LETTERS: Why post-mortem audit approach is ineffective

The Public Audit Act 2007 gives the Controller of Budget and the Auditor-General the mandate to audit all public entities and provide a qualified opinion to Parliament at least once every financial calendar year on matters arising from their audit work. Lately, mainstream media has been awash with accounts of financial impropriety in a number of public entities running into millions of shillings as highlighted by the Auditor-General.

A number of inquests emanating from audit reports are ongoing in Parliament. However, the frequency by which embezzlement of public resources get reported across the governance structures leaveS one wondering whether compliance audit approach is effective. To start with, revealed acts of fraud have over 50 percent chance of recurring thus revealing weaknesses and ineffectiveness of the post mortem audit approach in examining compliance to financial regulations and procedures in conduct of public affairs.

Incidentally, as a matter of procedure, much as financial audit is designed to uncover faults in the public expenditure trail, audit reports generated are expected to highlight weak points that abet compliance and advice on probable remedies. That being the case, it is high time relevant authorities reflects and evaluate on today’s audit trail, systems and procedures

Following the establishment of devolved units in 2013, financial audit became more complex, time consuming and taxing. For this reason, and without preempting the importance of compliance audit to financial management, the country had better consider employing financial risk management framework instead. This approach, assesses risk exposures beforehand capture them for control and put in place necessary administrative control measures to avert shortfalls.

Again, the approach deliberately explores appropriateness of applied controls and systems effectiveness.Actually, risk management involves gaps identification, evaluation and prioritization followed by coordinated and economical resource application to monitor and control risk occurrence and or minimize its impact in case of an occurrence.

Under this approach, strong internal control systems are advanced in managing exposure to operational risks through prevention or and early detection and correction of errors and irregularities. Where established, control systems are critical in addressing loss of public resources, malpractices and corruption in public realm.

Additionally, they lay a foundation of discipline and structures made functional in conduct of public affairs thus safeguarding integrity, ethical behavior, competence, participation and responsiveness. Still, it is easier to monitor quality of formulated controls through regular performance tests and design interrogation.

There is need to depart from the traditional audit philosophy that is reactive, detective and over relies on end year reviews and embrace tailored control concept that will enhance real time operational efficiency, proactive and one that will focus on prevention, detection and correction of errors and irregularities, embraces information technology and produces accurate, complete and actionable audit reports.

Basically, automated audit trail unlike paper based one will reduce use of hard copy documents, records duplication and avoidance to laid down procedures and rather make financial operations more effective, financial reporting more reliable and complete thus guaranteeing compliance to established laws, rules, regulations and policies. Only then, will governance objectives and processes be adhered to.

Kiragu Kariuki, public policy and administration expert.