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The purpose of this guideline is to provide information and assistance with respect to the appointment of auditors by the governance boards of government organizations.
A government organization is defined as a “corporation or other organization that is within the government reporting entity, other than the government itself.” The government reporting entity is “the government as reported through the consolidated revenue fund” plus other organizations determined by the government to be part of the government reporting entity.
The significance of the government reporting entity is that it is the basis upon which the Government reports annually to the Legislative Assembly in the Public Accounts. The Public Accounts provides the Legislative Assembly, and the public, with audited financial statements—including statements of assets and liabilities, and revenues and expenses—for the government reporting entity.
The Auditor General serves the Legislative Assembly and the people of British Columbia by providing independent assessments and advice with respect to government accountability and performance. The mandate of the Auditor General is set out in the Auditor General Act, SBC 2003, chapter 2.
The diagram below shows the relationships between the Government, the Legislative Assembly and the Auditor General.
The Auditor General is the auditor of the government reporting entity. The government reporting entity consists of ministries, Crown corporations, and other government organizations such as universities, colleges, school districts, health authorities, and similar organizations that are controlled by or accountable to the Provincial government.
The auditors of most Crown corporations and other government organizations are private sector firms appointed by the governance boards of these organizations (boards of directors, boards of trustees, etc.)
A committee of the Legislative Assembly, the Select Standing Committee on Public Accounts, with advice from the Auditor General, determines which Crown corporations and government organizations will be audited by the Auditor General and which will be audited by private sector firms. Once these decisions are made, the Auditor General is responsible for administering the auditor appointment process in accordance with the direction provided by the Public Accounts Committee.
The Auditor General discharges his responsibility by advising the governance boards of all government organizations of the Public Accounts Committee's decisions. The Auditor General also provides guidance on the selection and appointment of other auditors by boards, including advice on the scope of audit work that is required to enable the Auditor General to provide an audit opinion on the Summary Financial Statements of the Province.
Except for those organizations for which the Public Accounts Committee has decided the Auditor General will be the auditor, the selection and appointment of financial statement auditor is the responsibility of the governance board of the organization. The board, or a committee of the board, is responsible for determining, managing and controlling the specific process used to select and appoint an auditor. The board is accountable for ensuring the effectiveness, value-for-money and fairness of its process.
The basic requirements for an auditor include competence, independence and absence of conflict of interest. A governance board will also want to be satisfied that the auditor will provide it (the board) with the information it requires to discharge its responsibility to oversee management of the organization.
The Auditor General has developed a template for a Request for Proposal that boards may wish to consider in developing their own processes. Boards may also wish to consult with legal counsel and procurement professionals, such as the Purchasing Services Branch in the Ministry of Management Services, to ensure that their processes are appropriate.
In order to provide an audit opinion on the Summary Financial Statements of the Province, the Auditor General must be assured that the financial statement audit process for government organizations is sufficient to rely on. In order to obtain this assurance, the Auditor General will carry out directly a limited number of audits and will participate, to varying degrees, in some other audits. In order to facilitate his participation in those audits, the Auditor General will request that the contracts setting out the terms of engagement between the governance boards of government organizations and their auditors include specific provisions for including the Auditor General at key points of each audit. Participation of the Auditor General may vary from year to year and from organization to organization.
In order to fulfill his professional obligations, and to meet generally accepting auditing standards, minimum involvement of the Auditor General will require the Auditor General to communicate with the auditor of a government organization concerning his intended reliance on the work of that auditor. In other cases, the Auditor General will be extensively involved in the planning, examination and reporting phases of the audit. The involvement of the Auditor General will supplement, not replace, the work of the board’s auditor and will neither relieve nor interfere with the auditor’s duties to the board.
The diagram below shows the process to be followed for government organizations engaging private sector auditors.
If you have questions regarding this guideline, please call:
Doreen Sullivan
phone: 250 356-2627
e-mail: dsullivan@bcauditor.com
fax: 250 387-1230
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