Analysis of Audit Report: Irregularities and Strategies

This report analyzes the audit report of New South Wales Auditor generals' report, focusing on irregularities found and strategies for improvement. It covers issues related to financial reporting, IT governance, IT controls, and cyber security management in NSW city councils.

Case Study

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Analysis of audit report (750w)...................................................................................................3
Audit findings and irregularities found in report.........................................................................6
Audit strategies and actions.........................................................................................................7
Suggestive measures to overcome irregularities..........................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Audit report is a report which is made by auditor on the basis of their opinion regarding
validity and accuracy of the context in which audit report is prepared. This report will discuss
about It audit report which is based on the accuracy of the IT system and what are the changes
which has occurred since last audit. This report will include analysis of New South Wales
Auditor generals’ report. They conduct audits of state public sector and local government
entities’ financial statement. They carry out audit with the purpose of increasing credibility of the
financial statement and enhancing their value for end user. This report is based on Public Finance
and Audit Act, 1983 and the Local Government Act, 1993. This report will analyse several
aspects regarding the audit report and what are the irregularities in the audit report. This also will
discuss about strategies of the audit and actions.
MAIN BODY
Analysis of audit report
Audit focus and scope
Focus of this report is on truth and fairness of financial statements and on the compliance
of certain laws, regulations and government directives. This audit report also involves
performance audit of the entities to ensure whether entity is carrying out its operations
effectively in accordance with regulations and doing so economically (Hassan, 2016). This audit
report along with forming opinion on financial statements of the council also examines small
number of specific issues across the councils and focus of this report is on Credit Card Manager,
Fraud Controls, Gifts and Benefits, Cyber Security and Landfill rehabilitation. Other than this
scope of the report extends to financial reporting and performance. In this quality, timeliness,
accounting standards and financial performance has been covered. Governance and Internal
Control is another aspect and this involves financial reporting, payroll, governance, revenue are
some of the areas which has been focused. Information Technology, asset management are other
areas which have been audited in this report.
Audit findings and issues in NSW city councils

Issues found in financial statement are related to financial reporting processes. In this,
133 issues increased and 32 percent of them are of repeated nature. These issues are related to
not assessing the impact of new accounting standards, inadequate financial reporting project plan
which impact the quality and timeliness of financial reporting. This report involves that three
new accounting standards will be implemented in 2020 (Durand, 2019). In this audit report
overall high risk issues has been decreased in management letter and issues found through
management letter issues related to revenue process has decreased. Purchasing process related
issues also decreased management letter involves that issues related to payroll process has
increased. These all management letters in different aspects inform that issues which are of high
risk has reduced though number of overall issues has increased. Accounting standards and
financial reporting are important to ensure credibility and accuracy of the financial statements
and councils not assessing these can impact on the quality of statements and this is why it is
important that these are covered in audit of financial statements. Regarding this three new
accounting standards are also being implemented and this will help in enhancing and improving
quality of the financial statements and records. Issues were also assessed regarding various
elements and this helped in analysing increase and decrease in the issues and issues which are of
repeated nature and requires immediate attention can be identified.
Audit findings relates with IT governance
In this report issues related to information technology has increased in this high risk
issues has decreased but issues with low and moderate risk has increased. These issues involve
lack of key It procedure and policies, lack of minimal It risk management activities, shared user
accounts and weak password configuration are some of the high risk issues in IT audit of the
report (Oussii and Taktak, 2018). System implementation with missing documents, sign offs and
unresolved defects, in key financial system segregation of duties have not been enforced these
are some more issues related to IT. Report found that regarding IT governance 71% councils do
not have IT policies in areas like IT security, IT change management, IT incident and problem
management and available IT policies are not reviewed in line with schedule of council and this
create inefficiency in ensuring that policies are up-to-date. This audit clarifies that policies
regarding IT are important but councils do not have that policies and number of councils
regarding this is high.

Audit findings relate with IT controls in NSW
IT control is a procedure and group of activities which have been designed to ensure
confidentiality and integrity of system and data. Financial audit involved audit of IT system
which are related to financial systems. This involved user access management, privileged user
access restrictions and monitoring, acquisition of system software, change and maintenance and
planning of disaster recovery. Regarding user access management councils have improved their
processes yet there is a scope for improvement in terms of timely removal of access, restrictions
for staff that get privileged etc. Program change management involves that weak council system
can expose to risk like unauthorised and inaccurate changes to system program, issues with data
security and integrity and errors in financial reporting (Reid, Nelson and Carcello, 2019).
Regarding disaster recovery planning some of issues found related with these is that councils
have not formalised and approved the DRP. Regarding IT system this is an important element
involved in the audit because security of IT system is important to safeguard all the information
contained in the process and storage.
Audit finding relate with cyber security management in NSW city
Cyber security management is concerned with managing security concern regarding
NSW Cyber Security Policy states that strong cyber security is an important component of the
NSW digital government strategy. The term cyber security involves all the measures which are
applied to measures which are used so that system and information processed, stored and
communicated can be protected. Cyber security protects these from information being
compromise of confidentiality, integrity and availability. Audit finds that Cyber security if not
properly managed can expose council to broad range of risks which is theft of money, denial of
service, destruction of data, cost of repairing affected system, theft of corporate and financial
information and intellectual property of the council. Audit performed high level of assessment to
determine cyber security management at councils (Horne, 2017). It was found from that 80% of
the council do not have cyber security policy, 46% councils have not registered cyber security in
their risk register. 67% councils have not performed penetration testing, 76% councils have not
delivered cyber security training to the staff members, 48% of councils do not have cyber
security insurance policy and 78% councils do not have a centralized register of cyber incident.
Audit clarifies that this number is huge in relations with cyber security management and councils

are required to take action regarding this so that their cyber security management can be
enhanced and strengthen. If not considered this on time in such case councils can expose
themselves to several risks because of improper and inadequate cyber security management.
Audit findings and irregularities found in report
Audit findings which are included in the report are relevant to government and hance
several elements which are related to audit and financial aspect in the government were recorded
and analysed in this report. Though main focus of the audit report remained on the financial
aspect and all other parts were linked to this aspect of the report. This is the reason that audit
regarding IT also focused on several aspects like IT governance and relation considering this
with financial aspect (Grech and et.al., 2017). The IT security in this was on the basis of
financial system of the councils which are used to prepare and financial statements of the
councils. Though these are important but IT system security is important in other concerns as
well because parties who willingly harm the IT system can found several ways to affect the
security and access the financial data of the councils. Hence considering all the aspects of the
security are important in order to safeguard the financial data of the council and above all that to
safeguard finance and assets of the councils.
One of the major irregularities found in the report was that in this report effect of the
issues were properly identified along with issues but there was limited discussion over causes of
the issues. This is important while looking for solutions for the issues.
In relation with governance and internal control it can be said that this involved several
elements regarding governance of the councils in relation with financial aspects of the councils.
This report involved opinion expressed by the auditor though there were relevant and important
opinions regarding issues being faced in several by councils but one of the element and
irregularity regarding this report is that issues which are of high, moderate and low risks were
not properly included and segregated in the report and this is why it becomes difficult to identify
which issues are required to pay immediate attention so that can be solved soon in order to avoid
risk associated with it. The issue which has been identified in the report also does not provide
any type of adequate ground regarding solution of the problems (Thomas and Purcell, 2019).
Issues which has been identified in the report could have been more effectively presented so that

they can provide clear direction for the solutions. This is because one of the purposes of audit
report is to provide grounds and basis for the solutions of the problems.
This audit report is for identifying financial accuracy and validity and this is why
financial reporting in the report is been done very properly. Reporting of financial reporting has
been very adequately covering all the aspects and fulfils all the purpose of the financial reporting
and its quality. Errors found in financial statements of the councils are a result of efficiency of
audit being carried out to measure those financial statements.
Audit strategies and actions
Audit strategies can be considered as approach which is used for preparation of audit
report. This requires considering several options and actions which are applied while preparing
the audit report. This are applied while collecting financial statements, recording, analysing and
finally expressing opinion on the financial statements which has been identified and analysed in
the audit report.
Strategy of audit which has been used while preparing this report is reporting objectives
(Parker, Jacobs and Schmitz, 2019). This is because audit when is based on this strategy of the
report limited points are considered which are major and require immediate attention. This report
is based on government and their financial statements and this is why it is not easy and feasible
to cover all the issues and aspects relevant to governance and control. Specific focus through this
report has been kept on improving IT governance and control. This is also a reason because
information technology is an integral part of the system and all the data and documents are stored
and processed through information technology. This is why security of information technology
and adequate governance and control is important for councils so that all the data and
information can be kept safe and secure. This report also focused and improved management of
assets for the councils.
Credit card management, Fraud control, Gifts and benefits, Cyber security and Landfill
rehabilitation are also some of the areas of focus in this report. All these things suggest that
strategy chosen for this is reporting objective for the government. This includes reporting about
local government in different aspects (Cranney, Shaw and Phongsavan, 2019). These objectives

are important so that government can improve its governance in the selected areas and also
enhance its control over several activities of the councils.
This audit also is based on the strategy so that it can direct the efforts of the local
government through results which has been summarized in the report. For example excessive
issues related to cyber security and asset management will enable local government to take
adequate actions and they can be based on this audit report. This report pays special focus on
cyber security and related issues and this will enable the local governments to take measures in
that direction so that IT system and cyber security can be strengthened at local level of the
government.
The overall audit strategy of this audit was developed and carried out in three stages which are
Planning, Data collection and reporting.
Planning involves that plans are developed regarding audit and its objectives are determined this
is done so that audit can be directed on the basis of objectives which has been finalised for the
audit (Munyisia, Reid and Yu, 2017). This also involves determination of approach for data
collection and in what form they will be analysed and summarized so that audit can achieve its
objective and present accurate data.
Data collection which is next step in audit is concerned with collection of data. Regarding this
report data was collected through management letters from all the councils which involved issues
which are being faced by the councils and also financial statements of the council.
Reporting is last step in the auditing and this involves interpretation and analysis of the data.
This is important step so that accurate results can be found regarding data of financial statements.
Classification of data under various categories is also done in this step of audit and finally this
involves opinion of the auditor regarding report and statements which has been presented in the
report.
Suggestive measures to overcome irregularities
Irregularities in the audit report is related to inadequate and improper interpretation of
data and issues concerned with various aspects of audit. This can be solved by proper and
adequate interpretation of data in the report (Romero, Fry and Roche, 2017). The audit report can

involve more data so that it becomes more feasible to understand that data and what measures
can be taken regarding the issues.
Issues are not classified and hence it is required that issues are classified in the form high,
moderate and low risks. This will make it easy to identify and understand what issues are
required to be addressed before others and high risk issues can be addressed earlier. This will
also help end users to understand what issues which have high risk regarding various councils
are and what are others issues which are of moderate and low risk.
One recommendation here is that audit report should also cover the points it this report specially
as this is for government points which differentiate between practices in form of what is and
what should be (Ivannikov, Dollery and Blackwell, 2018). This will improve the quality of audit
report for the end user.
CONCLUSION
On the basis of above report it can be concluded that audit report which has been
analysed has several factors and elements in it some of them are accurate and adequate and some
requires attention to be so. Financial reporting was accurately analysed but governance and
control can be improved in terms of improved qualification. This report adequately analyse what
can be effects of particular issue if not resolved but analysis regarding what is the cause of these
are limited. Later some suggestive measures were included at the end report so that irregularities
of the report can be resolved.

REFERENCES
Books and Journals
Cranney, L., Shaw, L. and Phongsavan, P., 2019. Are outdoor gyms located in areas of greatest
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Durand, G., 2019. The determinants of audit report lag: a meta-analysis. Managerial Auditing
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vending machines nutritionally poor? A food environment audit. Nutrition &
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Hassan, Y.M., 2016. Determinants of audit report lag: evidence from Palestine. Journal of
Accounting in Emerging Economies.
Horne, S., 2017. 27 Years of fraud control in the New South Wales public sector: 1989–2016.
In The Changing Face of Corruption in the Asia Pacific (pp. 111-125). Elsevier.
Ivannikov, I., Dollery, B.E. and Blackwell, B., 2018. Accounting problems in the valuation of
infrastructure assets in New South Wales local government.
Munyisia, E.N., Reid, D. and Yu, P., 2017. Accuracy of outpatient service data for activity-based
funding in New South Wales, Australia. Health Information Management
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Oussii, A.A. and Taktak, N.B., 2018. Audit report timeliness. EuroMed Journal of Business.
Parker, L.D., Jacobs, K. and Schmitz, J., 2019. New public management and the rise of public
sector performance audit. Accounting, Auditing & Accountability Journal.
Reid, L.C., Nelson, M.W. and Carcello, J.V., 2019. Does Reporting Risks of Material
Misstatement in the Audit Report Impact Audit Adjustments? Experimental Evidence
from UK Audit Partners and Senior Managers. Experimental Evidence from UK Audit
Partners and Senior Managers (August 19, 2019).
Romero, B., Fry, M. and Roche, M., 2017. The impact of evidence‐based sepsis guidelines on
emergency department clinical practice: a pre‐post medical record audit. Journal of
clinical nursing. 26(21-22). pp.3588-3596.
Thomas, K. and Purcell, A.J., 2019. Local Government Audit Committees: A Behaviour
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Online
Report on Local Government. 2019. [Online]. Available through: <
http://202.129.210.58/projectfiles/internal_cust_document/FINALWEBReportonLocal
Government2019_1589385119.pdf>.