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Risk Based Auditing in the Public Sector

Explore the Kenya Experiment on implementing risk-based auditing in the public sector. Learn about the phases involved and the impact on internal audit capacity development. Discover the principles adopted and activities undertaken during the Enlightenment, Education, and Empowerment phases.

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Risk Based Auditing in the Public Sector

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  1. Risk Based Auditing in the Public Sector The Kenya Experiment ICGFM Miami Conference May 2006

  2. Risk-Based Audit Concept • A powerful audit methodology • Easily understood • Not so easily practiced • Useful accountability ‘tool’ • Best practice

  3. The Kenya Experiment • Partnership with the IIA • One pilot country - Kenya • Two pilot ministries • Phased approach • Decision points • Agreed follow-through plan

  4. Internal Audit Capacity Development in the Public Sector The Phased Approach • Phase 1 - Enlightenment • Phase 2 - Education • Phase 3 - Empowerment

  5. Phase 1 - Enlightenment Principles Adopted • Aim for the Top • It’s more about Management than IA • Partner with the Profession • Deliver one Message • Bank and IIA must demonstrate agreement • Use media to attract a wider audience • Identify a Leader - No success without local, credible IA leadership • Involve the Client • Manage Expectations

  6. Phase 1: Enlightenment - Activities High Level Forum on RBA Approach • Co-ordinate IAG/WB/IIA effort at a senior level • Minister of Finance and PS Finance engaged and active • Public invitation • Media presence • PS panel discussion

  7. Phase 1: Enlightenment - Impact • Minister of Finance ‘decrees’ RBA Approach for all government • PS’s ask to be part of expanded pilot • IAG credibility goes up • Appetite for RBA increases in IAG • IAG and IIA in national news • Decision taken to proceed with Phase 2

  8. Phase 2 - Education Principles Adopted • Classroom Training minimized • Keep interest level high • Peer Group only - Add a sense of competitiveness • Stakeholders included - Spread the message and the concept (i.e. C&AG and Treasury) • Emphasis on Hands-On training • Maintain maximum participation • Get hands ‘dirty’ from the start • Deliver a Product - Stretch the group (i.e. the product and the time constraint) • Involve the pilot Clients - Engage them throughout

  9. Phase 2: Education - Activities • Classroom Training • 2 day interactive workshop • High expectations set up front • Hands-On Learning • Work done in both pilot Ministries • Teamwork for 8 days (new for IAG) • Engagement with senior management and PS (new for IAG) • Products developed within time limit (new for IAG) • Delivery - RBA Plan for 2 Ministries presented to PS (new for IAG) • Management Input • PS challenges/ RBA plan revised (new for IAG) • IIA Workshops

  10. Phase 2: Education - Impact Importance seen of: • Applying IIA Standards • Working as a Team • Engaging with PS • Agreeing an Audit Plan with Management Value-add to PS: • Value ofRBA rather than pre-audit • Direct link of audit work to Management business objectives Need demonstrated for: • Nationwide audits – especially for Health • Linkage with Provincial auditors • Ongoing, hands-on support and leadership from IAG Appreciation that RBA: • Forces a fundamental ‘rethink’ of Audit activities • Requires ‘guts’ • Is a cultural change Decision taken to proceed with Phase 3

  11. Phase 3- Empowerment Principles Adopted • Keep Pressure Up - Without it, there is quick reversion • Support the Leadership - It is a lonely job • Instill a sense of Pride - Value-added work inspires and energizes • Maintain Oversight and Follow-up • Mid-course corrections are normal • Agreed actions need to be verified • Develop the IA Profession - Work in tandem with the Profession locally • Spread the Concept Cautiously - Demand builds up quickly and can overwhelm

  12. Phase 3: Empowerment - Activities • Review work to date – team effort • Reengage with Management • Teams brought together again • Audit Plans and initial audits reviewed • Discuss what works and what does not • Agree Follow-up Action • Provide Training and Insight • A mindset change is a process • Counsel and Encourage the IAG • It is a lonely job/ its not the only job • What to do about buildup in demand for RBA • Engage the Profession

  13. Phase 3: Empowerment - Impact • RB Audit Plans and audits start to emerge • Permanent Secretaries begin to buy-in - Management required to engage with IAG team • Auditors start feeling empowered • Engaging now with top management • Working in new spaces/places • Dealing with ‘real’ issues • Realizing hidden potential

  14. Initial Conclusions • Demand for RBA greater than expected • Govt. moving faster than expected • Mindset is changing • Auditors more focused on high risk issues • Need for training greater than expected • Auditors coming up with surprisingly useful results • Development Banks starting to see benefit of focused RBA

  15. Presenter and Consultant on the Kenya Experiment Graham Joscelyne CA(SA) CIA UHY Advisors, Inc. 1425 K Street, NW Washington DC 20005 202-296-2020 gjoscelyne@uhy-us.com

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