Providing an independent opinion
Parliament requires reliable information on the operation of NSW government entities. We provide parliament with independent audit opinions on entities’ financial statements, increasing their reliability and credibility. Our audits comply with professional quality and independence requirements as parliament needs to be assured our audits are independent. Our mandate further assures our independence by restricting us from providing non-audit services that other accounting firms provide. We completed 426 financial audits this year compared to 419 last year.
In addition to audits of individual entities, we audit the financial statements at the whole-of-government level, the Total State Sector Accounts. These accounts provide financial information to parliament on a State-wide basis, for example total State borrowings.
We also provided 79 other assurance audits and reviews (98 last year) to help entities attest compliance or acquit their grant revenues.
Number of audited entities
Modified auditor’s opinions and conclusions
During 2016–17, we issued 20 modified audit opinions and conclusions in our Independent Auditor’s Reports. This represented four per cent of the 505 assurance engagements we conducted. Modified opinions and conclusions included:
- 1 disclaimed opinion on an entity’s financial statements
- 1 qualified opinion on an entity’s financial statements
- 1 qualified opinion on a special purpose financial statement to acquit funds received from the Commonwealth
- 16 qualified conclusions on reviews of compliance with requirements
- 1 qualified conclusion on a review of financial information.
Modifications of audit opinions or review conclusions can be qualified, adverse or disclaimed:
- Qualified opinions and conclusions are issued when financial statements contain material misstatements or sufficient appropriate audit evidence is not available; and the impact is material but not pervasive
- Adverse opinions and conclusions are issued when misstatements in the financial statements are material and pervasive
- Disclaimed opinions and conclusions are issued where sufficient appropriate audit evidence is not available and the effects may be material and pervasive.
During 2016−17, we repeated four modifications, one fewer than last year. We continue to notify parliament of these modifications and encourage the entities concerned to act on our recommendations to address the underlying causes.
We issued 16 new modified opinions and conclusions in 2016−17.
Modified audit opinions and conclusions as a % of total assurance engagements
Comparing costs with other audit offices
We compare our financial audit costs with other Australian audit offices. In 2016–17, our cost per financial audit opinion was $88,699, three per cent less than last year. Our cost per financial audit opinion was two per cent more than the average of other Australian audit offices.
Cost per financial audit opinion ($’000)
Our financial audit volumes
The results of our 2016 financial statement audits were reported to parliament in 13 volumes of the Auditor-General’s Reports to Parliament in 2016–17.
All volumes focus on particular cluster industries, except for one special report which provided an overview of 2016, and one volume which focused on members of parliament and their entitlements. All volumes included audit insights broadly classified into four areas: financial and performance reporting, financial controls, governance, and service delivery.
The industry-based volumes covered:
- Finance, Services and Innovation (including Insurance)
- Family and Community Services
- Law and Order, Emergency Services and the Arts
- Planning and Environment
- Premier and Cabinet
- Industry, Skills, Electricity and Water
- State Finances
Timeliness of reporting to parliament
We recognise parliament and other stakeholders need timely reports to allow prompt scrutiny of NSW Government entities’ financial position and performance. For entities with a 30 June balance date (most of our clients) our internal benchmark is to report to parliament before the end of the calendar year. Our other financial audits (mainly universities) have a 31 December balance date and our reporting to parliament benchmark is by the end of May each year.
Although we reported 98 per cent of our State Government entities’ audits to parliament by our end of calendar year internal benchmark, we did not report on our university audits until 6 June 2017, after our end of May internal benchmark. Overall, this resulted in 79 per cent of our financial audits being reported to parliament on time.
Financial audits reported to parliament on time
The year ahead
In 2017–18, we will continue to provide assurance to parliament. In addition, we will strive to provide greater insights to increase our impact on agencies.
Under our strategic initiative ‘Influencing for Impact’ we will:
- improve engagement with our external stakeholders
- explore alternate audit approaches that improve the relevance, value and impact of our financial and performance audits.
Under our ‘Local Government’ strategic initiative we will be releasing our first Auditor-General’s Reports to Parliament on the local government sector, including one financial audit report and three performance audit reports. These reports will strengthen assurance to parliament on the local government sector in New South Wales.
For more information on our strategic initiatives see the year ahead.