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

Audit Practice Statement

The role of the Auditor-General

The Auditor-General is an independent officer of the Victorian Parliament, appointed under the Constitution Act 1975 to conduct and report on financial and performance audits in the Victorian public sector. The Audit Act 1994 (the Act) governs the powers and functions of the Auditor-General. The 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 tens of billions of dollars 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—and that the financial reports of public sector agencies are presented fairly to ensure accountability. 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 Parliament and citizens to have a better understanding of the performance of the public sector.

These reports, together with recommendations provided to agencies, assist agency management to improve their governance, 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 institutes, local government and water corporations. The 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.

The Act also enables the Auditor-General to consider public sector services or functions that are delivered for or behalf of agencies through contracts with private or not-for-profit providers (also known as associated entities).

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, subject to other legislation.


Audits rely on high-quality evidence to form conclusions. Audit staff gather information and evidence from a wide range of sources including records of agencies and associated entities, 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.


The Act requires that our audits are conducted in accordance with Auditing and Assurance Standards Board’s (AUASB) standards. They cover planning, communication, conduct, evidence, quality assurance, delegations and reporting aspects of an audit. The Act allows the Auditor-General to apply additional auditing standards for the conduct of audits provided these are disclosed in the Victorian Auditor-General’s Office’s (VAGO) annual report.

Access to information

The 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 Act allows for the premises of a public sector entity to be searched, and individuals can be compelled to provide documents in their possession, custody or control. In these circumstances, the Auditor-General and staff are required to maintain the confidentiality of any information gathered. Balancing these broad powers, individuals involved in our audits are protected by strict procedural fairness requirements in the Act, including the right to complain to the Victorian Inspectorate (VI) in certain circumstances.


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 sanctioned by the Australasian Council of Auditors-General. In addition to the annual financial statement audit, every three years an independent performance audit of VAGO is coordinated by the Public Accounts and Estimates Committee (PAEC) of Parliament.


Effective, regular and timely communication with audited agencies is a vital part of the audit process. For performance audits, entry interviews are held to clarify audit scope and decide communication arrangements. Advance notice of performance audits is usually first provided through our annual plan and then, in all instances, through the issue of audit specifications. As the Act requires, we consult with relevant agencies (and PAEC in certain circumstances) in the development of specifications for performance audits and provide final copies of specifications before we begin the conduct phase of our audits. Significant findings and emerging issues are regularly shared with agencies throughout the audit and heads of audited agencies are invited to provide comments for inclusion in the final audit report. For financial audits, the auditing standards and our audit policies require us—or our appointed audit service provider— to:

Reporting, natural justice and procedural fairness

Results of audits in the private sector are reported principally to the client, or audited body. Under the Act, 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, with particular protections provided to any named individuals. Legislation prohibits the Auditor-General from including in a report any information that would prejudice criminal proceedings and investigations by some integrity bodies. There are some types of sensitive and confidential information (such as Cabinet-in-confidence or trade secrets) that may only be included in a report if the Auditor-General considers it is in the public interest.

Coordinating with Victoria’s integrity system

Sometimes VAGO will share information with other Victorian integrity bodies, to fulfil our obligations under legislation and respond appropriately to problems that we become aware of. VAGO has obligations under the Act to notify the Independent Broad-based Anti-corruption Commission or the VI of corrupt conduct or conduct relevant to the functions of the VI. We can also share certain other kinds of information with Victorian integrity bodies and the police, although secrecy restrictions may still apply.

Scope and limitations

Audit findings and recommendations address:

Audits reports 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:

We also conduct a review of the state’s Estimated Financial Statements and our review opinion is included in the State’s Budget Papers.

Performance statement audits

For some sectors, such as local government, water entities and some TAFE institutes, financial audits also provide assurance on agency performance statements. Unlike performance audits, audits of performance statements express an audit opinion on whether the performance indicators are relevant to the agency’s objectives and appropriate for assessing the agency’s performance, and whether reported performance fairly represents actual performance.

Resourcing financial audits

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

The remainder are undertaken by private sector firms—audit service providers—contracted by the Auditor-General. Audits performed by audit service providers are undertaken in accordance with auditing standards and the Act and are also covered by VAGO’s quality and accountability mechanisms. While audit service providers may conduct the audits, the audit opinions for all 550 public sector entities are signed by, or under delegation of the Auditor-General.


Financial audits are conducted in accordance with professional auditing standards using a risk-based audit methodology. An audit strategy is developed for each agency, based on an assessment of existing management controls and organisational and environmental risks. The 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 performing 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 a range of performance audits, involving selected agencies in the Victorian public sector. All performance audits are primarily conducted by VAGO staff, with limited involvement by external specialists.


All audits are conducted using VAGO’s own performance audit methodology which complies with the Act 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 forward work program of VAGO. VAGO uses a series of steps and principles to help the Auditor-General determine which performance audits to undertake, including consultation with PAEC and agencies as required by the Act.

Identify and analyse public sector risks and issues

We undertake broad research and consultation to identify key risks and issues within public sector portfolios as well as analyse public sector performance. The analysis focuses on emerging trends, inherent risks and challenges that may influence the achievement of government objectives.

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

Assessing the risk and materiality of a potential audit topic means measuring its possible economic, social and environmental impact, including its financial value, the number of people that may be affected, and the social or environmental outcomes.

Suggestions and concerns from the public

Members of the public sometimes raise concerns with the Auditor-General about the activities of public sector agencies. Although this helps the Auditor-General decide on future audit priorities, it is rare that community suggestions result in an audit report solely on that topic as our legislation limits what and who we can audit. However, community concerns do often help our audit teams choose which systems and organisations to focus on as part of their broader audit program.

As we cannot resolve individual complaints, we try to help members of the community find the right way to address their concerns. Specific complaints about public sector agencies are directed initially to the agency concerned, and then towards other accountability authorities such as Ombudsman Victoria or the Independent Broad-based Anti-corruption Commission, the appropriate government minister or local Member of Parliament.


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