Audit priceless, prudent and too much for ScoMo

Tom Ravlic

Auditor-General Grant Hehir

The Federal Budget’s cut back in the funding of the Australian National Audit Office and the commentary that has followed the shaving of millions from the ANAO’s kitty reminds us of what audit costs, the limitation of scope of work and, of course, the limitations of an accountability function for which people pay.

The cost of audit is a perennial debate in the auditing profession. The fact that companies may not always want to pay a prudent amount for what some might consider to be a rather expensive but necessary service.

It is rare that the cost of audit gets headlines and then it is only when things are negative that the cost of audit starts being aligned with the provision of other services by the same firm that does the external audit.

The fact that some of the other services provided may not have any bearing on the audit will often not matter because it is looks rather than substance that tend to be the focus of the analysis.

A conflict of interest story based on perception will always be the sexier and much easier narrative to sell to a time-poor audience that has been conditioned by social media to pay attention to racy headlines.

It should also be borne in mind that audits are a requirement for those in the listed sector and more stringent requirements apply to the banks. Those requirements are in place for consumer protection and good governance with a healthy sprinkling of public interest thrown in for good measure.

Here is the hypocrisy that happens when we pivot to the public sector and the ability of governments to cut back funding to agencies that are engaged in accountability.

The audit function is critical at all times and not just when the government is shuffling money out the door as quickly as possible in the form of stimulus.

What the coalition has done is neuter the watchdog by forcing Auditor General Grant Hehir to be more selective about the inquiries the audit office undertakes rather than freeze the funding levels or increase them.

What is the underlying hypocrisy I referred to earlier?

The government is decreasing the amount that is being spent on the ANAO in the budget while at the same time there is an audit regulation inquiry being run the by Joint Parliamentary Committee on Corporations and Financial Services.

Public sector audits might be reducing in number but the parliamentary committee recommended earlier this year in its interim report that the scope of audits required under law be increased to include the audit of internal controls.

Politicians could at least learn the merits of leading by example and bump up the audit function’s appropriation if they are going to point to the corporate sector and suggest it needs to pay for auditors to do more work so companies have greater accountability to shareholders.