1. Analysis of Audit Reports OBJECTIVES AND TECHNIQUES 28 NOVEMBER 2014 - SOUTHERN SUN, OR TAMBO AIRPORT

2. Public Sector Overview  PAC and governance – PAC as the ultimate audit committee for the public sector  Central government (public sector accounting - IPSASs) vs. parastatals (International Financial Reporting Standards (IFRS))  Methods of analysis, therefore, differ  Financial statements vs. appropriation accounts vs. value for money  Report to management – controls  Controls and impact on financial reports – modification of an audit opinion  The public sector is a significant part of the economy.  Therefore, any improvement in public sector performance would have an effect on economic growth and reduce stress on fiscal policy.

3. Roles and responsibilities From your understanding and your jurisdiction, define the roles of the following in the audit process:  Role of the ministry, parastatal finance function  Role of the auditor general  Role of the PAC

4. Role of the “Accounting Officer” To prepare financial statements in accordance with the set accounting standards.

5. Role of the Auditor To express an opinion on the financial statements. Raise control weaknesses, risks and implications and make remedial recommendations.

6. Role of the PAC To analyse the audit reports and make recommendations for monitoring and implementation. Prepare reports for tabling in the House. Enforce public participation in the accountability process.

7. How does the PAC discharge the analytical role? Performance can be evaluated from three perspectives:  compared internally over time (prior periods to current period),  compared to similar processes in other organisations or jurisdictions (benchmarking),  and compared to external sources of information (standard empirical data). And using various financial analysis methods:  Ratio analysis  Cash flow analysis  Comparative financial statements  Trend analysis  Variance analysis

8. Ratio Analysis Definition - analysis of the interrelationship between two financial figures. Examples - liquidity ratios - solvency ratios - profitability ratios - etc

9. Cash flow analysis Comparative financial statements Trend analysis Cash flow analysis - analysis of the change in the cash position during a period. Comparative financial statements - analysis of financial statements of the entity for two years or of the two entities of similar type. Trend analysis - analysis of the trend of the financial ratios of the company over a number of years greater than two. Trends to analyse -Expenditure trends -Vote trend analysis -Project development rate -Resource utilisation rate -Etc

10. Variance Analysis Comparison of the actual expenditure incurred or income raised to budgeted income or expenditure. Can be a positive (favourable) or negative (unfavourable) variances depending on the objectives

11. Analysis Toolkit Overview 1.Overview of the Analysis Toolkit 1.Separate worksheet for appropriation accounts and SE&P 2.Drop down menus 3.Recommended generic follow up questions on findings 4.Category analysis per key AG findings 5.Category score and final score 6.Fail or pass result (sub-classified for action points) 7.Summary of results 8.Action points 2.Analysis Rules 1.Complete each question – answer and rating 2.2 or 3 score requires follow up question 3.Only drop down cells should be completed 4.Overall summary and action plans

12. Analysis Toolkit Focal Areas Corporate Governance Management of Assets - Property, plant and equipment - Receivables and revenue - Inventories - Cash and bank, investments, investment property Policies and procedures Procurement procedures Supporting documentation and fraud Regulatory compliance Audit opinion Financial analysis Value for Money Citizen Feedback Model

13. Presenter Details Clive M. Munemo CA(Z), RPA(Z) Managing Consultant Clive and Associates (Zimbabwe) +263 773 022 673 clive@cliveandassociates.com clive.munemo1