Abstract
This paper assesses the job of scrutiny and oversight in public services by examining the role of the internal auditor (IA) and external auditor (EA) and their relationship with the audit committee (AC) in two distinct English public sector environments. The research uses an exploratory qualitative case study approach based on semi-structured interviews, AC meeting observations, and documentation reviews. The study acts as a starting point to examine the effectiveness of governance arrangements during a period of change in the UK public sector. The research provides evidence of good triangulation between the work of the IA, EA, and AC. Nevertheless, having close interaction between EAs and ACs and a crossing over in terms of responsibilities may lead to a conflict of interest and raises serious doubts about the independence and objectivity of the EA. This needs to be closely monitored over the coming years. Due to the diversity and wider and more complex accountability relationships and intricacies found in public sector organisations the study highlights the need to consider additional factors to the analysis of simple principal agency theory assumptions. The research further provides evidence on the existence of loosely coupled CG structures within the roles of the EA and IA within local government. This is one of the few papers which explores the IA and EA roles and their relationship with the AC in an organisational and institutional setting different from the private sector
Highlights
This study examines the changing role of public sector oversight in the UK
The internal auditor (IA) usually reports through the management route first, which means that the personnel responsible from the management side meets monthly with the head of IA to go through the progress of the IA plan and any emerging issues before meeting with the audit committee (AC)
The AC must get a sign-off from the IA in terms of reasonable assurances that the internal controls are working effectively and that the major risks are within an acceptable level, to be able to certify the integrity of the accounts in the organisation
Summary
This study examines the changing role of public sector oversight in the UK. It focuses on the role of internal and external auditors and their relationship with the audit committee in two distinct public sector environments. This study investigates the roles and relationships between the AC, IA, and EA in two distinct public sector environments, namely foundation trusts (FTs) and local authorities (LAs). The choice was made on the two largest public-sector areas with distinct histories and characteristics, and which have been undergoing significant changes especially in terms of public audit and governance. This would offer suitable evidence to examine such relationships. FTs were created and set up as separate and independent legal entities Through their centralized top-down management structure, their governance model and structure are the closest in similarity to a private sector CG model. LAs, which are political in nature, are created by Acts of Parliament and are set up as statutory autonomous bodies, independently elected, and can raise taxes locally
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