Two auditors, one public client : the NAO/IAID relationship in Malta

Abstract

Purpose: The purpose of this study is to analyse the level of synergy between external and internal audit in the public sector. It aims at assessing any potential communication barriers between the NAO and IAID with respect to the following main aspects; audit planning, internal controls, fraud and irregularities, reporting and consultancy, and at evaluating the inter-relationship between them. Design: The objectives of this study were achieved through twenty-four personal semi-structured interviews with officials from the NAO, IAID and Government Departments. Findings: This study ascertains a number of barriers between the NAO and IAID that include ingrained culture, informal communication, misperceptions and lack of sufficient resources. The findings reveal that, although the inter-relationship between the NAO and IAID is satisfactory, there is still room for improvement as it tends to be weak in the five aspects of audit planning, internal controls, fraud and irregularities, reporting and consultancy. Conclusion: This study concludes that there are insufficient linkages in the NAO/IAID relationship for maximum benefits to be exploited by each entity whilst respecting mutual independence. This is reflected in the various weaknesses in the different coordination aspects. The relationship to date gives rise to inefficiencies as it covers too narrow a sphere of government activities, with little sharing of expertise and with strong possibilities of duplication of work. Value: It is hoped that this study will encourage further development in the public sector, particularly with respect to the study's recommendations: written agreement regulated by legislation; a memorandum of understanding; a programme of regular meetings; reinforcement of communication lines and decentralisation of the internal audit function retaining centralised monitoring, where applicable.