At this point in time, I'd like to call the meeting to order and extend to everyone a very warm welcome.
This meeting today, colleagues, is in two parts. In the first hour we're going to hear from witnesses, and in the second hour, from 4:30 to 5:30 p.m., we're going to consider reports.
The committee is very pleased to have before us today representatives from the Australian National Audit Office. Let me introduce Barbara Cass, the executive director from performance audit services group, and Brandon Jarrett, executive director, professional services branch. They are both from the Australian audit office.
Welcome, Ms. Cass, and welcome, Mr. Jarrett, to Canada and to this committee.
The committee also has before it the Auditor General of Canada, Ms. Sheila Fraser, and she's accompanied by the deputy auditor, Mr. John Weirsema.
We're going to hear a presentation from the Australian audit office dealing with a peer review that is under way right now. It's being led by the Australian audit office, but there are a number of other countries involved in this peer review. It will be finished sometime next year and tabled in Parliament.
Let me just say a few words on the entire process that is under way here.
When we talk about the Office of the Auditor General and who's auditing that office, or who's watching the watchdog, there are a number of processes involved.
First of all, as I believe many of us are aware, the initial budget of the Office of the Auditor General goes through a panel of parliamentarians, chaired by the Speaker, and that recommendation goes to Treasury Board. It does not have to be accepted, but it certainly has considerable weight. That figure then makes its way into the main estimates as a line item. Then the Auditor General, at a meeting we have every year, usually in May, comes before us to justify the appropriations and to discuss her office's report on plans and priorities and her office's departmental performance report. That estimate line is approved. That, of course, makes its way into the main estimates, and that is the parliamentary appropriation for the office.
The second phase, of course, is the audit. Parliament has to ensure that the money is spent in accordance with the appropriations. Of course, the audit can't be done by the Office of the Auditor General. In that process, Treasury Board assigns that work to a Canadian accounting firm, usually a mid-sized firm. That audit is done to assure Parliament and Canadians that the funds, as appropriated, are spent in accordance with standard public sector accounting standards and that all transactions are recorded, etc. Those audited statements eventually make their way into the consolidated summary of financial statements of the Government of Canada.
The third area, colleagues, is a peer review. I believe this is the third one that has been conducted on our Office of the Auditor General. The first was done by a major accounting firm. The last two were done by international audit firms, and that is exactly what's going on now. They take place every five or six years. This peer review is being led by the Australian audit office. I think there are five or six other countries involved, and they all have certain assignments. At the end of the day, a performance report will be completed. Of course, we will have access to that report when it is done sometime next year.
The steering committee and the committee as a whole thought it would be beneficial for us at this point in time, when the work is being started, to hear from the office of the Australian Auditor-General, the audit office, as to the processes followed, the mandate, and when the work will be expected to be done, so that we have a clear understanding as to what the peer review process entails.
Having said that, I'm going to reverse the order and ask for the presentation from the Australian National Audit Office.
The floor is yours, and again, welcome to the committee.
I won't bother to read out our opening statement. I'll just go through what our presentation is.
As you're aware, and I'm sure your Parliament is no different to ours, members of Parliament and the public look to the Auditor General of Canada for independent, objective, and reliable information upon which they can rely in assessing the government's performance and holding it to account.
This is by way of background information so that you're aware of what we're doing in terms of the peer review.
The Office of the Auditor General's audit work is guided by a rigorous methodology and quality management framework that is aimed at providing reasonable assurance that the OAG discharges its legislative authority in accordance with applicable standards of professional service. The objective and independent review that's being undertaken by our office and other experienced reviewers provides an opportunity to constructively examine and strengthen the work of the Office of the Auditor General of Canada.
The OAG has a quality management system for each of its product lines. The QMS, as it is called, covers areas such as audit and examination management, people management, and continuous improvement as some of the areas. The review objective is to provide the Auditor General of Canada with an independent opinion on whether the Office of the Auditor General of Canada's quality management system is suitably designed and operates effectively to provide reasonable assurance that the work of the OAG complies with its legislative authorities and professional standards.
The scope of the peer review will include all audit and assurance practice lines as well as key support areas that directly support the audit and assurance areas. These will be professional development, the resourcing of individual audits, and the continuous improvement processes that the OAG has in place.
The period under review will cover audit and assurance engagements reported during the period of September 2008 to October 2009. As has already been mentioned, the Australian National Audit Office is leading the peer review team, and it will cover all product lines. We have split the team to cover those lines.
The Netherlands and Denmark, with Australia, will be involved in the review of the performance audits and special examinations of crown corporations. Again, with Australia, Norway and Sweden will be involved in the review of the audit of the annual summary financial statements, the Government of Canada, and financial audits of crown corporations and territorial governments.
The review criteria we are using are going to be based on the OAG's quality management systems, key legislative authorities such as the Auditor General Act, the Financial Administration Act, and the Federal Sustainable Development Act, and it will be based on the Chartered Accountants of Canada assurance and auditing standards.
The peer review will be conducted in a number of stages, and it is our intention to provide a report by June 2010. The actual review commenced with a planning meeting with the OAG and the peer review team members from Australia in June this year. In August, the OAG provided the whole peer review team with comprehensive briefings and explained all elements of the quality management framework. These briefings will assist the team in assessing whether the QMSs are suitably designed for performance audit, special examination, and annual audits.
We've also analyzed the OAG's quality management system, auditing standards, their policies, and guidance as it applies to each of the audit categories. Our current visit is perhaps the most important one because we will look to see how the OAG implements its quality management system, and we'll do this by reviewing a sample of audit files.
The sample that we have chosen covers 17 audits as well as components of the consolidation of the summary of Public Accounts of Canada. It will include performance audits, special examinations, departmental financial audits, financial audits of crown corporations, a territorial financial audit, and other statutory financial audits.
For your information, when we looked at selecting our sample we based it on a number of factors. These included the risks that were associated with either the entity or the audit topic, the materiality of the particular audit, the timing of the audit, the number of agencies involved, how complex it was, and the audit practitioner and assistant auditor general of the OAG.
We are also seeking, as part of our peer review, to get the views of a number of key stakeholders and their view on the work of the OAG. As well as appearing before this committee and speaking to your chair and vice-chairs, we will be speaking to the chair and vice-chair of the Standing Committee on Environment and Sustainable Development, the Comptroller General and his assistant, the chief executive officer of Export Development Canada, the Privacy Commissioner, the Deputy Receiver General of Canada, and senior executives of the Department of National Defence and Revenue Canada. So we have a broad section of stakeholders that we will be talking to.
The final report, which, as I said, we will be able to present to the Auditor General by June 2010, will include findings of the performance audit, special examinations, and financial audit reviews. It will provide an opinion against the review objective. It will also include examples of good practice at the OAG and suggestions for improvements.
We would also like to acknowledge this committee and to thank the Auditor General and her staff for their cooperation and full support for this peer review.
If you have any questions you would like to ask, we are more than happy to answer them.
I would like to make a few comments regarding the external peer review, and my comments will be brief.
Let me start by providing a little bit of background information.
As you mentioned, this is the third peer review of my office. The first one was conducted in 1999 and focused on our financial audit practices. The second peer review, in 2003, focused on our performance audit practices. That particular review was the first of its kind for any national audit office. As you indicated, it was undertaken partly in response to a question that we are often asked: who audits the Auditor General of Canada?
The peer review under way now is even more comprehensive because it encompasses all of our product lines as well as some of our corporate services.
International peer reviews of legislative audit offices are becoming more common. Ultimately, they provide independent assurance that our work can be relied on.
We are grateful that the Australian National Audit Office accepted to lead this review. The peer review team is made up of representatives from several audit offices, including the Netherlands, Denmark, Norway and Sweden. The arrangement is that we pay the expenses of the peer review team while their salaries are paid by their respective audit offices.
As mentioned, the peer review team's report should be finalized by June 2010. At that point, we will provide responses to their recommendations and develop an action plan. Both the report and our action plan will be shared with this committee and made public. We would be pleased to appear before the committee to discuss both the report findings and our plan going forward in response to the recommendations of the peer review team.
Mr. Chair, if you permit I would like to present some of the members of the peer review team who are here today. In addition to Ms. Cass and Mr. Jarrett, we have from Australia Deborah Jackson, Clea Lewis, and Amy Fox. From Norway we have Erna Lea and Lars Moller. From Sweden we have Anna Fahl and Jan-Ake Nelsson, who are present in the room.
Thank you, Mr. Chair.
Actually, from both of those peer reviews there were opportunities for improvement, as we would expect, quite frankly, from any audit. An action plan was developed for the recommendations that we thought were appropriate and relevant.
I'll give you an example of one that wasn't. Not all of the national audit offices work to the same standards that we work to. We work to what we call assurance standards. Other offices don't need to have the same level of confidence, if you will, that we require in our work. So, for example, there were suggestions that we should be using other techniques in conducting our audits, such as focus groups. We looked at that and we agreed that focus groups would not be an appropriate source of information for us to bring to parliamentarians. It would not fit within our assurance standards. There were some recommendations like that, recommendations that we analyzed and concluded were not appropriate.
I would say most of the recommendations, the action plans, have been completed. There are still some areas that are ongoing, with new standards coming in and methodologies being updated. We have a very big initiative going on right now in the office to redo our methodology and to bring that up. I am convinced that one of the recommendations that will be coming out of this practice review will be that we need to complete that work, but I would say most of the work has been done. If the committee wishes, we can obviously provide an update on where those actions were from the last review.
Thank you very much, Chair.
Welcome to all our guests. I hope you have a wonderful time here.
I would just say to the Danish delegation that I'm proud to carry the name, but I have to tell you, that's as far as it goes. There's no other tie to the culture. The reality is—I'm giving you my family history here, but it's part of this—that was my father's stepfather. That's where the Danish came from. I've been proud to wear it. I got all the credit for how wonderful your country is, and it's been wonderful, but I'm actually Dutch by blood on my father's side.
I won't go into my Australian context, because I already bored them with that story the other day when I met with them.
This is a great delegation. I'm thrilled that you're all here.
I want to open up my remarks by saying how impressed I was with the calibre of the Auditor General from Australia and your delegation yesterday. Like the chair and the other vice-chair, as a vice-chair I was interviewed yesterday. I enjoyed it thoroughly. On the level of professionalism, the highest compliment I can pay you is that it meets the same standard that Madam Fraser brings to auditing here in Canada. I was very impressed.
I want to also say this to all our guests so that they know what esteem we have for Madam Fraser and her shop and all the people there, in terms of her leadership and the quality of it and also in terms of the quality of her person. I say this because you need to know how strongly we feel. I can tell you that the Canadian people see her as being on their side. Every time they see Madam Fraser on TV, they look at her and say, “That's my fighter, and she's there making sure that my bucks are being taken care of.” And that's well earned.
Having said that, I do have a question or two.
Voices: Oh, oh!
Mr. David Christopherson: First, I won't use the word “collusion”, because that's a bit strong, but I have to say that I don't think I've ever seen coordinated opening statements quite the same as I have here now. You didn't read them, but under the....
There's a reason why I'm raising this.
Mr. Jarrett, in your comments, you were going to say, “As noted by the Auditor General, this is a very comprehensive review.” But then you got kind of screwed up because you went first instead of second. Madam Fraser's comments say, “The peer review now under way is even more comprehensive....” It looked to me like there was a little bit of coordination and we don't normally have that.
I raise that by asking one question. We rely so much, particularly those of us who are not professionals, not auditors, on the professionalism of everything to do with the Auditor General's shop. It's so important and it's so detailed that we need to know.
Your check on this is critical for us, because we have no idea, really, of how to look at it from the outside in the way that you're going to.
My question to you is this. In order to give us the full comfort we need, what assurance, Mr. Jarrett, can you give us, on behalf of the auditing team, that we don't have to worry or be concerned about the clubbiness, if you will, of auditors general around the world?
You go to the same conferences and I'm sure you go to social events or have dinners when you're meeting, so you do get to know one another. What assurance can you give us that we need not worry at all that, on something that's a judgment call, good old Sheila is going to be a priority over good old Canada's ways of doing things?
I know the answer, but I think it needs to be asked. I'd just like to hear you say it. Put it on the record, if you would, please, sir.
Could I please actually explain to you so that I can give you some level of comfort about the opening statements?
I arrived here on Monday morning. The Auditor General's opening statement was already prepared. It was just coincidence, I have to tell you, that the word “comprehensive” got in there. The reason it is classed as comprehensive—and I think any audit office would say it—is that it covers every one of the practices and most of the support services that support the practices.
I'd also like to make the point that, from the point of view of the independent nature of it, perhaps it also helps the committee to know that I've personally been involved in a number of peer reviews, and I have been led by Canada, and I can assure you that everyone on that team brings to them a level of experience and professional judgment.
Equally, when it comes to making the findings of those reviews, they are done and treated with the respect they deserve. There is no collusion. There is no point where we sit down and argy-barge over what they are. We will do our utmost—
Welcome to all our guests. It's quite a remarkable thing; I don't think we could have invented this process if you didn't come to us with it. It reminds me of that Latin phrase, which I'm sure I will mangle, quis custodiet custodes, or who takes care of those who are supposed to watch over us?
Given the reverence, as you've heard, with which we hold our Auditor General, we're all kind of concerned that you might find something that we don't want to hear. But what would be the worst thing that you would be able to find? That would be a hypothetical situation, and then I'm going to ask you for a more concrete one. In other audits, what's the worst thing that you have found, or the most surprising thing that is perhaps of note to the citizens of the country where that audit took place?
I would love to be able to say that all of our systems are perfect, but that's not the reality. As I mentioned earlier, we have a very significant process under way with regard to our methodology and our guides to our staff. We realize these are not as good as they should be.
There are a number of very significant changes coming to accounting and to auditing standards in Canada. We actually came to the conclusion that we could not cope with all of this ourselves—which I think I informed the committee of in our last performance report—and formed a strategic alliance with one of the major accounting firms to be able to access their training.
So there will be, over the next two years, a significant investment by us in methodology and training and in redoing the way we deliver all of our manuals, and even how we deliver our training. We're going to go to e-learning and things like that.
As we say to departments, we're not going to wait until everything's perfect before we come in to do an audit, and so I feel the same way for us.
My expectation, my hope, is that the review team will take our plans into account. I know they will flag areas where there are gaps. Hopefully they don't find anything that we haven't already identified ourselves and that we're working on to address.
Until just recently, Canada has always set its own accounting and auditing standards through the Canadian Institute of Chartered Accountants. There are boards that develop these standards. The decision has been made to move to international auditing standards. That will come into effect in 2010. So modifications will have to be made to our methodology. In fact, we are holding the first pilot training course today. We will have to train all of our staff in these new standards and adapt all of our manuals, guides, and everything to the new standards. The differences are not enormous, but there are some pretty significant differences that have to be taken into account.
On the accounting standards, it's largely the same thing for publicly accountable enterprises, which would include crown corporations, for example. Canada has also gone to international financial reporting standards, IFRS, which will be coming into effect in 2011. There are some significant challenges there for the preparers of the financial statements as well as the auditors, because there are changes there.
Again, we have to go through and identify what the differences are, train our people--which we've already started--and put those differences into our audit program so we pick them up. There is a lot of work that has to be done. Some of it has started already, but it has to continue over the next year.
I'd like to call the meeting back to order. There is just one housekeeping matter before we get into the report.
In the first report we will deal with chapter 5, “Passport Services”, but what I want to do, colleagues, is review and approve the minutes of the steering committee held yesterday. Those minutes have been circulated. Attached to the minutes is the draft agenda of the committee for the next two or three weeks. As you can see there, it's all self-explanatory.
Next Monday we have a one-hour meeting on interest on advance deposits and draft reports. Then we go to the NRC the following week. In the week before the break, it's draft reports.
Then, I just want to point out to members that on Tuesday, October 3, we will have the tabling of the Auditor General's fall report. That's with the normal lock-up on the morning of the briefing by the auditor, and then at two o'clock, the auditor of course will be tabling that report in Parliament. On the following day, October 4, we will have the auditor before us on all chapters in that report.
After that, it becomes a little more of a moving target, but I just want to circulate this.
Are there any questions or is there discussion on the minutes?
All in favour of their approval?
(Motion agreed to)
The Chair: The minutes are approved as circulated.
Just for information purposes, I note that Mr. Lee has filed a notice of motion. That's been taken on notice. If Mr. Lee wants to pursue that, he can do so at the meeting on Monday.
The meeting will now resume in camera.
[Proceedings continue in camera]