The Christmas reception season is in full swing. One of the things that I am finding is that several good friends have left or are about the leave the Audit Commission – one of the first casualties of the coalition government’s cull of public spending.
This has set me thinking about the future of public sector external audit after the Commission’s demise. Strong and effective external audit is key to the good governance of public sector organisations and the changes that are being implemented leave a question mark over the future direction of the role.
In the current era of austerity it is not only finance directors who will be under pressure to ensure that proper financial management is maintained, but also external auditors. In the case of the private sector, the spectacular corporate collapses on both sides of the Atlantic have led to big questions about the value and competence of external audit.
In the public sector, I believe the quality and integrity of the external auditor’s function has been under-valued. Nevertheless, an undue focus of detail and a need to please the now discontinued inspection routines has limited the scope for auditors to take a more strategic role.
Now, in a period where public sector organisations are likely to be pressurised into taking imprudent decisions for short-term budgetary concerns, the role of the external auditor in supporting good governance will be a challenging one. While focus on the detail of accounts is important, I believe there is a need for external audit to step out of the detail and actively express opinions on the strategic financing in public sector organisations in this particularly difficult period.
With the abolition of the Audit Commission a greater emphasis will now be on the individual firms to take up the challenge and create this enhanced and proactive role. It does, however, give a unique opportunity to further add value to the public sector and I hope that the audit community will be up to the challenge.
I believe that external audit should have a key roll in ensuring the proper financial governance and strength of public sector organisations and, in the new, tougher business environment, there is real opportunity for the providers of external audit to demonstrate the added value to public bodies and ultimately the taxpayer that supports them.
Stephen Fitzgerald is director of finance at the London Borough of Hounslow
