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Enhancing the Audit

Auditing is not a dull profession - there are as many varieties of audit as there are new ways of doing business. In particular, the audit of the public sector is fast expanding too, with audits being conducted on statutory bodies; non-government organisations; trading funds; estate management; and even one-off fund-raising events. As long as accountability is demanded, auditors are expected to give an independent, impartial and professional opinion.

Auditors are also constantly expected to adapt and develop their professional skills in response to new predicaments and situations. For example, auditors have to be able to tailor audit reports to different organisations, e.g. banks, property companies, insurance firms and schools, etc. Furthermore, different circumstances will call for special reports, e.g. in times of mergers and acquisitions; share listings; and liquidations and receiverships. In these cases, auditors have to ensure that special reports meet current legal specifications.

As the size of many business deals in increasing, more and more disputes are now being settled in court or through arbitration. This has led to accountants becoming essential expert witnesses, providing the skills to analyse and present financial data in the most objective and persuasive ways.

When the world is faced with Year 2000 problems, the Government and regulators want a Y2K compliance audit. Fraud investigators looking for clues now seek help from a forensic auditor. When the community sets its goals to improve the environment, it asks for an environment audit, particularly on large government buildings. There is no end to these demands and accountants must be flexible and use their skills in different ways.

During these times of turmoil, most organisations are no doubt looking hard at managing risks, and looking at asset values as the ultimate line of defence. Bankers and creditors will be keeping a hawk's eye on lenders' financial statements. Government regulators will also be vigilant to prevent budding problems from developing into major disasters.

Furthermore, given the constant threat of layoffs and wage freezes, the growing influence of trade unionism can be felt as employees become more interested in their company's financial statements, particularly in regard to collective bargaining.

However, while as this means that financial statements are becoming more useful, value-for-money audits in the private sector still seem less developed than those conducted in the public sector.

During the present hard times, organisations should leave no corner unturned to economise and make sure that limited resources are spent wisely in the most efficient and effective way. It is here that accountants can enhance competitiveness.

With this in mind, there are several ways in which the Public Accounts Committee, well supported by the Audit Commission, has helped the Government make better use of public resources.

On the revenue side, we have constantly reminded the Government about the loss of commercial opportunities, e.g. the use of government property to generate rental income; weekend car-parking; surplus staff quarters; and shop and canteen spaces.

We have also strongly urged certain government departments to release valuable sites for early redevelopment, e.g. central market which is still held by the Urban Service Department, and the under-developed site of the General Post Office in Central. We have also prompted the Government to enforce its legal rights (e.g. in cases of industrial safety, and the surcharge for late tax payments) so as to impose real deterrents and to protect against possible revenue loss.

On the expenditure side, examples are abundant. One of the more high-profile recurrent problems includes the issue of three reports urging the Government to recover the HK$1.1 billion advances to the UNHCR for the Vietnamese boat people. Another problem is the frequent ineffective use of expensive consultants which gives the impression that government officials are trying to avoid responsibility.

We have also seen unfair tenders awarded with terms so restricted that only a very few suppliers were able to meet the stipulated requirements, e.g. the tender for the computer registration system of the Lands Department and grade A government vehicles.

Further, we are dealing with the slack control and monitoring of outdoor staff, of which there is a substantial surplus capacity, e.g. external staff of both the Water Services Department and the Regional Urban Services Department.

Our efforts in the Public Accounts Committee seek more than public apologies from senior Government officials. They aim to get to the heart of the issue - to save millions of dollars in public funds. Now it is perhaps good time too for our larger private sector organisations to make their internal and external auditors work to find and save millions of other wasted dollars.

Eric Li is the Accountancy Functional Constituency Representative on the LegCo. His web site can be found at http://www.ericli.org

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