Public value and public audit: strategic planning, 'business as usual' and demonstrating relevance

A number of explanations have been developed to explain the need for private sector audits, which are undertaken largely to satisfy shareholders, lenders and governors. Similar arguments of audit’s value can be applied to... [ view full abstract ]

A number of explanations have been developed to explain the need for private sector audits, which are undertaken largely to satisfy shareholders, lenders and governors. Similar arguments of audit’s value can be applied to the public sector. However, public sector audits include a wider range of stakeholders and it is likely that the benefits or harm caused by public audit will have a greater impact than private sector audits. Supreme Audit Institutions (SAIs) have an important role in ensuring public sector accountability and independently support public sector reform. Through their main activities of managing the audit of public sector entities’ financial statements and assessing probity/compliance, providing advice to parliamentary committees, and undertaking performance audits, they can therefore deliver public value. The International Organization of Supreme Audit Institutions (INTOSAI) encourages SAIs to recognise the value they deliver through their activities, and to demonstrate that to citizens, Parliament and other stakeholders.
This research utilises Moore’s (1995; 2013; 2014) public value framework to analyse the activities of one SAI (New Zealand’s Controller and Auditor-General) and how she and her office (the OAG) demonstrate their ongoing relevance. We conducted interviews and focus groups with experts employed by the Office of the Auditor-General. We also examined documents, including audit reports, reports to Parliament, management letters and other documents. We examined news media reports about public sector auditing, observed Parliamentary Select Committees and reviewed social media.
We find that the OAG strategically plans to ensure public sector accountability, and works to increase capacity across the sector, especially through published reflections on themes and sectoral audits, as well as support for Select Committees. Parliamentary Select Committees engage with the OAG reports and ask pertinent questions. The OAG publishes ‘other assurance’ reports which signal expectations to public sector entities and allows it to independently and objectively supporting reform. Such ‘good practice’ guides further confirm the audit hypothesis of organisational control, as do OAG submissions on Bills, Exposure Drafts and Consultation Documents.
While the OAG does not place a dollar value on savings (as do the SAIs in US and UK), we conclude that public audit is valuable to stakeholders in many ways. We also make recommendations about potential changes, and we suggest concerns about certain issues. Strategic planning is part of the SAI’s governance mechanism for creating public value, which is delivered through ‘business as usual’ activities. This research draws out the manner in which demonstrating relevance to stakeholders can add to public value, and highlights some difficulties involved in such an activity.