Topic Guide: External Audit and Oversight

The role of supreme audit institutions in fighting corruption

As a key element of the formal accountability system, supreme audit institutions (SAIs) have the mandate to scrutinise government transactions to ensure the accountability of public funds. They are in charge of conducting the external audit of public institutions across the public sector to ensure that the government’s financial statement accurately reflects revenue collected and expenditures made, and that public funds are used according to the laws and regulations in place. Increasingly, SAIs also undertake value for money and performance audits to assess the agency’s performance against its stated goal rather than just its compliance with rules and regulations.  

As the last step of the audit cycle, the SAI prepares a report which is examined by the legislature to validate the work of the executive and follow up on problems identified by the SAI. Furthermore, audit reports provide the public with the information they need to hold their governments to account. As such, SAI are playing a growing role in improving public financial management and accountability and strengthening good governance.  

However, in practice, in many countries of the world, the external audit process face challenges of independence, transparency, resources, capacity and political will of the executive and the legislature to implement the auditor general’s report. This can significantly undermine the effectiveness of subsequent legislative scrutiny. In many countries, SAIs also face major capacity challenges, as the introduction of integrated financial management information systems (IFMIS), performance audits, and a multiplication of the number of institutions to be audited which add to the workload of SAIs that are often already strained by a lack of financial autonomy, human and financial resources and capacity. SAIs are also often subject to limited oversight and not immune to risks of undue influence or corruption in their operations.

Strengthening the external audit and oversight process is instrumental to allow SAIs to effectively play their role in detecting corruption and holding corrupt officials to account. In particular, they can contribute to identify and publicise areas of corruption risk, working more closely with other institutions, such as parliament, and publicise the recommendations of audit reports more widely.

Transparency

Transparency is a prerequisite for strengthening external oversight and the role of civil society in the process. However, in many countries of the world, not all audit reports are made public and citizens do not have access to the auditor’s report, which limits opportunities for public scrutiny. There are some good practice examples of SAIs involving civil society, particularly in audit planning, to better identify and better addresses corruption risks in the audit process.

Focussing audit planning on areas highly vulnerable to corruption

SAIs have a key role to play in proactively identifying and monitoring emerging corruption risks. They can prioritise and focus their audit work on areas especially vulnerable to corruption, often as part of the audit planning process.

Working closely with other national institutions

A strong and supportive institutional environment is critical, especially to ensure that effective mechanisms exist for implementing the recommendations of audit reports.

Institutional reforms

It is also instrumental that SAIs have the independence, human, technical and financial resources and capacity to effectively fulfill their mandate.

The role of INTOSAI.

SAIs typically belong to a representative body – the International Organisation of Supreme Audit Institutions (INTOSAI) – which has established basic standards to guide SAIs’ work and provides an international architecture for reform. INTOSAI is currently developing a guideline for the audit of corruption prevention in government agencies[1]. By adopting this guideline, SAIs would become the first institutions in the PFM system to explicitly address corruption as part of their work.