NAO provides assurance to the National Assembly on the proper accounting and use of public resources and fulfils its audit mandate by carrying out, mainly, two types of audits, namely, Regularity Audit and Performance Audit.
Regularity Audit involves the:
✓ Examination and evaluation of financial records and expression of opinions on financial statements.
✓ Audit of accounting systems and transactions including an evaluation of compliance with applicable statutes and regulations.
✓ Audit of internal control and internal audit functions.
✓ Reporting of any other matters arising from or relating to the audit that the Supreme Audit Institution considers should be disclosed.
Performance Audit is an independent, objective and reliable examination of whether Government undertakings, systems, operations, programmes, activities or organisations are operating in accordance with the principles of economy, efficiency and effectiveness and whether there is room for improvement. It seeks to provide new information, analysis or insights, and where appropriate, recommendations for improvement.
In conjunction with the audit of financial statements and also as part of Performance Audits, NAO carries out Compliance Audit. Results are reported under the “Other Legal and Regulatory Requirements” section of the Financial Audit report and in Performance Audit reports.
Audit Approach for Regularity Audit
NAO conducts audits in accordance with the International Standards of Supreme Audit Institutions (ISSAIs) except for the audit of State-Owned Companies assigned to the Director of Audit, which are carried out in accordance with the International Standards of Auditing. We adopt a risk-based approach in the audit of Ministries/Departments including Rodrigues Regional Assembly, and other Public Sector Bodies including Statutory Bodies and Local Authorities.
The audit starts with the planning process which requires an understanding of the entity to be audited and its environment in order to identify risks. This is followed by an assessment of those risks which involves considering a number of factors, namely, the nature of the risks, relevant internal controls and the required level of audit assurance.
We use sampling methods to select transactions and balances for testing. We look for reasonable assurance as it is not cost effective to seek absolute certainty. Audit sampling enables us to obtain and evaluate audit evidence about some characteristics of the items selected in order to form or assist in forming a conclusion concerning the population from which the sample is drawn.
During the audit, we design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
An exit meeting is held with the auditee/client to discuss the audit findings at the end of an
audit and thereafter a Management Letter is issued.
For the audit of other Public Bodies including Statutory Bodies and Local Authorities, our objective is also to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatements, whether due to fraud or error.
Current Reporting Practices
Audit Report – Government and Rodrigues Regional Assembly
An Audit Report is issued annually by NAO, upon the examination and audit of the accounts of Government (Ministries and Government Departments) and the Rodrigues Regional Assembly. In accordance with Section 20 of the Finance and Audit Act, the report is submitted to the Minister responsible for the subject of finance, to be laid in the National Assembly.
At the conclusion of an audit, an exit meeting is held with the auditee/client to discuss the audit findings. Then, a Management Letter is sent to the auditee/client giving the latter the opportunity to give his explanations/comments in writing on matters raised therein.
NAO, thereafter, identifies audit findings which are considered significant and of a nature to be brought to the attention of the National Assembly and communicates them to the respective Ministry/Department through “Reference Sheets”. The Accounting Officers have the opportunity to give their comments on the truth and fairness of these audit findings before their inclusion in NAO’s Annual Audit Report. A summary of the comments of the audited entity are also included in the Audit Report, where appropriate.
Reports are also issued by NAO, on Performance Audits carried out in accordance with Section 16 of the Finance and Audit Act. These reports are submitted to the Minister responsible for the subject of finance, to be laid in the National Assembly.
Audit Report – Statutory Bodies, Special Funds and Local Authorities
NAO issues an Audit Report upon the examination and audit of the annual report/financial statements of each Statutory Body (SB), Special Fund (SF), and Local Authority (LA) falling under its mandate.
The report is submitted to the Board of the SB or the management committee of the SF, as the case may be, in accordance with the Statutory Bodies (Accounts and Audit) Act or the relevant SF Regulations, respectively. For LA, the Audit Report is submitted to the Council and the Minister (responsible for Local Government) in accordance with the Local Government Act.
In the Audit Report, the Director of Audit expresses an opinion on whether the financial statements show a true and fair view of the financial position, financial performance and cash flows of the entity, in accordance with the relevant accounting framework. He also expresses an opinion on whether the activities, financial transactions and information reflected in the financial statements are, in all material respects, in compliance with the laws and authorities which govern them.
All audit findings are reported in a Management Letter (ML) addressed to management, prior to the issue of the Audit Report. The ML includes shortcomings relating to the financial statements as well as findings on the economy, efficiency and effectiveness of operations. The audited entity is given the opportunity to comment on matters raised in the ML and, if necessary, to amend the financial statements before the issue of the Audit Report.
Performance Audit
Under the Finance and Audit Act, the Director of Audit is mandated to carry out Performance Audit and to report on the extent to which a Ministry, Department or Division is applying its resources and carrying out its operations economically, efficiently and effectively.
Performance Audit Steering Committee
A Performance Audit Steering Committee (PASC), chaired by the Director of Audit and comprising five members approved pre-study memos and work plans of Performance Audit topics selected.
Impact of NAO Audit Reports
NAO makes recommendations in its reports, on how Government can obtain value for money, achieve better efficiency and improve its services.
As required by the International Standards for Supreme Audit Institutions (ISSAIs), Supreme Audit Institutions (SAIs) should report on follow-up measures taken by audited entities with respect to their findings and recommendations. The follow-up mechanism is intended to:
Enable the SAI to report on the results of its follow-up actions appropriately to the legislature, executive, stakeholders and the public;
Encourage the audited entity to take relevant corrective actions; and
Demonstrate the value and benefit of the SAI and the impact of the audit report.
