SBLE1033 ENGLISH FOR COMMUNICATION I
CAREER & VOCATIONS
Introductions
I,m
working as an assistant auditor at National Audit Department at Sabah. I have
more than seven years experience in this audit field. So what is audit? Why it
is important in this world?
Definition of 'Audit'
Definition:
Audit is the examination or inspection of various books of accounts by an
auditor followed by physical checking of inventory to make sure that all
departments are following documented system of recording transactions. It is
done to ascertain the accuracy of financial statements provided by the
organisation.
Description:
Audit can be done internally by employees or heads of a particular department
and externally by an outside firm or an independent auditor. The idea is to
check and verify the accounts by an independent authority to ensure that all
books of accounts are done in a fair manner and there is no misrepresentation
or fraud that is being conducted.
The
Audit Institutions in Malaya has been established during the British Colonial
administration in the early 20th Century to strengthen the Government financial
management system. At that time, the office of the Auditor General was formed
separately into the Federated Malay States and the Straits Settlements. In each
of the Federated Malay State, the Institution was known as the Audit Office and
was headed by a State Auditor. The headquarters of the Audit Office was
situated in Kuala Lumpur and was headed by a Chief Auditor. A more organised
National Audit Institution in respect of the structure and audit scope could be
traced back to 1906 when the Auditor General of the Federated Malay States,
W.J.P Hume was appointed. For the Straits Settlements, even though the Audit
Institution has been traced as early as the end of the 19th Century, it was centred
in Singapore and only involved two Malayan States namely, Penang and Malacca.
Both the institutions were merged in the year 1932 and placed under the
Director of Colonial Audit centralised in London. Auditingand the preparation
of the audit report were carried out by the Auditor of the Straits Settlements
and the Federated Malay States in Kuala Lumpur. When the Federation of Malaya
attained its independence in 1957, the post of Director of Audi Malaya was
changed to the Auditor General. The appointment as well as the responsibilities
of the Auditor General are spelt out under Article 105 of the Federal Constitution
and the Audit Act 1957.
The
International Organisation of Supreme Audit Institutions (INTOSAI) operates as
an umbrella organisation for the external government audit community. For more
than 50 years it has provided an institutionalised framework for supreme audit
institutions to promote development and transfer of knowledge, improve
government auditing worldwide and enhance professional capacities, standing and
influence of member SAIs in their respective countries.
INTOSAI
is an autonomous, independent and non-political organisation. It is a
non-governmental organisation with special consultative status with the
Economic and Social Council (ECOSOC) of the United Nations. INTOSAI was founded
in 1953 at the initiative of Emilio Fernandez Camus, then President of the SAI
of Cuba. At that time, 34 SAIs met for the 1st INTOSAI Congress in Cuba. At
present INTOSAI has 194 Full Members and 5 Associated Members[1].
The
International Standards of Supreme Audit Institutions (ISSAI) state the basic
prerequisites for the proper functioning and professional conduct of Supreme
Audit Institutions and the fundamental principles in auditing of public entities.
Article 105: Auditor
General
(1) There shall be an Auditor General, who
shall be appointed by the Yang di-Pertuan Agong on the advice of the Prime
Minister and after consultation with the Conference of Rulers.
(2) A person who has held the office of Auditor
General shall be eligible for reappointment but shall not be eligible for any
other appointment in the service of the Federation or for any appointment in
the service of a State[2].
(3) The Auditor General may at any time
resign his office but shall not be removed from office except on the like
grounds and in the like manner as a judge of the Federal Court.
(4) Parliament shall by law provide for the
remuneration of the Auditor General, and the remuneration so provided shall be
charged on the Consolidated Fund.
(5) The remuneration and other terms of
office (including pension rights) of the Auditor General shall not be altered
to his disadvantage after his appointment
(6) Subject to the provisions of this
Article, the terms and conditions of service of the Auditor General shall be
determined by federal law and, subject to the provisions of federal law, by the
Yang di-Pertuan Agong.
Article 106: Powers and
Duties of Auditor General
(1) The accounts of the Federation and of the
States shall be audited and reported on by the Auditor General.
(2) The Auditor General shall perform such
other duties and exercise such powers in relation to the accounts of the
Federation and of the States and to the accounts of other public authorities
and of those bodies which are specified by order made by the Yang di-Pertuan
Agong, as may be provided by federal law.
Article 107: Reports of
Auditor General
(1) The Auditor General shall submit his
reports to the Yang di-Pertuan Agong, who shall cause them to be laid before
the House of Representatives.
(2) A copy of any such report relating to the
accounts of a State, or to the accounts of any public authority exercising
powers conferred by State law, shall be submitted to the Ruler or Yang
di-Pertua Negeri of that State, who shall cause it to be laid before the
Legislative Assembly.
The
risk of fraud is inherent to any organisation. Right now, we are being exposed
to seemingly endless cases of fraud and corruption occurrence in the public
sector, many of which are related to government procurement of various levels
of government, federal, state and local as well as statutory bodies, despite
multiple measures to prevent it. Research too indicates that the most
significant fraud schemes occur in, or as part of, the procurement process.
From our auditing experience, public procurement is one of the government
activities most vulnerable to corruption. In many countries, significant
corruption risks arise from conflict of interest in decision making, which may
distort the allocation of resources through public procurement.
According
to the OECD Foreign Bribery Report (2014), almost two-thirds of foreign bribery
cases studied occurred in sectors closely associated with contracts or
licencing through public procurement: the extractive, construction,
transportation and storage and information and communication sectors. Clearly
no markets and industries are immune from procurement fraud, yet the problem is
further compounded by the sheer complexities in detecting fraud within the
procurement cycle - ranging from personal motivations of employees seeking
financial gains, to collusions among vendors within the market place. With the
procurement processes still relying on manual checks at times, it is imperative
that all the government agencies takes on a more systematic and proactive
approach to detect both known and unknown strains of procurement fraud.
For
sure procurement fraud in the public sector is a complex problem. It covers a
wide range of illegal activities from bid rigging during the pre-contract award
phase through to false invoicing in the post-contract award phase. It can be
perpetrated by those inside and outside an organisation. Thanks for the hard
work put in by the MACC, the public in recent weeks is witnessing what may be alarming
involving government procurements. Last year 2016, MACC Kuala Lumpur has
investigated five cases involving the senior government officers making false
claims and fraud in procurement amounting to RM 20 million. This was followed
by cases Senior Officer of the Ministry of Youth and Sports (RM107 million),
Sabah Water Department (RM153 million) and latest case involving a Federal
Ministry Secretary General. The procurement fraud reportedly involves the
public officers responsible for procurement receiving commissions, leaking the
value of the contract to bidders and plagiarising proposals submitted.
Procurement
fraud is a deliberate deception intended to influence any stage of the
procure-to-pay lifecycle in order to make a financial gain or cause a loss. It
can be perpetrated by contractors or sub-contractors external to the
organisation, as well as staff within the organisation. The nature of
procurement fraud differs between the two core stages of the procurement
lifecycle; precontract award and post-contract award.
How to enhance the
integrity and curb corruption in public procurement?
There
is also a need to address the integrity issues which normally appear throughout
the public procurement process. Thus, a holistic approach for risk mitigation and
corruption prevention is needed. Why? If we focus on the early stage of
procurement, the procurement fraud still can exist. Based on research, a
procurement risk management model with an explanatory fraud risk matrix can be
used to detect, prevent and manage risks in the procurement function
effectively and efficiently. What is procurement fraud risk matrix? The
development of procurement fraud risk matrix is the combination from various
source of information on the risk management and fraud.
Guile(2013), has proposed a 10-point
procurement fraud control plan to help any organisation reduce the risk of
procurement fraud.
i.
Ensure the risk of procurement fraud is acknowledged on your company risk
register, and there is a risk owner who has overall responsibility in the
organisation.
ii.
Ensure all staff who are able to make or are involved in financial decisions
are trained how to identify procurement fraud. Don’t dismiss minor red flags
indicating possible fraud such as a perceived close relationship with a
supplier that may be closer than you think.
iii.
Ensure a three-way match is carried out. So, do the amounts documented on
requisition, purchase order and invoice all align? Don’t forget the delivery
note and also check against the contract schedule.
iv.
Staff members often move to other departments within an organisation. If a
staff member moves departments, remove all of their current permissions and
authorities and add the permissions applicable to their new role.
v.
Ensure the procurement process is followed and is enforced. Has an order been
placed before the procurement paperwork has been raised? If so, why?
vi.
Segregation of duties is a recognised procurement fraud barrier but is not enforced.
In addition, a two-person system should be implemented to define who can either
add or delete a supplier from the approved supplier list or change a supplier’s
bank account number.
vii.
When auditing suppliers (both framework and non-framework suppliers), the
sub-contractors. Do your contracts stipulate that sub-contractors must be
agreed to by your organisation before they are engaged?
viii.
Implement a variation limit for costs on both contracts and on projects. If the
costs go over an agreed limit, the reasoning can be explained and investigated
before it is too late.
ix.
Is your organisation proactive in preventing procurement fraud? It is worthwhile
carrying out proactive data set matches of your staff against suppliers looking
for shared bank accounts, address and telephone numbers. There is other information
that can be gleaned from this data apart from conflicts of interest such as
suppliers sharing office buildings that you didn’t know about.
x.
Analysing your spend patterns with your suppliers will ensure you are spending
what you think you are. Check that your procurement thresholds are being
followed and there isn’t evidence of splitting orders to circumvent tender
thresholds.
prevent corruption and stimulate good governance
and accountability in public procurement.
These
principles include:
Integrity
- of actors in the procurement process may significantly reduce corruption
risks. Safeguarding integrity is at the basis of any effort to curb corruption
in public procurement. In addition to the standards applicable in the whole
public service, specific standards for procurement officials may mitigate the
specific risks related to the complexity and characteristics of the public
procurement process. The standards for procurement officials – in particular
specific restrictions and prohibitions – are necessary to ensure that officials’
private interests do not improperly influence the performance of their public
duties and responsibilities.
Transparency
- is central instruments to promote good governance in the public sector. For
public sector, it is recommended that every agency to have adequate degree of
transparency of the public procurement system in all stages of the procurement
cycle. This is a line with the recommendation by the OECD on Public Integrity
to safeguard integrity and the public interest at all stages of the policy
process, in particular through promoting transparency and open government,
including actively ensuring full access to information and open data, along
with active and timely responses to request for information. Although transparency
in the public service is strongly related with integrity and anti-corruption,
the relationship is not automatic. Several conditional factors need to be in
place for effective accountability
Conclusion
Corruption
is a social phenomenon that fosters an anti-democratic environment; characterized
by uncertainty, unpredictability and declining moral values and disrespect for
constitutional institutions and authority. Corruption is the dark side of the
relationship between personal interest and organisational goals. The implications
of corruption related practices in the procurement systems have manifold
negative consequences, most of which are manifested in economic, financial and
social dimensions. Procurement fraud or any fraud and corruption have caused a
negative impact and high risk everywhere, both in the public and private
sectors. Apart from continued effort to increase awareness about this threat as
well as taking measures to detect or prevent its occurrence as long as the
motivating factor in combatting fraud will remain an important agenda the public
sector should not ignore[3].
REFERENCES
[1]
http://www.intosai.org/about-us.html
[3]
Keynote Address by: YBhg. Tan Sri Dato’ Setia Ambrin Buang, “The Holistic
Approach To Combat Procurement Fraud”, 24th January 2017, Istana Hotel, Kuala
Lumpur
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