Developing an engagement performance framework in enhancing government sector audit report quality in Uganda

Abstract

Audit quality has been a major debate within the financial reporting and auditing fraternity for decades as a result of major corporate collapses and scandals such as that of Enron (Neri & Russo, 2014:25; Deis Jr & Giroux, 1992:463) and Wells Fargo (Corkery, 2017) in the private sector, but also the OPM and Irish Aid 2012 scams in the government sector in Uganda (Kasigwa et al., 2013:26-27). This has sparked growing interest in the necessity and importance of producing high quality audit reports (Francis, 2004:35), although Deis Jr and Giroux (1992:462) reported that there are limited audit quality studies focusing on the government sector, a shortcoming this study partially addresses. The study seeks to establish, evaluate, and propose improvements to the key OAG engagement performance QC measures (deployment, review, supervision, documentation and pre-engagement discussions) and audit quality indicators (AQIs), in order to develop a new OAG engagement performance QC framework for use at engagement level for public universities’ audits. The study utilises a cross-sectional design involving the adoption of a qualitative research strategy; the multiple case studies being those at four public universities, OAG Uganda and five private audit firms (two ‘Big 4’ and three local Ugandan firms); used semi-structured open-ended interviews administered to 51 respondents while data was coded a priori and analysed using the Atlas.TI software and the engagement performance QC framework developed was discussed and refined by a panel of six experts using the Delphi technique towards meeting the unique OAG QC needs.

The study shows that the OAG faces several challenges in ensuring consistent QC at engagement level such as high workload, partial or no documentation using Teammate audit software which limits compliance with the auditing framework and methodology, poor work assignment and resource deployment style, undefined audit supervision and review responsibilities leading to an overlap of roles by senior managers, poor QC for outsourced universities’ audits, client audit stress from analogous audit activities by accountability institutions and poor attitude of staff and management towards quality management. Study findings further revealed that audit impact assessment, monitoring and reporting is not the OAG’s mandate which stops at issuing an opinion and/or assurance, the need for the OAG to adopt the pooling deployment system to eliminate slack time and deficiencies associated with the current directorate system, introduce a three-year rotation policy for OAG in-house audit entities to complement non-rotation of teams, auditees’ desire that the OAG provides actionable or implementable audit recommendations and adopts total or positive reporting of key auditee achievements, adoption of the Management Information System (MIS) to improve audit processes and quality management in the OAG and significant debates on whether or not to disclose the OAG AQIs to the public. This study contributes significantly to the theoretical and empirical understanding of audit quality and QC in the government sector, with its most significant results being the development of a new ‘OAG DRSDPA engagement performance QC framework’ to improve QC for in-house and outsourced universities’ audits at engagement level, and major recommendations like the need for regular SAI inspections by professional organisations like the Institute of Certified Public Accountants of Uganda (ICPAU) and African Organisation of English-speaking Supreme Audit Institutions (AFROSAI-E); the need for parliament to develop a local board or commission responsible for guiding the OAG regulatory activities to avoid regulation capture and set the maximum delay period allowed to the Public Accounts Committee (PAC) for discussion of audit reports; the need for standard setters like International Organisation of Supreme Audit Institutions (INTOSAI) to revise International Standards for Supreme Audit Institutions (ISSAIs) to provide guidance on quality management for in-house and outsourced government audits and allowed practices to audit institutions in disastrous periods; while researchers need to assess the

impact of government audit outsourcing on the OAG’s workload and audit quality and the effectiveness of ISSAIs and ISAs (International Standards on Auditing) triangulation in conducting and reporting on government audits of public universities. The results are therefore relevant to the OAG, key stakeholders like parliament and CSOs and international jurisdictions like standard setters, academics and the research community.