Introduction

This chapter focuses on the unique challenges and standards associated with auditing in the public and not-for-profit sectors. It is structured to provide a deep dive into the principles, methodologies, and ethical considerations underpinning effective auditing practices within these contexts. It offers a comprehensive exploration of the auditing standards for the public sector, the specialized challenges faced by not-for-profit organizations, the pivotal role of the Auditor General in public audits, the intricacies of performance auditing, and the paramount importance of ethical considerations in these sectors. It discusses how these standards are adapted to the public sector context, emphasizing compliance with legal and regulatory requirements, accountability, transparency, and the role of these standards in building public trust and confidence.

Moving to auditing for not-for-profit entities, the text delves into the unique financial structures, reporting requirements, and the assessment of program efficiency and effectiveness. It covers managing and auditing donor funds and grants, volunteer management, operational risks, and compliance with tax exemption regulations. The Auditor General’s role in public audits is then highlighted, outlining the mandate, authority, scope of work, and the impact of Auditor General reports on public administration and policy. The collaboration with legislative bodies for oversight and accountability, challenges faced by the Auditor General’s office, and examples of significant findings and recommendations are examined.

Performance auditing in the public sector is addressed next. The section begins with a definition of performance auditing, its objectives, scope, and methodologies. The program’s performance evaluation against established criteria and the value assessment for money are discussed. Techniques for gathering and analyzing performance data, reporting findings, and the role of performance audits in policy development and improvement are explored, including case examples of impactful performance audits.

Finally, the chapter covers ethical considerations in public and not-for-profit auditing, emphasizing the importance of upholding integrity and objectivity, navigating conflicts of interest, and maintaining auditor independence. Confidentiality issues, ethical dilemmas, decision-making frameworks for auditors, and the role of professional ethics in strengthening public trust are discussed. Training and awareness programs on ethics for auditors in these sectors and addressing unethical behaviour and fraud are also considered.