Our resources and our risks

There are six resources that we must manage well, and four ongoing strategic risks that have the potential to significantly affect our role and work.

The resources we must manage well

There are six key resources (or capitals) that we must manage well to improve our organisation and support the delivery of our strategic intentions to 2025.

The six key resources are:

  1. Our independence and reputation;
  2. Our people;
  3. Our knowledge, information, and methods;
  4. Our relationships;
  5. Our financial and physical resources; and
  6. Our use of natural resources.

Our independence and reputation

We cannot do our work without being, and being seen to be, independent. Our reputation is critical to maintaining Parliament’s and the public’s trust and confidence in our work. As we cannot enforce our recommendations, our ability to influence is critical. We aim to be trusted, impartial, and authoritative.

We have high expectations in the independence standards that auditors who work for us must meet. These standards are described in The Auditor-General’s Auditing Standards. They exceed the minimum independence standards required of auditors operating in the private sector.

All our auditors are expected to have a very good understanding of the requirements and the consequences of not meeting the expected standards. We provide advice, training, and support to help our auditors in maintaining their independence.

Our independence requirements limit the additional work that can be carried out for public organisations by auditors who work for us. This mitigates the risk that other work could be seen to compromise the auditor’s objectivity and diminish the standing and value of the auditor’s report.

We have a range of systems and processes in place to identify and mitigate risks to our independence and reputation. Formal declarations of our independence are required for every audit or assurance engagement we carry out. We continually assess the more challenging independence situations and their resolution, and we have monitoring systems to ensure that staff with independence conflicts are not involved in work about those public organisations.

The effective relationships we have with public organisations and select committees help us to manage reputational risks.

Our people

The experience, knowledge, skills, and commitment of our people are vital to our work and our ability to deliver on our statutory responsibilities and our strategic intentions. It is essential that we attract, develop, and retain talented staff.

We promote an organisational culture based on trust, respect, inclusiveness, and valuing each person’s contribution. We consider this is fundamental to actively engaging, motivating, retaining, and enabling our people to do their best work. We seek independent advice about remuneration in comparable roles, so we can be confident that we are paying our people fairly. 

We recognise the importance of regularly monitoring our culture and the engagement of our people, and responding to their feedback to strengthen our organisational culture. We continue to prioritise our investment in the systems, tools, and equipment that our people need to do their jobs safely and efficiently. 

We consider equality of employment opportunity critical to creating a workplace that enables all our staff to contribute to their full potential. The principles and practice of equal employment opportunities (EEO) are embedded in our human resources policies.

We continue to develop the skills and capability of our people to achieve our strategic objectives and strongly position ourselves to meet future challenges and changes in auditing. We encourage and support learning and development through on-the-job learning and formal training. Some of our people have been seconded internally, externally, and internationally. We also have staff who have been seconded to us from outside the Office to exchange skills and knowledge.

We are accredited as a Recognised Training Employer by Chartered Accountants Australia and New Zealand. We provide practical experience and support for over 30 new graduates each year as they work and study to become chartered accountants. Our people also hold many other professional accreditations and memberships, and some of our people have roles in international auditing organisations.

Our knowledge, information, and methods

Our mandate and independence gives us access to a wealth of information, which we collect and analyse as we carry out audits and our other work. This information, the knowledge we gain from it, and the methods we use to store, analyse, and share it are vital to our role and our ability to create value and insight. 

We take our responsibilities for protecting and managing that information seriously. Our business processes and systems protect access to the information we gather and help us to actively monitor and manage any risks to our independence.

We invest in and continue to upgrade our systems and tools to effectively manage and protect our information, and enable us to improve our insights from the information we collect.

We also contribute internationally – our approaches are often held up as examples for others to follow, and other audit offices come to learn from us. For example, we share our knowledge, information and advice with other audit organisations throughout the world, particularly in the Pacific.

We know that there are risks to our systems so we take active steps to mitigate them, including keeping our disaster recovery and business continuity plans up to date. There are also risks to our capacity and methods. We are actively considering how fit-for-purpose our approaches and practices will be as we prepare to move into the next quarter of the 21st century.

Our relationships

Effective working relationships with our many stakeholders are essential to our work and our ability to create value. Our most important external relationships are with Parliament, the organisations that we audit, and other audit institutions around the world (particularly in the Pacific).

As an independent Officer of Parliament, the Office cannot operate without the trust and confidence of Parliament.

Our people advise Parliamentary select committees in support of their work to hold the public sector to account. We help the committees to scrutinise the performance of public organisations on behalf of Parliament. We work hard to support Parliament while maintaining our independence from the Government and the organisations that we audit. 

Our relationships with the public entities that we audit support the flow of information, intelligence, and reports that collectively improve efficiencies and, through our recommendations, the delivery of services to New Zealanders.

Our relationships with other stakeholders also serve to strengthen public sector accountability and promote good governance. For example, we share our skills, information, and advice with other audit organisations throughout the world, particularly in the Pacific. We take part in international auditing conferences, peer review organisations like ours, and host international visitors. We work with other integrity and accountability agencies – for example Transparency International New Zealand – to influence transparency and accountability in the public sector.

We regularly check – formally and informally – that our stakeholders are satisfied with the relationships they have with us.

Our financial and physical resources

The financial and physical resources we use are essential to our work. Most of our operating costs are staff-related. Other costs include office accommodation, costs of providing information technology systems, and travel for auditors to work at the premises of the organisations they are auditing. 

We cannot deliver value without investing in the assets that support our work. Our largest physical asset is the fit-out in our seven offices. We also acquire and maintain our own information technology hardware and software, and maintain vehicles because our staff travel widely for their work.

Audit New Zealand and our contracted audit service providers charge fees for the audits they carry out for the Auditor-General. A proportion of annual audit fees are passed on to the OAG, and that money helps to cover the OAG’s operating costs for managing the auditor appointment, standard setting, reporting, and other processes supporting our annual audits.

Revenue from audit fees varies from year to year, based on the extent of audit work carried out. In some years we generate a surplus, and in other years a loss. To manage these ebbs and flows, we use a memorandum account. We put surpluses into that account so we can draw on the funds when we have a deficit.  

Every three years, we audit the long-term plans of local authorities, which means additional audit fee income every third year. To manage the fluctuations, we regularly update our five-year forecasts for expected fees, costs, and the memorandum account balance. We also monitor our financial risks. 

There are risks in securing adequate audit fees to fund our operations, and risks to the affordability of having adequate numbers of competent audit staff who can complete our audits to the required standards. Risks to our cash position arise from our reliance on timely invoicing and collection of audit fees, and are managed through monitoring and follow-up of audit contracts and invoicing.

Our use of natural resources

Our main environmental impact is from greenhouse gas emissions generated by the air and vehicle travel required to do our work. Despite technology advances, most auditing work is done on site so that our auditors have direct access to records and people. This means unavoidable travel. Our other work also requires travel – for example, our involvement with other audit offices in the Pacific and international auditing organisations.

We use video conferencing extensively and have flexible working practices to reduce our overall environmental impact. Over time, we plan to consider the environmental implications of the work locations of the auditors we appoint and how we could further improve our recruitment, travel, and vehicle policies.

Our strategic risks and how we manage them

These risks are primarily managed through governance, internal controls, and work processes.

Our Combined Leadership Team regularly assesses changes in our external or internal environments that could affect the Office's position. The Auditor-General’s Audit and Risk Committee receives a quarterly report, and provides additional insight and advice to the Auditor-General about our strategic risks.

Risk: Loss of independence

Independence underpins the value of the Auditor-General's work and reporting. Losing that independence in fact or appearance, whether by failure on the part of the Auditor-General, the Deputy Auditor-General, the Auditor-General’s staff or appointed auditors, would likely undermine trust in our organisation.

We manage this risk by:

  • applying the Auditor-General's independence standards, which set a high standard of independence for all employees and auditors appointed to carry out audits and other work on the Auditor-General’s behalf;
  • monitoring the independence standards, including for the two statutory officers (the Auditor-General and the Deputy Auditor-General) and all employees. This includes requiring regular declarations by all employees and, where necessary, implementing measures to manage and mitigate conflicts of interest;
  • inducting staff on independence matters so that they understand the independence expectations and requirements;
  • monitoring the nature and extent of work carried out by audit service providers that could affect their independence when working on behalf of the Auditor-General; and
  • at senior management level, regularly monitoring and assessing factors that could threaten auditor independence.

Risk: Audit failure

The quality of our audit work is fundamental to our role. Issuing an incorrect audit opinion with material effect or a report that is significantly wrong may undermine the credibility of our work.

We manage this risk by:

  • adhering to professional auditing standards, including implementing and complying with the current quality control standards from the External Reporting Board, supplemented by the Auditor-General's auditing standards, to address public sector matters not covered by general auditing standards;
  • monitoring adherence to auditing standards through external quality assurance regimes (such as practice reviews by the Chartered Accountants Australia and New Zealand, quality reviews by the Financial Markets Authority, and from time to time, peer reviews by our international counterparts);
  • applying internal quality control procedures, including carrying out quality assurance reviews of all our work on a risk basis and reviewing, on a rolling three-year timetable, the performance of all our appointed auditors and our different products;
  • formal training and development programmes and performance management systems which monitor employee performance and identify improvement opportunities; and ensuring that, before our reports are presented to Parliament, we carry out rigorous quality assurance internally, and externally check facts and fairness with affected parties.

Risk: Loss of capability

The quality and delivery of our work relies on the skills and professionalism of our employees. If we are unable to retain, recruit, or access people with the required technical and other skills we would likely be unable to maintain high standards of required outputs.

We manage this risk by:

  • using rigorous selection processes as part of our recruitment programme to ensure we identify individuals with the right skills and personal attributes;
  • carrying out ongoing training and development of our employees and appointed auditors and their employees on matters necessary for audit work;
  • providing management programmes, leadership development initiatives, and professional development programmes for our own employees;
  • placing focus on organisational culture and employee engagement to ensure we retain talented employees; and using contract resources at peak times.

Risk: Loss of reputation

Failings in one or more of our other three ongoing strategic risks could negatively affect our reputation. The Auditor­-General's discretionary mandate is broad, and it is inevitable that we will not meet all expectations. However, a good reputation is essential for us to maintain effective relationships and credibility with stakeholders and the public. Our reputation could also be put at risk by unmanaged external expectations and perceptions about the role of the Auditor-General or its findings on any particular matter that has been the subject of audit scrutiny.

We manage this risk by:

  • exercising judgement about where to focus our audit effort and how best to report while also achieving the greatest likelihood of public sector improvement. We also actively seek feedback on our work, for example:
    • we carry out regular stakeholder and client feedback surveys;
    • we formally consult with members of Parliament on our proposed annual work programme;
    • at senior management level, we regularly discuss issues and feedback from key stakeholders and public entities about our work;
    • at a senior management level, including the Auditor-General and the Deputy Auditor-General, we liaise with public entities and key stakeholders;
    • we regularly monitor our own compliance, for example legislative compliance, internal controls and independence standards; and
    • we monitor external sources, including media and social media, to identify where the Office could communicate more effectively about its role and the results of its work.

Page last updated: 12 July 2019