Public Sector Audit Research Articles

Current auditor expertise and future relevance of innovative audit technology: evidence from Indonesia public sector auditor

ABSTRACT The COVID-19 pandemic has inevitably accelerated technology adoption in almost all industries, including the auditing industry. Indonesia’s supreme audit institution (Badan Pemeriksa Keuangan-Republik Indonesia – BPK-RI) as a government auditor had to use remote audit technologies in conducting state financial audits. Despite the widespread adoption of digital technologies in public administrations, little attention has been paid to the expertise level of auditors as the main users of audit technologies. This study aims to investigate current auditor expertise, and the future importance, of 18 innovative audit technologies identified from relevant studies. In addition, this study also aims to compare the importance of the technologies with current auditor expertise to identify the relevance-knowledge gap (expertise gap). We surveyed state external auditors (supreme auditors) from Badan Pemeriksa Keuangan Republik Indonesia – BPK-RI. We used t-test and deviation analysis to analyse the data. Cloud computing, self-service reports, and scanbots are perceived as the most relevant technologies, and auditors perceive their knowledge of most technologies as moderate. The results also reveal an expertise gap ranging from moderate to high across all the innovative audit technologies. It appears crucial for policymakers to focus on educational efforts to bridge this gap.

Audit Expectation Gap of Government Auditees on the Duties of Public Sector Auditors in Sri Lanka

Audit Expectation Gap of Government Auditees on the Duties of Public Sector Auditors in Sri Lanka

Implementation of Public Sector Audit Committee Guidelines: A Case Study of the Ministry of Finance Audit Committee

This study critically examines the implementation of public sector audit committee guidelines within the MoF Audit Committee. Employing a comprehensive case study approach, the research delves into primary documents and conducts structured and semi-structured interviews with both the MoF Audit Committee and relevant stakeholders. Guided by best practices outlined in H.M. Treasury’s Audit and Risk Assurance Committee Handbook and the IIA’s Independent Audit Committees in Public Sector Organizations, the study establishes that the MoF has successfully instituted an audit committee in adherence to the principles and elements prescribed for public sector audit committees. While acknowledging this achievement, the research also identifies areas warranting improvement in the implementation of the audit committee. These findings underscore the importance of continual refinement to ensure optimal effectiveness and alignment with evolving best practices. The study contributes valuable insights to the discourse on public sector audit committee performance, offering practical recommendations for the MoF and other entities seeking to enhance their audit committee implementations within the broader context of public sector governance.

Literatur Review: Pengaruh Audit Kinerja terhadap Akuntabilitas Publik dengan Pengawasan Fungsional sebagai Moderator

A performance audit is an audit activity systematically and objectively based on the type of evidence to assess the efficiency, effectiveness, and economics of the audited entity's operations to improve unit operations and achieve good public accountability. This research aims to get to know more about how much influence public sector audit performance has on public accountability through functional oversight that acts as a moderator. This research is a qualitative research type, in which public sector organizations are the object of the research being studied. Conducting research methods in the form of a literature review by analyzing books and scientific writings that have the same title and discussion, so that there are 3 journals taken randomly. This study found that there is a significance between Performance Audits on Public Accountability and Functional Supervision in moderating performance audits on Public Accountability.

A Review on Risk-Based Audit Approach: Malaysian Public Sector’s Perspective

Purpose: This study aims to understand the Risk-Based Audit (RBA) approach, the advantages of RBA, RBA in the Malaysian public sector, and the issues and challenges inimplementing RBA in the Malaysian public sector. Design/ Methodology/ Approach: A library search and evaluation of earlier literature reviews were conducted on the topic of RBA and internal auditing that covers online and print sources, journal articles, newspaper articles, and official legal documents. Findings: RBA is a methodology that provides an independent and objective opinion to an organisation's management, determining whether the management of its risks is on acceptable levels. The strength of RBA lies in the distinct nature of this audit approach, which focuses on the business risk and factors triggering the risk and resulting in a more effective and efficient audit. Several issues and challenges were identified in the implementation of RBA, especially in Malaysia: (1) legislation requirements; (2) lack of resources; (3) limited access to data; and (4) duplication of work. Research Limitations/ Implications: The data pertaining to public sector internal audit reports are considered confidential and sensitive. This aspect placed limitations on the depth of the collected insights. This study also focused on the data obtained mainly from secondary sources, leading to results that cannot be generalised to other countries. Practical Implications: Findings from the document review and identification of current problems may offer indications to the Accountant General's Department of Malaysia (AGD) on the current usage of RBA. Therefore, subsequent actions are required to improve internal audit work. Originality/ Value: This study discussed the current state of RBA applied by the internal auditors in the Malaysian public sector. This finding may encourage future researchers to highlight the methods of integrating a comprehensive RBA that would fulfil the 3Es (effective, efficient, and economy) for the benefit of internal auditors, particularly in the Malaysian public sector. Keywords: Risk, internal audit, public sector, Accountant General's Department of Malaysia (AGD).

Supreme Audit Institution Recommendations and the Legal System: The Case of Indonesia

Abstract The audit recommendations of the Indonesian supreme audit institution (Badan Pemeriksa Keuangan, BPK) acquired new significance after the collapse of the authoritarian state in 1998 and constitutional amendments in 1999–2002 that reformed the regulation and institutional governance of public sector audit in Indonesia. However, while the reform of public sector audit regulation was carried out through a strong adoption of private sector audit standards and the Westminster SAI model, the BPK retained some of its Napoleonic legacy. This syncretic organisation led to confusion about the BPK’s role and position in the Indonesian legal system. Using a historical and case study approach, this paper analyses the relationship between the BPK’s audit recommendations and the Indonesian legal system. It argues that it is important for the BPK to develop auditing standards that take full account of higher rules, administrative law, and national interests, or at least not to adopt and abolish auditing standards that are counterproductive to its judicial function – not merely to accommodate private international law instruments developed by private non-state actors operating outside the legal framework of a sovereign state.

Perception on Audit Expectation Gap of Public Sector Audit in Nigeria

The exponential rise in corruption has necessitated the call for transparency in financial management in Nigeria. The public is dissatisfied with Auditor General’s reports as not been credible. While the public is dissatisfied with the performance of the Auditor General, the Auditor General Office thinks otherwise. The study employed four stakeholders groups (Legislature, Accountants, Bankers and Auditors) to explore the feelings of the society. The study revealed most respondents admit the present audit Act does not address the lack of transparency, accountability, dearth in human capacity, training, non-accessibility of public sector audit reports and great influence on reports due to environmental, social, economic and political factors. Highlighted also are disagreements between the auditor group and other respondents groups in mandatory training of audit staff, present audit team composition effectiveness and need for multi-disciplinary team composition. The study thus recommend urgent review of the Audit Act, enhancement of continuous professional training in modern forensic accounting techniques, guaranteed social security and protection of audit staff, the Auditor General be made to report to an Audit Commission whose membership should be drawn from professional bodies to avoid political influence from the executive and audit teams mandatorily be made to be multi-disciplinary in composition and a ban on auditors rendering non-audit services to clients in the course of their service.

Impact of Public Sector Auditing in Promoting Accountability and Transparency in North Central Zone of Nigeria

The gap in confidence between the citizens and elected officials in Nigeria forms the background of this study. As such, financial and performance audit was examined on accountability and transparency among North Central states of: Benue, Kogi, Kwara, Nassarawa, Niger, Plateau and FCT. The specific objective of the study is to determine to what extent the audit of the public sector helps to narrow this gap in confidence between the activities of elected public officials and the citizens. Spearman regression analysis was used in the study. Result showed that both financial audit and performance audit is statistically significant in explaining accountability and transparency among the states. As such, strengthening the audit process in respective states is mentioned as one of the recommendation.

CONCEPTUAL APPROACHES TO THE IMPACT OF ARTIFICIAL INTELLIGENCE ON THE AUDIT OF STATE ASSETS

In order to understand the impact of digital and artificial intelligence on auditing, it is important for professionals to understand the forces driving the Fourth Industrial Revolution. One of these forces is the explosive growth of data that fuels digital technology. Another force is the acceleration of the pace of change, which brings additional complexity in managing trust in an environment that is becoming increasingly insecure. For example, cyberattacks are becoming more complex and large-scale. Social media also creates new risks.
 In the field of auditing, first of all we need to understand the ongoing transformations, the types of risks and controls that need to be audited. On the other hand, these trends also open up new opportunities for accounting and auditing professionals.
 There is an active platform for audit professionals to understand these changes. For example, two years ago, an Ernst & Young survey showed that 74% of executives said they had no strategic plans for artificial intelligence. A year later, exactly the same survey results showed that 73% of managers are already ready to implement artificial intelligence (AI) or plan to implement it in the next 2 years. The second statistic provided by the World Economic Forum shows that 30% of every corporate audit will be performed by artificial intelligence by 2025. Finally, the OECD has counted more than 200 ongoing public sector audit blockchain initiatives in 46 countries.
 They show the importance of being prepared for this changing environment. To deal with these challenges, audit and finance professionals need to understand (i) how “what” they have to analyse is changing, (ii) the new risks that are emerging, (iii) the new opportunities offered by these disruptive technologies.

Audit Expectation Gap and the Credibility of Public Sector Audit: The Nigerian Case

The study investigated the impact of audit expectation gap on the credibility of Nigerian public sector audit. The survey research design was adopted to elicit responses from respondents on audit expectation gap in Nigeria. The source of data was primary. Descriptive and inferential statistics were used. The gathered data were scrutinized and analyzed by employing a ChiSquare quantitative analysis technique using SPSS. The results revealed that there was a significance impact of audit expectation gap on the credibility of audit report and that audit expectation gap can be eliminated or minimized through sensitization. It also found auditing education to be highly correlated to reducing the expectation gap. The study concluded that there was the existence of audit expectation gap in the Nigerian Public Sector. It therefore recommended that there was the need for continued sensitization of the public, by both the auditing profession and other stake holders on the role and duties of the auditor to avoid unreasonable expectation by the public.

Changing the boundaries of public sector auditing

PurposeThis paper aims at reflecting on the changing boundaries of public sector auditing. In particular the paper focusses on the opportunities and challenges for performance auditing, for sustainable development auditing and digitalised public sector auditing.Design/methodology/approachBuilding from the papers in this special issue, the authors draw on the literature on current development of public sector auditing (such as public sector auditing performance auditing, sustainable development auditing and digitalised public sector auditing) and propose a future research agenda.FindingsThe “changing boundaries” of public sector auditing may influence the difficulty for public sector organisations to manage the uncertainties and risks not only associated to corruption but also the public governance development (collaborative, digital and emergency governance). The authors speculate on the role that the “changing boundaries” of public sector auditing can play.Originality/valueThe paper contributes by setting new research avenues for future studies on public sector auditing in a post-new public management context.

FACTOR-FACTOR THAT INFLUENCING INDEPENDENCE OF PUBLIC-SECTOR AUDITOR: A LITERATURE REVIEW

The study of public sector audit is a relatively large, complex, unexplored and under-recognized field. Therefore, researchers call for more studies on public sector audit, especially in the context of developing countries. This article gives review of academic study pertaining to public-sector auditors’ independence and factors affecting public-sector auditors’ independence. This literature review is implemented based on published papers in 20th century in prestigious journals related to public sector audit. Firstly, we review and explain definition of independence clearly. Secondly, we organize our review around three main threats to public-sector auditors’ independence, namely, (a) political manifestos, (b) auditor tenure, and (c) relationship with auditee. For each of the threats, this study discusses the effects of each threat on the public-sector auditors’ independence. Additionally, we conclude that proofs together with recent changes, provides for future study on public-sector auditor’s independence.

Determinan Faktor Pencegahan Fraud Pada Inspektorat Kota Jayapura

This study aims to examine and analyze the effect of public sector audit, internal auditor competence and organizational justice on fraud prevention at the Jayapura City Inspectorate. The population of this study are employees at Jayapura City Inspectorate office. Sources of data in this study are primary data, which data or information obtained directly through the distribution of questionnaires. The measurement scale used by questionnaire in likert scale. The sampling technique used in this research is simple random sampling. The number of samples used are 52 samples. Data analysis in this study was carried out quantitatively, using multiple linear regression statistical tools (Multiple Linear Regression) with SPSS 26 statistical software. The results obtained are public sector audit implementation, internal auditor competence, organizational justice have a significant effect on fraud prevention at the Jayapura City Inspectorate

Factors Influencing the Auditor Independence and Affects to Audit Quality of Supreme Audit Institution of Vietnam

Purpose: The aim of this study is to explore the factors affect to auditor independence, and impacts auditor independence to audit quality of Supreme Audit Institution (SAI). Theoretical framework: This study explores factors affecting the auditor independence in public sector based on articles pertaining to public sector audits that were published in major publications in the 20th century. The theories were applied in order to build up research model about factors influencing the auditor independence and affects to SAI’s audit quality. Design/methodology/approach: Research using complex techniques to analyze complex relationships in the SEM model. This result tests research model in Vietnam from the perspective of the state auditors’ perception with 225 valid responses. Findings: The result found out three primary factors that affect the independence of public-sector auditors: political hegemony, auditor tenure and relationships with auditees. These factors have negative impact on state auditor’s independence, meanwhile auditor independence has a positive impact on SAI’s audit quality. Research, Practical & Social implications: The study contributes to existing literature by providing empirical evidence for there is no suitable audit quality measurement framework for SAIs. Originality/value: The results highlight strong importance of the auditor independence so that SAI Vietnam can have effective solutions to protect independence of state auditor from threats and improve the audit quality of SAI.

SCOPE OF AUDIT AND EFFECTIVENESS OF PUBLIC SECTOR AUDIT IN MALAYSIA

The public sector audit is a cornerstone for an effective corporate governance. However, its effectiveness largely depends on the scope of audit conducted in public sector agencies. Therefore, this paper examines scope of audit and its effects on the effectiveness of public sector audit in Malaysia. The respondents include the public sector auditors. By employing non-probability purposive sampling using 203 respondents and analysed using Partial Least Square Structural Equation Modeling (PLS-SEM), it was discovered that the scope of audit have a significant positive effect on the effectiveness of public sector audit. The finding reveals that performance and compliance auditing is crucial in public sector. A sound regulatory mechanism in terms of rewards and punishment should be fair and clear. This is important to ensure that the internal auditors strictly address the non-performance behaviours of the government. The research topic is relatively new in Malaysian public sector. This study is therefore likely to significantly contribute to the knowledge about how scope of audit operates in a public sector agencies context that differs significantly from the contexts of private sector agencies.

Antecedents of public‐sector auditors’ economic error communication: Evidence from Germany

AbstractTraditionally, public‐sector auditors are concerned with auditing the legality and regularity of government activities (compliance audits). However, such auditors are increasingly expected to conduct “performance audits” and communicate economic errors due to inefficiency, ineffectiveness, and poor economic decisions to the auditee. This type of role change is often accompanied by role stress. This study explores whether role stress—role conflict and role ambiguity—among local public‐sector auditors and their perception of their new business partner role are precursors of their communication of detected economic errors to their auditees. Therefore, survey data from German local public sector auditors (i.e., municipalities and counties) are gathered and analyzed. Our results show that compare to those in other organizations, auditors who work in more formalized public‐sector audit organizations are less likely to experience role ambiguity and role conflict and to communicate auditees’ economic errors more actively. Furthermore, we find that auditors who do not experience role ambiguity find it easier to see themselves as a business partner of the auditee and show more active economic error communication. The present study informs the literature on performance auditing by transferring the business partner concept to the context of public‐sector auditing and applying a role theory perspective to reveal drivers of economic error communication.

Public sector audit and influence the investment institutional background during a pandemic

The study purpose was to assess the impact of public sector audit on investment climate formation under the COVID‐19 pandemic and to develop recommendations to improve its effectiveness. For this purpose, a multistage research project was developed with the participation of auditors from Russia, Kazakhstan, and Ukraine. The project was based on the primary information obtained in the course of expert interviews. Testing the methodological approach with experts from these countries allowed proving the main study hypotheses, according to which the public sector audit has an indirect positive impact on investment climate formation. Such an audit influences the main impact factors through improving public administration efficiency, the fight against corruption, and the provision of the regulatory framework. During the testing, the main directions for improving public audit for a more favorable investment climate were formulated. The developed methodological approach makes it possible to obtain an expert assessment of the impact of the public audit on investment climate formation. At the same time, partial use of statistical methods makes it possible to replicate the study in the form of an expert interview, which increases its attractiveness for researchers in conditions of shortage of qualified interviewers.

OBSERVING THE REALITY OF PUBLIC SECTOR AUDIT IN ERADICATION OF CORRUPTION

This study aims to examine the reality of public sector audits in efforts to eradicate corruption in Indonesia. The analysis covers a number of aspects related to the implementation of public sector audits in supporting the eradication of corruption. The data was obtained using the perspective of seven experienced BPK auditors. In-depth interviews were conducted using semi-structured questions. The research results reveal a number of realities regarding public sector audits, namely the nature of public sector audits which are not specifically designed to routinely detect corruption, differences in the authority of examiners and law enforcers, and the relationship between auditors and auditees in the audit process. Therefore, to be more proactive in increasing the effectiveness of the public sector audit function in order to support the eradication of corruption, extensive efforts are needed both by individual auditors and by the BPK institutionally

The influence of public sector audit digitalisation on local government budget planning: evidence from Brazil

PurposeThis article analysed how data collection systems (DCS) developed by governmental audit organizations (Court of Accounts) affect budgetary planning within local governments.Design/methodology/approachEighteen semi-structured interviews complemented by six time-lagged interviews via WhatsApp were carried out with the actors involved in the preparation and auditing of the Medium-Term Expenditure Framework (MTEF) in Brazilian local governments. Documents such as the structured layouts of Courts' DCS and the publicised MTEF prepared by local governments were also analysed.FindingsThe findings indicate that Courts' DCS structured layouts reduce local governments' budgetary planning autonomy in elaborating their MTEF. It happens as the Courts' main driver is to make MTEF information auditable and not to improve the usefulness of information by governments. As a result, the planning choices of the local governments end up limited, not by the general legislation but by the rules established by the computerized systems of the Courts.Originality/valueThe paper's originality relies on demonstrating that the digitalisation of audit processes ultimately affects local governments' practices through structured layouts for the data collection on MTEF information - that impose rigidity on the budget planning process of local governments. The authors highlight the role of public sector auditing organisations as potential catalysts of reforms; however, this should be considered cautiously since the drivers and motivations of the organisation that sponsors public financial management reforms matter for overall reform effectiveness.

Cognitive Style and Personality in Fraud Detection: Experimental Study on Government Internal Auditors

This study aims to examine the perception of responsibility for detecting fraud in government internal auditors. This research is important to know the intrinsic factor of the auditor in his responsibility to detect fraud. These factors are the cognitive style and personality of the auditor. Personality is the novelty of this research based on the triangle model of responsibility. This study used an experimental design on 75 internal auditors of the South Sumatra provincial government. The results of this study are expected to be useful for scientific development in the field of accounting, especially public sector auditing. The results showed that the internal auditor with the field independent cognitive style had a higher level of perceived responsibility than the field dependent style in detecting fraud. Meanwhile, either a tolerant or intolerant of ambiguity of personality does not show a significant difference in detecting fraud for auditors. The benefit of the research results is that it can increase the preference for internal auditors in increasing competence in the task of detecting fraud.