The slidedeck for the presentation can be downloaded at Related documents on this page. The discussion related to the slides is available below.

Good afternoon. Thank you to Mike for convening this conversation about audit quality. As we have heard, audit quality is a key pillar of the new PASAI Strategy and I welcome the opportunity to speak with you today about the ANAO’s approach to audit quality.

Quality in our audits is critical to support the integrity of audit reports and maintain the confidence of the Parliament and public sector entities.

If our audit quality is questioned, we run this risk of losing the trust of Parliament and auditees and we may not be able to deliver on our purpose.

The ANAO’s Quality Statement links audit quality to the purpose of the ANAO, which is to support accountability and transparency in the Australian Government sector through independent reporting to the Parliament, and thereby contribute to improved public sector performance.

The definition of quality incorporates not only the concepts of compliance with legislation, auditing standards and methodologies but also doing the right audits at the right time, such that the work of the ANAO is valued by the Parliament.

The quality of ANAO audit work is reliant on the strength of our independence and system of quality management.

The ANAO Quality Management Framework is our system of quality management that supports delivery of high-quality audit work and enables the Auditor-General to have confidence in the opinions and conclusions in the reports prepared for the Parliament. This facilitates the confidence of the Parliament that the ANAO operates with independence and that the audit approach meets the auditing standards set by the Auditor-General.

The Quality Management Framework includes policies and procedures that address each of these elements:

• ANAO’s risk assessment process - The framework is designed to meet ANAO quality objectives and address our identified quality risks.
• Governance and leadership - The culture committed to quality is supported by the tone at the top established by the ANAO’s leadership through their actions and behaviour. The importance of quality is communicated regularly through ANAO all staff meetings, the Auditor-General’s messages and technical updates. The responsibility of all personnel for quality is recognised and reinforced by the incorporation of quality into individual performance agreements, discussion and assessment. Our audit policies assign specific responsibilities for quality to senior leaders in each group of the ANAO. 
• Audit mandate and selection – Throughout the year the Auditor-General determines which audits will commence based on a risk assessment, priorities identified by the Parliament and achieving sufficient coverage across the sector. The A-G also considers recent developments in the sector, areas of public concern and balances this with considerations of resourcing including ensuring that we are able to perform our audits with sufficient capability, competence and time.
• Resources - Workforce capability and capacity is a key driver of audit quality. As part of our framework, we have a Workforce Plan considers the immediate and future resourcing and capability requirements of the ANAO and includes strategies on attracting, developing and retaining staff. Workforce resourcing risks are closely monitored by senior leaders at the ANAO as it is one of our enterprise strategic risks as well as a quality risk area. Our quality risks arise from staff turnover, an increase in new starters without audit experience and elevated workloads during peak periods. The ANAO has resourcing models and policies to ensure that staff have sufficient capacity to undertake a quality audit, and Engagement Executives and audit managers have sufficient time to not only undertake appropriate review and supervision, but also to coach and mentor staff to improve staff capability and development.

I will talk in more detail about monitoring and remediation processes and engagement performance and on my next slides.

All audit reports produced by the ANAO are public documents and tabled in the Parliament. The Joint Committee of Public Accounts and Audit (JCPAA) reviews all tabled Auditor-General reports and conducts inquiries into selected reports. The Parliamentary committee can challenge our findings and ask further questions about the evidence supporting our reports. We need to ensure that our audit evidence is robust and supports our findings and conclusions to be able to stand up to this level of scrutiny.

The results of internal and external monitoring activities are reported to the ANAO’s Execuitve Board of Management, the ANAO’s Quality Committee and the ANAO Audit Committee.

We identify areas of improvement and areas of good practice. Where there are deficiencies in audit quality we assess the root causes of the deficiencies and develop remedial actions to address the identified deficiencies and their root causes. The completion of these remedial actions is monitored by the Quality Committee.

Lessons learnt and good practice from monitoring processes are communicated to ANAO audit staff and contract firms to allow all staff to implement lessons learnt and to foster continuous improvement.

The Engagement Performance component of the Quality Management Framework is focused on the policies, methodology, review and approval processes that support quality in each audit.

The ANAO Audit Manual policy clearly sets the responsibilities of audit teams and engagement executives to comply with ANAO Auditing Standards, ANAO Audit Manual policies and methodology.

ANAO auditors apply a robust methodology as set out in the ANAO Audit Manual and are supported by standardised documentation tools and templates. Application of this methodology ensures ANAO audits are of a consistent quality and are performed in accordance with the ANAO Auditing Standards.

The ANAO audit manual and methodology incorporate policies regarding direction, supervision and review of team-members by more senior staff. Auditors are provided with levels of direction, supervision and on-the-job training appropriate to their skills and experience. Engagement executives are responsible for determining that adequate direction and supervision is provided to all auditors working on an engagement.

The ANAO Audit Manual and methodology set out key stages of review and approval for each audit product. The review and approval processes differ in timing and extent of executive involvement for performance audits, performance statements audits and financial statements audits. This reflects the differences in the length and nature of the audits.

The responsible engagement executive reviews a sufficient quantity of the work to ensure that the audit has been properly performed and appropriate conclusions reached, given the evidence obtained. This includes a review of critical areas of judgment, especially those relating to difficult or contentious matters, significant risks and any other areas the engagement executive considers important.

We also take a risk approach to resourcing of audits – for audits with a high risk engagement risk rating we allocate more experienced staff to that audit and will assign Engagement Quality Reviewers which provide an additional level of oversight to these audits, including review of significant judgements and high risk areas.

We have consultation policies where teams will consult with our technical areas and we have a Qualifications and Technical Advisory Committee made up of senior representatives from across the office and chaired by the Deputy Auditor-General for difficult and contentious matters to form a recommended course of action for the Auditor-General to consider and approve. 

Each layer of review in an audit process will be assuring quality in the audit, from working paper reviews by team leaders and audit managers ensuring that the planned audit procedures have been performed to a high-quality and in accordance with the planned approach and standards. The Engagement Executives will review significant risk areas, complex audit procedures and areas of high judgement. For performance audits, there is higher engagement with the Group Executive Directors, Deputy Auditor-General and Auditor-General, reviewing and challenging the judgements made regarding findings and conclusions and ensuring that the report is appropriate including tone.

Feedback from auditees and Parliament helps us measure the relevance and impact of our work which forms part of our audit quality definition.

We have performance measures on the number of audits conducted during the year and how auditees accept and respond to audit recommendations.

We also have a performance measure related to our quality assurance activities – reporting on whether our QA reviews indicate that our reports and conclusions are appropriate – therefore supported by sufficient and appropriate audit evidence. 

The ANAO’s transparency in quality and performance measure reporting is important to maintain our reputation for producing high quality audit reports and maintain the confidence of the Parliament and public sector entities.

I look forward to continuing the discussion on this important topic with you all.