| Review of: | Audit in a democracy: The Australian model of public sector audit and its application to emerging markets by Paul Nicoll |
|---|---|
| Reviewed By: | Jeremy Lonsdale |
| Reviewed in: | Public Administration |
| Date accepted online: | 14/01/2008 |
| Published in print: | Volume 85, Issue 03, Pages 857-883 |
Reviews
Traditionally, state audit offices have been seen as quite closed organizations, undertaking what to some outsiders can appear arcane, or (in Michael Power's phrase), 'obscure', activities. Paul Nicoll's book - the work of an experienced practitioner at the Australian National Audit Office - is therefore a welcome addition to the still limited literature on what they do and how they do it, as well as a valuable perspective on the role of public audit within democratic government.
The book is in two distinct parts, serving different purposes. The first is an introduction to the Australian model of public sector auditing, covering both national and state levels; the second half, an examination of ideas from the Australian experience that developing countries may want to apply as they extend their audit capacity: especially in circumstances where market economies are emerging. In this case, Nicoll is not prescriptive; rather, he considers 'it is up to citizens of developing countries to establish the role of public sector audit and to define the way in which public sector audit does its work'. As he explains, the book arises from the belief that issues around the reform of public sector audit are similar in different parts of the world, and that a smoothly running audit office is essential for good government.
Nicoll characterizes the development of the Australian model of public sector audit as a slow evolution for almost the whole of the twentieth century until 1997, when 'there was rapid change, with general acceptance that the Auditor-General's principal task was to serve Parliament but in an independent way'. He suggests that legislation in that year has allowed increasingly broad performance audits to be undertaken and notes that the absence of a definition of public sector audit has enabled the Audit Office to state its preferred outcomes as: independence assurance to Parliament on public sector reporting, administration, control and accountability; and improvements in public administration.
This list highlights the interesting question of what is the role of a state audit office today. Nicoll suggests that the Auditor General's interpretation of his role as 'provider of an affirmation of the sound performance of government entities contradicts the image of the auditor as fault-finder '. Identifying where it wants to place itself is a key dilemma for the modern audit office at a time of public sector reform: how does it help and hold to account at the same time. To Nicoll the 'art' of public sector auditing is for the office to 'dance with its two partners' - the legislature and government - simultaneously rather than struggle with them.
One substantial chapter of the book focuses on performance audit, an aspect of audit that has perhaps received the most external examination, including in this Journal. Interestingly, Australian state and territory legislation defines performance audit in different ways, with three jurisdictions applying a narrower definition than suggested by Australian Auditing Standards, and three extending it. In general, Nicoll reports that performance audits have been used to assess efficiency and economy, but not effectiveness. Another interesting observation is that there has been limited cooperation between audit offices at national and state level. To Nicoll, both these facts have led to parliamentarians having only a partial view of the use of public funds. The usefulness of audit work is also considered. Nicoll notes that most parliamentarians have showed little interest in audit matters, a point he suggests is simultaneously a sign of confidence in the Audit Office and an indication that its work was not relevant to most parliamentarians and committees.
The second part of the book addresses a series of more general issues for state audit offices, issues that will be familiar to practitioners, and draws on examples from a wider range of countries. It considers the importance of independence and distance from both government and the legislature, as well as the auditor 's different roles - providing assurance, helping to make changes in public administration and offering advice - and the question of who pays for audits. It examines the wider administrative conditions that assist an audit office to do its work, including requirements on organizations to produce performance information and have internal controls, and the development of accounting standards. Other chapters cover the amount of freedom needed by state audit offices, the necessary reporting powers, as well as practical advice on reducing costs and increasing impact. The second part of the book is, therefore, a helpful guide to what audit offices should and should not be aiming to contribute, grounded in practical examples and linked to international auditing standards. All this is set against the background of assumed ongoing public sector reform that is challenging the role of audit offices in developing countries. Nicoll's conclusion is clear - the state audit office has a very important role to play in modernization but can never be a principal agent of change since it neither controls agency management nor resources.
Despite the comprehensive coverage, Nicoll leaves some questions unanswered. It is not clear, for example, why different Australian states and territories have chosen to permit their audit offices to examine effectiveness or not, or what the implications of not doing so have been for a proper understanding of the performance of government. Equally, there is some interesting work to be done about why some audit recommendations but not others are implemented, and to assess the impact on public administration of the Audit Office. Nicoll is not alone in being unsure of the contribution of audit to the maintenance of confidence in public administration and to public sector reform over a period of considerable change.
Nicoll's book is a readable and thoughtful analysis, including helpful summaries at the end of each chapter and at the halfway point. The first half will certainly be of interest to those seeking an understanding of public sector audit in Australia. The second half will be of particular interest to practitioners in developing countries. From either perspective, this is a valuable contribution to the literature on state audit.