures have changed and why.

The ANAO will communicate the areas of improvement arising from the peer review to staff and reiterate the policy requirements and guidance relating to documentation of planned audit approach and changes to the planned audit approach.

Completed – September 2024.

Findings from the NZ Peer Review, along with a reminder on the policy and guidance requirements, were shared with staff at the all PASG staff meeting held in September 2024.

Demonstrating how materiality has been addressed

In our 2022 review, we suggested that the ANAO take a more structured approach to documenting how materiality is addressed in audit files. We found some improvement in the two audit files reviewed this year.

The variability between the two audits indicates that there are opportunities to promote greater consistency in documenting how materiality is considered. The ANAO has acknowledged that there is a need for further training and guidance in this area

The ANAO is currently trialling the documentation of materiality by expanding the documentation in the test program.

This approach will be followed by training and guidance when formally approved.

Completed – August 2025

The assessment and documentation of key professional judgments pertaining to materiality has been incorporated into the Audit Work Plan and the Test Program – guidance and template. The revised Test Program - template and guidance was formally issued in August 2025. PSG and PASG jointly delivered training on assessment and documentation of key professional judgments pertaining to materiality during the PASG Technical Update in July 2025.

Readability of published report

We have three suggestions for making the ANAO’s audit reports more reader friendly:

Replace the current level 2 question headings and level 3 topic headings with headings that describe the main finding for that section. This would result in a Contents page that signals an audit’s main findings to the reader.

Give the “audit expectations” sections their own heading. Because the “audit expectations” sections come immediately after the main chapter summaries, they are at risk of being overlooked.

Align the level 2 headings with the audit expectations. This would signal to readers the content in each chapter and help them navigate the report.

We consider these suggestions could increase the overall impact of the report and help readers to easily find the parts of the report that interest them.

The ANAO welcomes the suggestions on how to improve the overall impact of the report and make the report more reader friendly. The ANAO will consider and assess the three suggestions for making performance audit reports more reader friendly.

In progress.

A project is underway and recommendations for changes to the published report are expected to be presented to Executive Board of Management in March 2026.

Recent ACAG discussion groups among performance audit staff have highlighted that the various audit offices are trying to find effective ways to more consistently document how materiality is addressed during fieldwork and analysis.

For the audit files we reviewed, working papers sometimes explicitly discussed materiality, such as whether minor non-compliance with organisational policies would affect the ANAO’s audit findings.

In our view, a more structured approach would improve the ANAO’s ability to demonstrate how materiality has been addressed for the audit criteria. For example, the audit test program could be enhanced to include a column documenting the materiality benchmark (or performance expectation) for each audit question, and what factors would constitute an unsatisfactory audit finding.

The assessment of materiality is a key professional judgement and is considered throughout the audit, including when establishing the scope of the audit, developing the detailed audit criteria and evaluating the effect on the conclusion(s) of any identified findings, taken individually and in combination.

The ANAO will consider further expanding the documentation of materiality assessments in performance audit procedures and templates such as the test program, sampling template and evidence collection procedures

Completed – August 2025.

The assessment and documentation of key professional judgments pertaining to materiality has been incorporated into the Audit Work Plan and the Test Program – guidance and template. The revised Test Program - template and guidance was formally issued in August 2025. PSG and PASG jointly delivered training on assessment and documentation of key professional judgments pertaining to materiality during the PASG Technical Update in July 2025.

Locating key documents and sign-offs

The reviewers sometimes found it difficult to find documentation for significant stages of the audit (for example, some sign-offs could not be found). At times, it was unclear which file was a final version. We suggest having a more structured approach to audit documentation including consistent naming conventions and putting the important documents in one place in the filing system. We understand that performance audit teams are piloting audit software as an option.

For performance audits using the ANAO’s document management system as the audit file:

PSRG will present to all staff on the findings from the peer review and will encourage staff to clearly label saved items as final versions.

PSRG will work with PASG Practice Management to develop a guide on naming conventions for key documents and approvals saved in the document management system.

Completed – March 2019.

Findings from the NZ Peer Review were shared with staff at the All PASG staff meeting held in March 2019.

As performance audits used audit software from 1 July 2019, guidance on naming conventions for the document management system was not considered to be necessary.

IT audit services

Both the audits had used IT audit services. Clearer documentation of the IT service specifications of the services would be useful. This includes naming the IT audit staff assigned, and describing how they will work with the audit team (for example, in the team or independently with set outputs). It would also be useful for documentation to include a description of the tasks, lines of responsibility, relevant outputs, and time frames.

Addressed by existing follow-up action

An existing follow up action from the 2017-18 PASG internal Quality Assurance program on the clear documentation of the IT audit scope, procedures and results will address this better practice recommendation. SADA and PASG have developed IT Audit Memorandums and the Audit Work Plan template includes the responsible IT Executive. PSRG are drafting the ANAO Audit Manual policies for engagement of IT specialists to ensure it is consistent between AASG and PASG.

Completed – July 2019.

The IT Audit Executive is identified in the Audit Work Plan and IT sign-off is incorporated into the audit methodology.

Specific policy requirements regarding the involvement of the IT Audit Executive was added to the ANAO Audit Manual – PASG Specific volume released in 2019.

Independence declarations

It was difficult to assess the completeness of Independence Declaration documentation for the audits. As team members and senior staff changed through an audit, the Audit Work Plan did not necessarily have the full list of people who may have worked on the audit. Ensuring staff put their job title on the declarations would help.

Addressed – no follow up action required.

Practice changes have been implemented to address findings regarding completion of Independence Declarations arising from internal Quality Assurance reviews of AASG and PASG engagements and the Internal Audit on compliance with ANAO policies have addressed this recommendation. It is the responsibility of the Engagement Executive to ensure that all team members have signed a declaration by checking to ‘time charged’ records prior to signing the completion and Policy compliance checklists.

Not applicable

Test Programmes

The audits reviewed did not prepare test programmes after completing their Audit Work Plans. Even if a test programme is not prepared, detailing how the intended methodology will ensure the evidence collected will address the audit criteria would be useful. This can provide extra assurance that the planned fieldwork will generate the evidence needed to address the audit criteria.

Addressed by existing follow up action

PSRG and PASG are working on the implementation of consistent test programs as a current action item arising from an internal PASG Quality Assurance review. The project will incorporate the recommendation from the NZ Peer Review to ensure it addresses the points made in the detailed test programs. PSRG will also request a copy of their test program template.

Completed – July 2019

Test program guidance was released and minor policy updates were made in the ANAO Audit Manual – PASG Specific volume released in July 2019.

For both audits, sign-offs needed during the reporting phase of the audit were missing. However, it was clear from the files that senior staff had reviewed reports at important stages.

1. ANAO to confirm policy requirements for sign-offs during the reporting phase of the audit have been addressed in revised version of the ANAO Audit Manual.
2. PASG to confirm workflow and templates for sign-offs during the reporting phase of the audit are in place.
3. PASG Quality Assurance test program to be updated to reflect the sign-off requirements in accordance with current requirements and retested in next PASG Quality Assurance program.

Completed – June 2018.

The follow-up actions were confirmed as addressed as part of the 2017-18 ANAO Quality Assurance program.