Auditor Appointment Process

A Guide to the Appointment of Auditors of Government Organizations

The purpose of this guideline is to provide information and assistance with respect to the appointment of auditors by the governance boards of government organizations.

What is a Government Organization?

A government organization is a corporation or other organization that government is responsible for. These include ministries, Crown corporations, and other government organizations such as universities, colleges, school districts, health authorities, and similar organizations that are controlled by and accountable to the Provincial government. Combined, these government organizations are referred to as the government reporting entity and are the basis upon which the Government reports their overall financial standing. Government reports their financial standing to the Legislative Assembly through the Public Accounts. The Public Accounts provides the Legislative Assembly, and the public, with annual audited financial statements - including statements of assets and liabilities, and revenues and expenses - for the government reporting entity.

Audit of the Government Reporting Entity

The Auditor General is the auditor of the government reporting entity. The Auditor General serves the Legislative Assembly and the people of British Columbia by providing independent assessments and advice with respect to government accountability and performance. The mandate of the Auditor General is set out in the Auditor General Act, SBC 2003, chapter 2.

The diagram below shows the relationships between the Government, the Legislative Assembly and the Auditor General.

Government = Government Reporting Entity

Auditors of Government Organizations

The auditors of most government organizations are private sector firms appointed by the governance boards (boards of directors, boards of trustees, etc.) of each organization.

The Select Standing Committee on Public Accounts (Public Accounts Committee) is a committee of the Legislative Assembly. With advice from the Auditor General, the committee determines which government organizations will be audited by the Auditor General and which will be audited by private sector firms. The Auditor General is then responsible for administering the auditor appointment process in accordance with the direction provided by the Public Accounts Committee.

The Auditor General also provides guidance on the selection and appointment of other auditors by boards, including advice on the scope of audit work that is required to enable the Auditor General to provide an audit opinion on the Summary Financial Statements of the Province.

Auditor Selection and Appointment Process

Except for those organizations for which the Public Accounts Committee has decided the Auditor General will be the auditor, the selection and appointment of financial statement auditors is the responsibility of the governance board of the organization. The board, or a committee of the board, is responsible for determining, managing and controlling the specific process used to select and appoint an auditor. The board is accountable for ensuring the effectiveness, value-for-money and fairness of its process.

The basic requirements for an auditor include competence, independence and absence of conflict of interest. A governance board will also want to be satisfied that the auditor will provide the information it requires to oversee management of the organization.

Relationship Between the Auditor General and Other Auditors

In order to provide an audit opinion on the Summary Financial Statements of the Province, the Auditor General must be assured that the financial statement audit process for government organizations is reliable. To obtain this assurance, the Auditor General directly carries out a limited number of audits and participates, to varying degrees, in other audits. To facilitate his participation in those audits, the Auditor General will request that the contracts setting out the terms of engagement between the governance boards of government organizations and their auditors include specific provisions for including the Auditor General at key points of each audit. Participation of the Auditor General varies from year to year and from organization to organization.

In order to fulfill his professional obligations, and to meet generally accepting auditing standards, minimum involvement of the Auditor General will require the Auditor General to communicate with the auditor of a government organization concerning his intended reliance on the work of that auditor. In other cases, the Auditor General will be extensively involved in the planning, examination and reporting phases of the audit. The involvement of the Auditor General will supplement, not replace, the work of the board’s auditor and will neither relieve nor interfere with the auditor’s duties to the board.