Acting on Information in Audit Reports

2.1.3 Acting on Information in Audit Reports

The following sections discuss indicators of acting on information to examine the quality of information in audit reports, namely, (i) publication of the audit reports, (ii) realistic audit recommendations, and (iii) followup of audit findings and recommendations.

Publication of Audit Reports

To embed the accountability of government, the publication of audit reports opens opportunities for the public and media to get information on the government‘s performance and policies. Guthrie (1992: 27) believed that increasing interest in public sector auditing influences the awareness of, and helps to explore, critical issues in public sector auditing. In addition, Widodo (2004:19-24 pointed out that publication of audit findings and recom mendations enhance the quality of auditing information beyond the scope of ―being obscure‖ from the public who also participate in assessing the information being reported. Mikesell (2003: 156) also argued that publication of the audit reports of government institutions would relatively important to reduce the possibility of the same findings and problems happening.

In democratic countries, there is a direct relationship between the mass media and the concept of publicity. Santiso (2008:67-84) argued that the media is an effective actor in publishing audit findings. He also believed that the publication of audit reports has a role in indirect enforcement to implement audit recommendations for auditees. Arter (2003: 97) suggested that to improve the effect of audits, after they are finished, a summary that highlights any positive and negative conclusions should be published promptly.

A limited exemption for unreported audit results may be allowed in certain

circumstances, for instance, security interests. Nonetheless, these exceptions should not be too many in addressing government spending efficiency and effectiveness and maintaining public trust in an auditing institution. Kaltenback (1993:9-12) pointed out the case of the German government audit system under its democracy, which has fewer audits and reports withclassified security interests than would be the case under a monarchy, had led to better efficiency. Moreover, he stated that in the case of security interests, there are limited numbers of auditors involved; they protect classified information to safeguard government spending which leads to greater efficiency. Moreover, Hope (2008: 271) found that management and national culture affect the quality of financial reporting because auditors would be more willing to disclose findings in audit reports.

Publications for corporate organisations that belong to the public sector, such as state-owned enterprises (SOEs) may have different characteristics. According to Mulgan (2008b: 23),SOEs may resist if the audit results are reported to the Legislative and published to the public. This is due to the data and information relating to commercial sensitivity, as SOE has a private sector background and largely commercial orientation.

As independent auditors of SAIs, they are required to report their findings after examining the financial and performance of the public sector agencies to the public (Chaturverdi 1987: 32; Guthrie and English 1997: 13). In addition, current communication technology development provides the opportunity to publish audit reports electronically by presenting them on a website (Debreceny and Gray 1999:335-50). Based on their case

8 studies, Debreceny and Gray indicated that some public companies in France 9 , Germany and the UK 10 also provided a printed annual audit report version on their website. For the

Organisation for Economic Cooperation and Development (OECD) countries, externalaudit reports are published routinely (Bertsk 2000: 314).

Therefore, publication of audit reports through printed or electronic media is one indicator of the quality of information relating to acting on audit reports that provide information about the performance of the public service.

Realistic Audit Recommendations

One of the measurements for the quality of effective information in audit reports is theprovision of realistic audit recommendations. Wilkins (1995: 429) pointed out that the improvement in public sector accountability can be achieved through audit results and recommendations. This means that public sector audits can be effective if auditees put into action audit recommendations for better government performance and resource management, which will improve economy, efficiency and effectiveness.

8 www.ccomptes.fr (accessed on 26/03/2007). 9 www.bundesrechnungshow.de (accessed on 15/03/2007).

10 www.nao.org.uk . (accessed on 15/03/2007).

For this purpose, auditors have to provide realistic and practicable audit recommendations for auditees to implement in order to improve their performance and public administration in general (Taylor 1996:147-56). Gendron et.al. (2007: 110) underlined the essential nature of auditor ‘s expertise in issuing recommendations and constructing performance guidance measurements to improve the management of government.

Followup of Audit Report Findings and Recommendations

The quality of information is also indicated by the followup to the audit report findings and recommendations. The advantages of auditing can only be realised when findings and recommendations have been followed up. Following up of auditing can be in the form of discussion in Parliament and corrective action in government-auditedentities (Marsidi 2002:12-16; Thai 1992: 350). Without any followup from Parliament, the Executive, orinvestigators, audit reports are useless and public accountability cannot be enforced. This means that an audit office provides audit report information to raise political interest among Members of Parliament to follow up by presenting political oversight and control that offers further action. Moreover, Chowdhurry (2005: 905) suggested that effective monitoring and controlling is needed for the implementation of the audit follow-up recommendations.

The internal auditor of a government agency has an important role in taking corrective action based on audit recommendations. Triadji (2004:9-12) described a situation where there was an absence of internal control to prevent corrupt government The internal auditor of a government agency has an important role in taking corrective action based on audit recommendations. Triadji (2004:9-12) described a situation where there was an absence of internal control to prevent corrupt government