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As we know that, government auditors play a vital role in maintaining public accountability and ensuring the effectiveness of public sector governance. Government auditor is also name as public sector auditor. For Malaysia, National Audit Department (NAD) is the auditor for public sector. In the recent years, public sector had experienced significant expansion in all over the world. The reasons for this significant expansion are closely related to the changes of the government structure and the increasing concerns for more accountable and transparent governance. Moreover, the increasing democratization and attention on corruption people are contribute to the changes in public sector auditing also. More and more people start to concern on the publication of public sector audit report as they want to get known on the performance of government agencies project. People want to ensure that the resources that used in the government agencies project are appropriate and as stated objective since it is the public fund. Consequently, these changes had resulted in a large increase in the number of accounts and sophistication of financial reporting.
Traditionally, public sector auditing was relating to the financial and compliance auditing. Public sector auditors have the duty to provide an independent assurance over the use of public funds by the government. They need to ensure that the recorded financial transactions are correctly authorized and comply with laws and regulations. However, the public (via parliament) commented that the audited report that based on the financial information only was insufficient. The information that provided in the audit reports was insufficient for them to determine the accountability of government agencies in the operating of programs or activities. Hence, this issue had led the National Audit Department (NAD) to expand the traditional public sector auditing into a broader area, which is relating to the performance auditing.
As the performance auditing is expanding the traditional public sector into a broader area, some challenges and issues are faced by government auditor. The professional and qualified auditors possessed by the National Audit Department are inadequate. For the purpose to run a more comprehensive auditing, different techniques and skills are required by the government auditor. However, the auditing educational, training arrangements and number of audit staff do not meet the requirement of the modern public sector auditing. The problem of inadequacy of the audit staff in National Audit Department can be proved by the numerical numbers in years 2005 and 2006. In 2005 and 2006, only 128 times and 143 times of the performance auditing is being carried out. The basic facilities for training and research are not enough as they are lacking of professional and qualified auditor. Hence, the performance auditing that carried out is much lower than the number of government agencies, ministries and departments at the state and federal levels.
Next, the changes in the public sector auditing were also influenced by the reforming of public sector since 1980. Public sector changes the focus on managing the result. As for the changes, it was a need for the government auditor to review the public sector auditing. Although the audit provisions in the Federal Constitution and the Audit Act 1957 have been amended and the significant improvements in the operations and administration of National Audit Department, the overall accountability of the Auditor General is still debatable. The power of Audit General to conduct the audit will influence their effectiveness; power in this context refers to the authority to investigate and access to the needed information. Currently, audit mandate were questioning about the merits of the policy. There was some argument saying that they should cover the issues of effectiveness of the merits of the policy into their scope. This reason for that is to maximise the benefits of performance auditing and maintaining the independent of the government auditor. However, the process of including the merits policy into responsibility function of audit mandate is difficult and risky because this issue can be arguable and debatable. The responsibility of the issues of merits policy is under minister as they are setting the policy for the auditing.
In addition, the public sector auditors in Malaysia are facing the problem with timeliness issues for the audit report. The publication of the audit report will be late because the report is comprehensive. Audit General Department need to issue an audit report that based on financial information and relevant economic information that related to government agencies' projects. For that reason, it consumes longer time to gather the both needed information for government auditor if compare to previous year. They are facing the problem of timing gap after that implement the performance auditing into the public sector auditing. National Audit department was concerned about this issue and took several alternatives to solve the problem of timeliness. As a result, the timeliness issues on the publication of audit report had substantial improvement. Even though government auditor had a substantial improvement for the issues of timeliness on audit report publication, they did not completely settle this issue. The problem of timing gap still exists. For instance, the audit report for 2005 was completed after the middle of the year 2006, which was completed only in October 2006.
Besides, the National Audit Department faces the issue of independence as well. Some non-governmental organizations and third parties argue that National Auditor Department is not independent enough as they will be influenced by outside parties, especially government. In New Sunday Times that reported in 2005, it stated that Audit Department was under the care of our Prime Minister. Next, our previous Prime Minister, Datuk Seri Dr Mahathir Mohamad had also inference as to request that the Auditor General should not publish some issues to public. It is because he wants to avoid the attention from public and making it sensational. Then, more importantly, Audit General had admitted that the undercover or unreleased national interest and policy issues will have an impact on the information that provided to public. As if it is fully disclosed the relevant national interest and policy issues in the audit report, it will uncover the problems. The position and reputation of the project for government agencies will be different because it disclosed all the problems that the government agencies facing now. In summary, they did not have the freedom to disclose the content of the audit report.