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Introduction

Welcome to the module Public Financial Management: Audit and Compliance. Audit is an evolving function in the public sector. It has evolved from simply checking that money has been spent in the ways that governments intended and ensuring that none was stolen or misappropriated. Now it is also concerned with evaluating whether the application of funds represents good value for the taxpayer and, more recently, to evaluating whether government policies have been effective. The early functions of audit (i.e. the detection of fraud and technical errors in accounting) still remain but have now been overlain with new, more evaluative, functions.

The purpose of this module is to give you an understanding of the different roles and purposes of audit and to enable you plan and commission audits. In addition, it will enable you to carry out some of the functions of the auditor. This is an ambitious aim, and the module ranges over the spectrum of audit activities, drawing examples from detecting fraud to evaluating the success of policies.

Learning outcomes

When you have completed the study of this module and its readings you will be able to:

  • explain the public finance control function as an activity that involves different actors in the constitutional system
  • explain the different rationales with which the different control actors operate in a democratic state
  • make comparisons between the different control subsystems
  • explain and compare the different forms of audit reporting
  • examine the International Public Sector Internal Audit Standards applicable and effective from 1 April 2013 and other internal audit guidelines
  • outline the advantages of cybernetic control theory
  • carry out a systems-based approach to audit
  • use compliance and substantive testing
  • explain the various sampling techniques and demonstrate how to use IT to test the whole population
  • discuss the concept of performance audit, and what it consists of
  • differentiate the role of performance audit from evaluation activity
  • define the concepts of economy, efficiency and effectiveness, and evaluate the performance of a public programme or organisation through these elements
  • use audit criteria to determine the economy, efficiency and effectiveness of a public programme or organisation
  • value the importance of performance audit in the contemporary public administration
  • discern the fuzzy delineation between political and external control when it comes to performance audit
  • distinguish the two main functions of performance audit: accountability and organisational learning
  • assess the performance of a performance auditor
  • situate the function of fraud combat within the broader architecture of budgetary control
  • discuss how a fraud investigation is carried out, including the legal framework and evidence collection
  • explain the main types of classical and contemporary fraud which exist in all countries, developed or developing.

Study materials

Study guide

You will receive a looseleaf binder containing eight units. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Virtual Learning Environment.

Textbook
  • Davies M & J Aston (2011) Auditing Fundamental. Prentice Hall.
Readings

You will receive two Reader volumes, which are a compilation of recently published articles or seminal writings which augment and illustrate the main text.

Virtual learning environment

You will have access to the VLE, which is a web-accessed learning environment. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Module overview

Unit 1 Public Sector Auditing
  • 1.1 Introduction to Auditing
  • 1.2 Accountability in the Public Sector
  • 1.3 External Audit in the Public Sector
  • 1.4 Internal Audit in the Public Sector
  • 1.5 Political Power and Control
  • 1.6 The Control of Public Spending in the Genesis of Constitutionalism
  • 1.7 The Purposes of Budgetary Control
  • 1.8 Conclusion
Unit 2 The Public Finance Control System
  • 2.1 The Control Pyramid
  • 2.2 Internal Control
  • 2.3 External Control
  • 2.4 Jurisdictional Control
  • 2.5 Political Control
  • 2.6 Social Control
  • 2.7 Conclusion
Unit 3 External Audit and Reporting
  • 3.1 The Role of External Audit?
  • 3.2 Reporting on Finanical Statements
  • 3.3 Probity Audit
  • 3.4 Verification Audit
  • 3.5 Supreme Audit Institutions
  • 3.6 Conclusion
Unit 4 Internal Audit and Control
  • 4.1 What is Internal Audit?
  • 4.2 Internal Audit and Internal Control
  • 4.3 Ethical Issues and the Internal Auditor
  • 4.4 Public Sector Internal Audit Standards
  • 4.5 Internal Control
  • 4.6 Cybernetic Control Theory
  • 4.7 Conclusion
Unit 5 Risk Assessment and a Systems-Based Approach
  • 5.1 Introduction to Risk
  • 5.2 Policy and Risk
  • 5.3 Risk Management
  • 5.4 Systems-Based Auditing
  • 5.5 System Documentation
  • 5.6 Sampling
  • 5.7 An IT Approach to Sampling
  • 5.8 Conclusion
Unit 6 Performance Audit I
  • 6.1 Introduction to the Concept of Performance Audit
  • 6.2 Auditing Performance: Economy, Efficiency and Effectiveness
  • 6.3 Performance Audit Criteria
  • 6.4 Conclusion
Unit 7 Preformance Audit II
  • 7.1 Performance Audit in Contemporary Public Administration
  • 7.2 The Political Dimension of Performance Control
  • 7.3 Performance Audit, Between Accountability and Learning
  • 7.4 Performance Audit in the Age of Multi-Level Governance
  • 7.5 Implications of the Elaboration of the Audit Agenda
  • 7.6 The Learning Component of Performance Audit
  • 7.7 Evaluating the Performance of a Good Performance Audit
  • 7.8 Conclusion
Unit 8 Fraud
  • 8.1 The Problem of Fraud
  • 8.2 Fraud and Irregularity
  • 8.3 Corruption and Risk in Public Procurement
  • 8.4 Preventing Fraud through Internal Control: COSO
  • 8.5 Conclusion

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 6, and the second assignment at the end of the module, on the Tuesday after Week 10. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.

Module sample

Click on the link below to download the module sample document in PDF.