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Introduction

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 (ie the detection of fraud and technical errors in accounting) still remain but have now been overlain with new, more evaluative, functions.

The institutions carrying out audit have also evolved. All governments have some form of national auditing body or Supreme Audit Institution. These institutions are often very old, but some, such as China's Audit Administration, established in 1983, are more recent. As with the evolution of the audit function, these national audit bodies have also expanded their role over time, and many, as you will see in this module, now include policy evaluation in their remit. At the same time, there is internal audit, offering an independent assessment of an organisation's risk management, control and governance processes.

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:

  • describe the role of the external auditor within the public sector
  • explain the requirements for internal audit within public sector organisations, and how it is different from external audit
  • distinguish between the public sector and private sector models
  • outline the corporate governance requirements and their applicability to the public sector
  • discuss how the different aspects of governance impact on audit activity
  • carry out an assessment of risk and be able to measure and manage it, and provide assurance to management
  • explain the role of forensic accounting within the organisation
  • discuss the role, purpose and importance of value-for-money audits
  • explain the contribution of audit to policy evaluation
  • analyse the key stages of the contract audit process taking a systems-based approach
  • assess the issues arising from outsourcing and their contractual importance
  • discuss the potential for citizen involvement in audit.

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.

Textbooks
  • Davies M & J Aston (2011) Auditing Fundamental. Prentice Hall.
  • Millichamp A & J Taylor (2012) Auditing. 10th Edition. Cengage Learning.
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 Corporate Governance
  • 1.6 The UK Corporate Governance Code
  • 1.7 Executive Pay – Guidance to Government Reforms
  • 1.8 Conclusion and Summary
Unit 2 External Audit and Reporting
  • 2.1 The Role of External Audit
  • 2.2 Reporting on Financial Statements
  • 2.3 Probity Audit
  • 2.4 Verification Audit
  • 2.5 Supreme Audit Institutions
  • 2.6 Conclusion and Summary
Unit 3 Internal Audit and Control
  • 3.1 What is Internal Audit?
  • 3.2 Internal Audit and Internal Control
  • 3.3 Ethical Issues and the Internal Auditor
  • 3.4 Public Sector Internal Audit Standards
  • 3.5 Internal Control
  • 3.6 Cybernetic Control Theory
  • 3.7 Conclusion and Summary
Unit 4 Risk Assessment and a Systems-Based Approach
  • 4.1 Introduction to Risk
  • 4.2 Policy and Risk
  • 4.3 Risk Management
  • 4.4 Systems-Based Auditing
  • 4.5 System Documentation
  • 4.6 Sampling
  • 4.7 An IT Approach to Sampling
  • 4.8 Conclusion and Summary
Unit 5 Forensic Accounting
  • 5.1 What if Forensic Accounting?
  • 5.2 The COSO Framework
  • 5.3 Fraud and Irregularity
  • 5.4 Crime and Theft
  • 5.5 Modern Fraud
  • 5.6 Classic Fraud
  • 5.7 Conclusion and Summary
Unit 6 Value-for-Money and Performance Reviews
  • 6.1 Value-for-Money Measurement
  • 6.2 Performance Indicators
  • 6.3 Example 1: The Best Value Regime in the United Kingdom
  • 6.4 Performance Audit
  • 6.5 Example 2: European Union Spending on Climate Change
  • 6.6 Example 3: Education for Māori
  • 6.7 Conclusion and Summary
Unit 7 Contract Audit
  • 7.1 Corruption Risk in Public Procurement
  • 7.2 A Systems-Based Approach to Capital Construction Con-tracts
  • 7.3 Tender Evaluation
  • 7.4 Service Contracts
  • 7.5 Conclusion and Summary
Unit 8 Other Approaches to Audit
  • 8.1 Auditors and IT Systems
  • 8.2 Controls
  • 8.3 Modern Problems with IT Systems
  • 8.4 Environmental Auditing
  • 8.5 Social Audits
  • 8.6 Citizen Engagement in the Audit Process
  • 8.7 Audit and the Construction of Legitimacy
  • 8.8 Conclusion and Summary

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 5, and the second assignment at the end of the module, on the Tuesday after Week 8. 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.