About Audits and Auditing Terms
 A great deal of publicity has been given to matters relating to audits and some of the frequently used audit terms applied to entities.
What Is A Forensic Audit?
A forensic audit is defined as an examination of an institution’s or individual’s financial affairs resulting in a report designed for use in a tribunal or a court. A forensic audit strives to establish a comprehensive picture of an entity’s or individual’s affairs in relation to assets, liabilities, revenue, cash flow, business transactions, accounting, compliance and enumerating total assets.
Forensic audits are conducted whenever reliable financial data is required on an entity’s or individual’s state of affairs. In a commercial enterprise or public institution a forensic audit may be carried out when fraud or embezzlement is suspected. Forensic audits are normally conducted by accounting or legal specialists who conduct systematic and in-depth investigations and probes. So for example, the finding of a forensic investigation was recently used as evidence in the disciplinary hearing of Leonard Chuene, the former CEO of Athletics South Africa.
The office of the Auditor-General, during January 2011, announced that quarterly audits of all government departments, rather than the once-yearly at present, will become the norm. The benefit of such a system would be that those tasked with political oversight will have an early warning allowing for corrective steps.
A major issue to be considered by the quarterly review process was whether the departments and entities were working on issues identified needing attention in the audit report of the previous financial year.
For those interested in auditing processes, an understanding of the following auditing terms is useful:
Unqualified Audit Opinion With No Other Matters: the auditors conclude that the financial statements accurately reflect the financial position of the entity.
Unqualified Audit Opinion with Other Matters: the financial statements are unqualified but there are other matters, which signify ‘red flags’. These have not yet led to qualification but if not fixed, may lead to one.
Qualified Audit Opinion: except for specifically listed material errors, the financial statements are a fair reflection of the financial position. With some effort, they can receive an unqualified opinion in future.
Adverse Audit Opinion: the auditors disagree with the representation made by the management in the financial statements to the extent of confirming that the statements are not a fair reflection of the financial position.
Disclaimer of Opinion: the lack of sufficient audit evidence is such that the auditors are unable to express an opinion.
In an extensive interview with a national daily newspaper, Auditor-General Terence Nombembe referred to the current investigation of alleged tender fraud of R25billion announced by Minister Pravin Gordhan. He admitted that it was just the ‘tip of the iceberg’ and government should establish mechanisms to detect malpractices in time to prevent it from getting to a stage of investigation. Investigations waste time; they are expensive and complicated because you are trying to uncover and retrace something that has been done by sophisticated syndicates.
Currently, the lack of supervision and lack of monitoring makes it very easy for people with ‘ill intent to take government for a ride’, he said.
Pieter Rautenbach |
