Operating context and key risks
Office of the Auditor General of Canada2018–19 Departmental Plan
Operating context: Conditions affecting our work
The operating context of the Office of the Auditor General of Canada is most affected by developments in the auditing and accounting professions, and by changes in government operations.
Professional developments
All of our audits are planned, performed, and reported in accordance with professional auditing standards. As these standards evolve, we integrate changes into the Office’s methodology, tools, and training to ensure that our auditors remain well equipped to conduct their work.
New and amended Canadian Auditing Standards applicable to the practice of financial auditing were issued in Canada in 2017, for application in 2018. Most notably, changes include a new auditor’s report that provides more transparency on important aspects of the audit and better describes what an audit is and what an auditor does.
Auditing standards also changed for direct engagement audits (that is, performance audits and special examinations). The Canadian Standard for Assurance Engagements (CSAE) 3001—Direct Engagements, which contains new and amended standards, came into effect in Canada on 30 June 2017 and we are now conducting the first round of audits that are applying it.
In addition, a number of new financial accounting standards, both Public Sector Accounting Standards and International Financial Reporting Standards, became applicable to financial reports during this past fiscal year.
Government operations
The federal government’s budgeted program expenditures for 2017–18 were $50 billion higher than its actual program expenses in 2014–15. These expenditures appear in government financial statements, and the Office must audit them. They also increase the size of our audit universe for performance audits, requiring us to develop a knowledge of these expanded operations and their risks. The federal government has given us three new financial audits to conduct each year. For two of these, we must also do a periodic special examination.
The federal government has had challenges in implementing its new payroll system, which has caused us to change our financial audit approach for payroll and payroll-related expenses. We expect we will need to keep this change in place for a number of years. We will also have to increase our capability to audit information systems and assess evolving information technology (IT) security controls to obtain audit evidence about large IT systems that store and process financial data while they are being developed.
The nature of government transactions is becoming more complex, which means that we need more capacity to audit them. Derivative financial instruments are more prevalent and more complex. New infrastructure arrangements, including different public–private partnership arrangements are being used. More complex pension investments are being made by pension funds such as the Public Sector Pension Investment Board. The government always has complex programs under way, such as purchasing new fighter jets and naval ships, carrying out large infrastructure programs, and implementing new IT systems. The complexity of government programs requires us to develop an adequate understanding of these programs even before we start our performance audits.
Finally, we need to change the way we do follow-up audits to provide parliamentarians and the government with better information on the impact of our audits on results for Canadians.
Key risks: Things that could affect our ability to achieve our plans and results
The ongoing and evolving changes in our environment are putting a significant strain on the Office’s resources and ability to deliver high-quality products on a timely basis. In addition, our funding is stable while our operating expenses continue to increase. In particular, our information technology capacity is insufficient to address pending requirements.
Internally, we have made many changes to our organization. We have changed the roles and responsibilities of our senior audit managers. We have put in place a renewed Bilingualism in the Workplace Strategy, and an updated Policy on Learning and Professional Development. We expect these changes to generate many benefits for the Office, but we also recognize that this level of change can be unsettling, and that we need to manage these changes as effectively as possible.
Key risks
| Risks | Risk response strategy | Link to the Office’s Core Responsibilities | Link to the Office’s strategic priorities |
|---|---|---|---|
|
Budget and funding pressures The Office is facing capacity pressures in a number of areas, including audit operations, audit services, and corporate services. This situation is affecting the Office’s ability to deliver essential services, deliver quality products in a timely manner, and meet compliance requirements. It is also affecting staff morale. |
Actions:
Risk appetite:
Measures:
|
Legislative auditing |
To be a financially well-managed organization accountable for the use of resources entrusted to it |
|
IT systems and security The Office’s current information technology (IT) security controls do not reduce security risk to a level acceptable to the Office. In addition, we are facing the potential failure of some of our IT systems, with an immediate need to replace our human resource management system. |
Actions:
Risk appetite:
Measures:
|
Legislative auditing |
To ensure effective, efficient, and accountable Office governance and management |
|
Enhancing value The Office wants to enhance and demonstrate its value to Parliament and Canadians, both in the selection and conduct of individual audits, and through the type of assurance and other products it offers. |
Actions:
Risk appetite:
Measures:
|
Legislative auditing |
To report what is working, areas for improvement, and recommendations in a manner that is understandable, timely, fair, and adds value To ensure selection and continuance of audit products likely to have significant impact and value |
|
Transitioning Office senior management While the Office believes this situation is well managed, it acknowledges that the significant changes to the senior management of the Office that will occur in the coming few years need to be managed effectively to ensure the continued strong oversight and management of the Office. |
Actions:
Risk appetite:
|
Legislative auditing |
To develop and maintain a skilled, engaged, and bilingual workforce |