Providing an independent opinion
Parliament requires reliable information on the operation of NSW government entities. We provide parliament with independent audit opinions on these entities’ financial statements, increasing confidence in their reliability. Our audits comply with professional quality and independence requirements as parliament needs to be assured our audits are of a high quality and objective. Our mandate further assures our independence by restricting us from providing non-audit services.
We completed 550 financial audits this year compared to 426 last year. This significant increase was due to our new mandate to audit local government with 139 audits completed under this new mandate.
In addition to audits of individual state and local government entities, we audit the financial statements at a 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 583 other assurance audits and reviews (79 last year) to help entities attest compliance or acquit their grant revenues. This significant increase in the number of other assurance audits and reviews is largely due to our new mandate to audit local government.
Number of financial audits
Modified auditor’s opinions and conclusions
During 2017–18, we issued eight modified audit opinions and conclusions in our Independent Auditor’s Reports. This represented one per cent of the 1,133 total assurance engagements we conducted. Modified opinions and conclusions included:
- 1 disclaimed opinion on an entity’s financial statements
- 1 disclaimed opinion on an entity’s special purpose financial statements
- 3 qualified opinions on an entity’s financial statements
- 1 qualified opinion on Basic Financial Statements prepared under the United States of America’s Generally Accepted Accounting Standards
- 2 qualified conclusions on a review of financial information.
Modified 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 2017−18, we repeated three modifications, one fewer than last year. One modification relates to an engagement that is only performed every three years. 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 five new modified opinions and conclusions in 2017−18.
Modified audit opinions and conclusions as a % of total assurance engagements
Comparing costs with other audit offices
We compare our financial costs with other Australian audit offices. In 2017–18, our cost per financial audit was $89,594 compared with $75,305 across other Australian audit offices. This includes the cost of auditing the state, university and the local government sectors. The significant difference between our cost and the average is due to the inclusion of the cost of auditing the local government sector for the first time. The prior year comparisons exclude the local government sector.
Cost per financial audit opinion ($’000)
Note: Prior to 2018, figures include state and university costs only as these were the only sectors we audited. From 2018, our costs also include local government costs, and our costs are compared only to other audit offices who audit local government in their jurisdictions.
Our financial audit volumes
The results of our 2017 financial statement audits were reported to parliament in 12 volumes of the Auditor-General’s Reports to Parliament in 2017–18.
Nine volumes focused on particular NSW state government clusters. One volume focused on internal controls and governance of the 39 largest agencies in the NSW public sector, and another volume focused on the university sector. We also released our first volume on the outcomes of our financial audits of the local government sector under our new mandate.
The nine state cluster-based volumes covered:
- Planning and Environment
- Family and Community Services
- Central Agencies
- State Finances.
Timeliness of reporting to parliament
We recognise parliament and other stakeholders need timely reports to allow prompt scrutiny of government entities’ financial position and performance. For state government entities with a 30 June balance date our internal benchmark is to report to parliament before the end of the calendar year. For our local government auditees, who also have a 30 June balance date, we reported to parliament by 20 April 2018 in accordance with transitional legislation. 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.
In 2017–18, we reported 100 per cent of our financial audits to parliament on time.
Financial audits reported to parliament on time
Note: Local government financial audits were reported to parliament on 20 April 2018 in accordance with transitional legislation allowing that our report not be tabled before 31 March 2018.
The year ahead
In 2018–19, we will continue to provide assurance to parliament. In addition, we will strive to provide greater insights to increase our impact on the entities we audit.
Under our strategic initiative ‘Influencing for Impact’ we will improve engagement with our external stakeholders, and find more innovative ways to present our reports on a new, modern website.
We will also explore alternate audit approaches that improve the relevance, value and impact of our financial and performance audits.
For more information on our strategic initiatives see the year ahead.