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Audit Practice Statement
Performance Audit Practice Statement
Audit Evidence Brochure
Section 11

Audit Practice Statement

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Who is the Auditor-General?

The Auditor-General is an independent officer of the Victorian Parliament, established by the Constitution Act 1975 to conduct and report on financial and performance audits in the Victorian public sector. The Auditor-General has complete discretion in the performance of their duties, and is not subject to control or direction by either Parliament or the government.

The Audit Act 1994 governs the powers and functions of the Auditor-General. The Audit Act provides the legal basis for the
Auditor-General’s access to all government information and the freedom to report findings arising from audits to Parliament.

The Auditor-General’s principal aim is to provide assurance to Parliament on the accountability and performance of the Victorian public sector.

Why we audit

In the Westminster system of government, all authority for government activity ultimately stems from Parliament. Public sector agencies are therefore accountable to Parliament for their use of public resources and the powers conferred on them by Parliament.

The public sector outlays more than $50 billion each year in delivering an extensive range of services for all Victorians. To assist it to oversee the public sector, Parliament seeks independent assurance that agencies are operating economically, efficiently and effectively and in accordance with Parliament’s purpose. It is the Auditor-General’s role to provide this assurance.

The Auditor-General, through independent and forthright reports on the results of audits, assists Parliamentarians and the public to have a better understanding of the performance of the public sector.

These reports, together with advice provided to agencies, assist agency management to improve governance and control environments and the efficiency, effectiveness and economy of their activities.

Who do we audit?

The Auditor-General is responsible for the audit of around 550 public sector organisations including government departments, public bodies, government business enterprises, superannuation funds, health services, universities, TAFE colleges, local government and water corporations.

The Audit Act also assigns to the Auditor-General responsibility for carrying out audits to establish whether government grants provided to non-government organisations or persons have been applied for the purposes for which the grant was made, and whether the money has been applied economically, efficiently and effectively.

How we audit

Although there are different types of audits undertaken by the Auditor-General, they share general principles and elements.


The cornerstone of auditing is independence. Accordingly, auditors must avoid situations where their objectivity could be compromised or where bias could influence their judgement. In the public sector, auditors must be independent from executive government. This independence is enshrined in the Constitution Act 1975, which gives the Auditor-General complete discretion when deciding whether to conduct an audit, how to carry it out and how to prioritise any particular matters.


Audits rely on high-quality evidence to form conclusions. Audit staff gather information and evidence from a wide range of sources, including agency records, data analysis, interviews with relevant staff members and stakeholder surveys. Auditors can also gather information from sources outside the sector, such as universities and similar organisations from other jurisdictions.


Audits are conducted in accordance with Auditing and Assurance Standards Board’s (AUASB) standards, which carry the full force of the law and must be complied with by auditors in the public and private sectors. They cover planning, communication, conduct, evidence, quality assurance, delegations and reporting aspects of an audit. The Audit Act allows the Auditor-General to apply additional auditing standards for the conduct of audits provided these are disclosed in VAGO's annual report.

Access to information

The Audit Act provides the Auditor-General and VAGO staff with wide-ranging powers to access information needed during the course of an audit, irrespective of any restrictions on disclosure imposed by other legislation. This includes statutory secrecy provisions and Cabinet or commercial-in-confidence confidentiality. The Auditor-General can search the premises of a public sector entity and compel individuals to provide information. Balancing these powers, the Auditor-General and staff are required to maintain the confidentiality of any information gathered in an audit.


With independence and wide-ranging powers comes the responsibility to undertake audits efficiently, effectively, in compliance with legislation and to high standards. A number of internal and external quality and accountability mechanisms are in place to help us better meet the needs of Parliament and audited agencies. These include reviews of audits and reports by peers and experts, and self-assessment of VAGO and its audit processes against a framework agreed by the Australasian Council of Auditors-General. In addition to the annual financial statement audit, an independent performance audit of VAGO every three years is coordinated by the Public Accounts and Estimates Committee of Parliament.


Effective, regular and timely communication with audited agencies is a vital part of the audit process. Entry interviews are held to clarify audit scope and decide communication protocols. Advance notice of Performance audits is provided through issue of specifications. Significant findings and emerging issues are shared with agencies throughout the audit. Heads of audited agencies and those with special interests are invited to provide comments for inclusion in the final audit report.


Results of audits in the private sector are reported principally to the client, or audited body. Under the Audit Act 1994, the Auditor-General reports to Parliament on results of audits. These reports highlight issues of importance to Parliament and often generate considerable parliamentary and community debate. The reports may include any information or recommendations related to the audit, but must set out the reasons for all opinions expressed. Entities and officials are afforded natural justice and procedural fairness as reports are finalised.

Scope and limitations

Audit findings and recommendations address:

Audits cannot:


Primary responsibility for the detection and prevention of irregularities, fraud, illegal acts and errors remains with the agency. It is the responsibility of the agency to keep proper accounts, maintain adequate internal controls, safeguard assets and prepare reports.

Financial audits

Financial audits provide independent assurance to Parliament and the public that the information contained in the financial reports of public sector entities is presented fairly, in accordance with Australian Accounting Standards and applicable legislation, and is reliable and relevant.

Our financial audits give rise to:

Performance statement audits

For some sectors, such as local government, water corporations and some TAFE colleges, financial audits include the provision of assurance on performance statements and performance indicators. Unlike performance audits (see below) these performance statement audits focus solely on determining if performance information is fairly represented in accordance with an authority’s reporting requirements.

Resourcing financial audits

Financial audits are undertaken for around 550 public sector entities each year. Around half of these audits are undertaken by VAGO staff.

The remainder are undertaken by private sector firms - audit service providers - contracted by the Auditor-General. All audits performed by audit service providers are undertaken in accordance with auditing standards, the Audit Act 1994 and are also covered by VAGO's quality and accountability mechanisms.


Financial audits are conducted in accordance with professional auditing standards using a risk-based audit methodology developed in partnership with other Australian public sector audit offices. Under this methodology, an audit strategy is developed for each agency, based on an assessment of existing management controls and organisational and environmental risks. This methodology guides auditors through the financial audit process.

Performance audits

A performance audit is an audit which evaluates whether an organisation or government program is achieving its objectives effectively, economically and efficiently, and in compliance with all relevant legislation. Performance audits extend beyond the examination of the financial affairs and transactions of a government agency to encompass wider management issues of significance to the community.

Each year, we undertake between 25 and 30 performance audits, involving more than 80 agencies in the Victorian public sector. All performance audits are primarily conducted by VAGO staff, with limited involvement by external specialists.

Each performance audit results in a separate report to Parliament after it has been completed.


All audits are conducted using VAGO's own performance audit methodology which complies with the Audit Act 1994 and relevant professional auditing standards

Selecting topics for performance audits

The Auditor-General considers many potential performance audit topics annually, with a focus on quality and the effective use of resources. A selection of these topics is included in the Annual Plan, outlining the proposed work program of VAGO for the coming year. VAGO uses a series of steps and principles to help the Auditor-General determine which performance audits to undertake, including consultation with PAEC.

Analyse public sector performance

We analyse public sector performance against the Victorian government’s visions and goals. The analysis focuses on emerging trends, inherent risks and challenges which may influence the achievement of the established visions and goals.

Identify potential areas of audit interest

Potential areas of audit interest include programs or initiatives that are identified as having significant inherent risks, underperformance issues, or strong public interest. To prevent overlap, we consider whether a topic is receiving suitable scrutiny through another review process.

Assess risk and materiality

The assessment of the risk and materiality measures the potential economic, social and environmental impact on the community, including the value of a program, the number of people that may be affected, and the social or environmental outcomes.

Complaints and inquiries from the public

Members of the public sometimes write to the Auditor-General suggesting areas for investigation and audit, often regarding specific actions taken by public sector agencies. While these complaints can be crucial ‘early warnings’ of issues related to the performance, probity and compliance of the sector, few of these matters lead directly to performance audits as they do not meet the Auditor-General’s criteria of materiality and risk. Instead these concerns serve as background to those areas of interest selected for audit.

VAGO tries to assist complainants by finding the right channel for their concerns. Specific complaints about public sector agencies are directed initially to the agency concerned, and then towards other accountability authorities, the appropriate government minister or local Member of Parliament.

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