Message from the Auditor General of Canada
I am pleased to present my Office's Report on Plans and Priorities for 2006–07.
As Parliament's auditor, the Office of the Auditor General plays an important role in promoting government
accountability and well-managed public administration in Canada. As Auditor General, I lead a staff of highly
qualified auditors in the independent scrutiny of federal government operations. Following professional standards, we examine the
government's activities against established criteria, such as its own laws, policies, and targets. We look at whether the
government is carrying out its programs and initiatives with due regard for economy, efficiency, and environmental impact, and
whether it has measures in place to determine how effective they are.
Canadians support government-funded programs such as old age security, international development assistance, and environmental
protection through their tax dollars and deserve to know how well these funds are being managed. Our financial and performance
audits provide parliamentarians with fact-based information they can rely on in their oversight of government spending and
performance. In 2006–07, we will conduct more than 130 annual financial audits and we plan to complete 37 performance
audits that we will report on to Parliament.
In 2005, Parliament expanded the mandate of the Office through Bill C-43, which was enacted in June as the Budget
Implementation Act. This Act amends both the Auditor General Act and the Financial
Administration Act—the main pieces of legislation that govern our work. This move signals considerable confidence in my
Office on the part of parliamentarians, which my staff and I greatly appreciate. Let me take this opportunity to assure
parliamentarians and Canadians alike that we will work diligently to uphold the trust they continue to place in us.
In practical terms, an expanded mandate will mean two things beginning in 2006–07. First, we will be able to include
foundations in our performance audits. Foundations are non-profit corporations that are entrusted with large amounts of public
money to fulfill significant public policy roles. For many years, one of the concerns I have expressed about the accountability of
foundations to Parliament stems from the fact that there was no provision for auditing their contribution to achieving government
objectives. I am pleased that this concern has been addressed.
Second, we will conduct financial audits of three additional Crown corporations, making us the auditors or joint auditors of
all but two of the government's Crown corporations. In addition, changes to the Financial Administration Act mean that
five Crown corporations have been added to the list of those requiring a special examination every five years. A special
examination is a form of performance audit that assesses the management systems and practices of a Crown corporation and provides
reasonable assurance that there were no significant deficiencies. The results of a special examination are provided to a Crown
corporation's board of directors. As with our other audits, they contribute to improved governance and greater accountability.
To be credible and effective, my Office must be independent of the government of the day. Numerous safeguards are in place to
protect our independence, many of which are set out in our legislation. For example, the Auditor General is appointed for a
10-year, non-renewable term, and can be removed only upon resolution of both the House of Commons and the Senate. In conducting
performance audits, I have the right to decide what to audit, when to audit, and how to audit, and the power to ask for any
information I need to do my job. Another key to our independence is the ability to remain unbiased and stay faithful to the
evidence in our audits. This is safeguarded by our allegiance to a professional discipline that requires us to adhere to stringent
standards and our own deep commitment to producing high-quality work.
It is important to all public sector audit offices that the process used to establish their funding levels be sufficiently
independent. I am pleased to report that our long-standing concern in this area is close to being resolved. Although my Office is
funded by Parliament, historically we have negotiated our level of funding with the Treasury Board Secretariat,
which is one of the organizations we audit. For some years now, we have been working toward a more appropriate and independent
funding process. Recently, the government committed to piloting a new funding and oversight mechanism that would apply to all
Agents of Parliament, including us, for 2006–07 and 2007–08. A parliamentary oversight panel was formed, a process agreed to,
and work commenced. We look forward to the resumption of this work under the 39th Parliament, the success of the pilot project,
and a permanent resolution to this long-standing issue.
Not only does the Office of the Auditor General audit the federal government and the governments of the three territories, but
we also participate in the auditing of international organizations. We take part in international public sector accounting and
auditing organizations and support the development of professional auditing standards and the transfer of knowledge between
national audit offices. We believe that playing a role in the international community is a serious responsibility, but one that
comes with many benefits. It lets us contribute to improved governance and accountability throughout the world while at the same
time strengthening our own work as legislative auditors in Canada. Our new international strategy, which will take effect in 2006–07,
will help us build on past successes and put us in a strong position to meet the opportunities and challenges that lie ahead.
I look forward to carrying out the plans outlined in this report. I consider myself extremely fortunate to be supported by an
exceptional group of employees who are dedicated to excellence, integrity, and making a difference for Canadians. Together, we
will continue to serve the Parliament and the people of Canada with energy and enthusiasm.
Sheila Fraser, FCA
Auditor General of Canada
6 March 2006
Management representation statement
We submit, for tabling in Parliament, the 2006–07 Report on Plans and Priorities for the Office of the Auditor
General of Canada. Management of the Office is responsible for preparing this report, which
- is based on the Office's results chain consistent with its approved program activity architecture,
- presents fair and reliable information,
- provides a basis of accountability for the results achieved with the resources and authorities entrusted to it,
- reports finances based on approved planned spending numbers from the Treasury Board Secretariat, and
- is based on the reporting requirements outlined in the Treasury Board Secretariat guidance.
The Office's Executive Committee oversees the preparation of the report, and approves it based on the recommendation and advice
of the Office's Audit Committee.
Sheila Fraser, FCA
Auditor General of Canada
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Robert D'Aoust, CA
Comptroller and Senior Financial Officer
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Ottawa, Canada
6 March 2006
Section I—Overview
What we do: Legislative auditing
The Office of the Auditor General of Canada conducts independent audits and studies that provide objective information, advice,
and assurance to Parliament, territorial legislatures, government, and Canadians. With our reports and testimony at parliamentary
hearings, we assist Parliament in its work related to the authorization and oversight of government spending and operations, and
answer many important questions (Exhibit 1).
Exhibit 1—The Auditor General answers many important questions
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Audits and studies1
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Questions
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Performance audits and studies of departments and agencies, including audits on the environment and
sustainable development
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Are programs well managed? Were they run with due regard to economy, efficiency, and their environmental effects? Does
the government have the means to measure their effectiveness where it is reasonable and appropriate to do so?
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Audit of the summary financial statements of the Government of Canada
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Is the government presenting fairly its overall financial situation?
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Financial audits of Crown corporations, territorial governments, and other organizations
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Is their financial information presented fairly, and are they complying with their legislative authorities?
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Special examinations of Crown corporations
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Do their systems and practices provide reasonable assurance that assets are safeguarded, resources are managed
economically and efficiently, and operations are carried out effectively?
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Sustainable development monitoring activities and environmental petitions
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Are departments and agencies meeting the objectives and implementing the plans set out in their sustainable development
strategies? Are ministers responding as required to environmental petitions?
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Assessments of the performance reports of the Canadian Food Inspection Agency, Parks Canada, and the Canada Revenue
Agency 2
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Are the agencies presenting their performance information fairly and in a reliable way?
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1 These audits and studies are explained in more detail in the Auditor General Act (sections 5, 6, 7,
and 23) and the Financial Administration Act (Part X).
2 These assessments are published annually in the statutory reports of these organizations.
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Supporting and promoting accountability is an important part of our work with Parliament. Our audit reports, tabled in the House
of Commons, provide members of Parliament with objective information to help them examine the government's activities and hold
it to account.
The Auditor General Act, the Financial Administration Act, and other acts and orders-in-council set out the
duties of the Auditor General. These duties relate to legislative auditing and monitoring of federal departments and agencies,
Crown corporations, territorial governments, and other entities that include international organizations.
In 2005, Parliament passed Bill C-43 to amend the Auditor General Act and the Financial Administration Act,
which expands our mandate in two areas:
- First, we are now able to include foundations in our performance audits. This addresses one of our long-standing concerns
about the lack of accountability to Parliament of foundations—organizations entrusted with large amounts of public funds to
fulfill significant public policy roles.
- Second, with the addition of three Crown corporations to our mandate, we are now the auditors or joint auditors of all but
two Crown corporations. Five Crown corporations have also been added to the list of those requiring a special examination
every five years.
This bill received royal assent on 29 June 2005.
Who we are: An Agent of Parliament
The Auditor General is an Agent of Parliament who is independent from the government and reports directly to Parliament (Exhibit
2).
Exhibit 2—The Auditor General's role as an Agent of Parliament
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Objectivity and independence. Maintaining our objectivity and independence from the organizations we audit is
critical. Our independence is assured by a broad legislative mandate, freedom from certain government controls, and a 10-year
mandate for the Auditor General that is not renewable.
Additional mechanisms are in place to ensure the independence of the Office:
- The reports of the Auditor General are presented to Parliament.
- The Auditor General is accountable to Parliament directly and not to the government of the day.
- Funded by Parliament, the Office does not receive fees for its services from the departments, agencies, and Crown
corporations that it audits.
- As a separate employer, the Office appoints its employees, has its own classification standards, and performs human resource
functions including determining the terms and conditions of employment.
- Auditors follow the standards of the Auditing and Assurance Standards Board of the Canadian Institute of
Chartered Accountants and the Office's audit policies, methodology, and Code of Values, Ethics, and
Professional Conduct.
- The Auditor General may, within the total dollar limitations established for the Office in appropriation acts, contract for
professional services without the approval of the Treasury Board.
Funding. The Office is funded by Parliament; however, historically we have negotiated the level of funding
with the Treasury Board Secretariat, one of the organizations we audit. That process is not sufficiently independent to ensure
that our budget is appropriate for meeting Parliament's expectations. Since 2001, we have been discussing with the Treasury Board
Secretariat alternative ways to determine the Office's future funding requirements.
In 2005, the government committed to implementing a pilot project for a new funding and oversight mechanism for the 2006–07
and 2007–08 Estimates process for all Agents of Parliament. The new mechanism seeks to respect the role of Parliament and the
independence and distinct mandates of its Agents, and also to reflect the responsibility of the government for sound stewardship
of public resources.
A parliamentary oversight panel was formed, a process agreed upon, and work commenced. The panel ceased to exist upon the
dissolution of the 38th Parliament on 29 November 2005. We look forward to the establishment of a new parliamentary
panel under the 39th Parliament and the resumption of the pilot project, leading to the permanent resolution of this long-standing
issue.
Who we serve
Our primary responsibility is to Parliament, and our relationship with parliamentarians is key to our effectiveness.
Parliamentary standing committees. The Auditor General's main relationship is with the House of
Commons Standing Committee on Public Accounts. In turn, much of the work of the Public Accounts Committee draws on the work of
the Office. The Standing Senate Committee on National Finance and other parliamentary committees also rely on
our work.
The House of Commons Standing Committee on Environment and Sustainable Development and the Standing
Senate Committee on Energy, the Environment and Natural Resources draw on the work of the Commissioner of the
Environment and Sustainable Development, who leads the environmental audit function within the Office.
Appearing at committee hearings is an important way that the Office promotes awareness and understanding of the issues in our
reports. Hearings also help gain department and agency commitment to implement our recommendations. After hearings, committees may
report and make recommendations to the government. Departments and agencies are usually expected to report to the committees on
what they have done in response to the recommendations.
Territorial legislatures. As the legislative auditor of the three territories, the Auditor General's opinions
on financial statements and reports on other matters are presented to the territorial legislatures and discussed in hearings of
their public accounts committees.
Our strategic framework
The strategic framework of the Office of the Auditor General presents our vision and summarizes who we are, what we do, and the
values that guide our work (Exhibit 3).
Exhibit 3—The strategic framework of the Office of the Auditor General of Canada
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Our vision
An independent audit office serving Parliament, widely respected for the quality and impact of our work.
We promote
- Accountable government
- An ethical and effective public service
- Good governance
- Sustainable development
- The protection of Canada's legacy and heritage
We do this by
- Conducting independent audits and studies that provide objective information, advice, and assurance to Parliament,
government, and Canadians.
- Working collaboratively with legislative auditors, federal and territorial governments, and professional
organizations.
- Providing a respectful work place in which our diverse workforce can strive for excellence and realize their full
career potential.
Our values
- Serving the public interest
- Independence and objectivity
- Commitment to excellence
- Respectful workplace
- Trust and integrity
- Leading by example
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Our program activity
Our Office has one program activity: legislative auditing. Legislative auditing consists of seven major sub-activities, of
which the four largest are performance audits and studies; the audit of the summary financial statements of the Government of
Canada; financial audits of Crown corporations, territorial governments, and other organizations; and special examinations of
Crown corporations.
Exhibit 4 provides summary information on the Office's financial and human resources and program activity.
Exhibit 4—Summary information: The Office's financial and human resources and program activity
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Financial resources ($ millions)
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2006–07
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2007–08
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2008–09
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83.5
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83.7
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83.5
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Human resources (full-time equivalents)
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2006–07
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2007–08
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2008–09
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595
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595
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595
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Program activity: Legislative auditing ($ millions)
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Sub-activities*
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Forecast spending
2005–06
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Planned spending
2006–07
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Performance audits and studies of departments and agencies
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42.8
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43.5
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Financial audits of Crown corporations, territorial governments, and other organizations
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23.0
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22.8
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Audit of the summary financial statements of the Government of Canada
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5.7
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4.6
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Special examinations of Crown corporations
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3.3
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2.5
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Sustainable development monitoring activities and environmental petitions
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3.0
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2.5
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Assessments of the performance reports of three agencies
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1.2
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1.1
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Professional practices
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7.2
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7.0
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Sub-total
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86.2
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84.0
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Less: Non-respendable revenue
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(1.0)
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(0.5)
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Net cost of program
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85.2
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83.5
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*We have allocated the cost of administrative and other overhead expenses to each sub-activity.
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Our planning priorities
Following the general election of 23 January 2006 our first priority is to inform new and returning members of
Parliament about our role and mandate, and of the work we have conducted on their behalf over the past several years. Through
letters to standing committees and meetings with new ministers, we highlight issues within their purview that we believe remain
outstanding. We seek to meet with committee chairs and vice-chairs to obtain their views on matters of mutual interest. We also
participate in information sessions that are organized for parliamentarians by the House of Commons.
We are continually looking to improve how our audit reports, testimony, information, and advice can best meet Parliament's
needs. For the planning period 2006–09, there are three specific priorities for our Office.
Our expanded mandate
In 2005, Parliament expanded our mandate. In the coming year we will be working to integrate these changes into our audit
planning and operations. We will increase our financial audits and special examinations of Crown corporations, and include
foundations in our performance audit planning over the next three years.
Our audit products
The Office has modernized its financial audit practice by introducing an electronic file management system along with
supporting methodology and staff training, and by evaluating internal financial controls in departments, agencies, and Crown
corporations. This is leading to more risk-focussed audits, more timely recommendations, and lower audit costs.
During 2006–09, we will be expanding our use of this new management system to our special examinations and performance audit
practices. We will also continue implementing our risk-based audit planning approach. As a result of these initiatives, we
anticipate that similar improvements to those noted above will be realized in these two practice areas.
Building on the successful 2003 external peer review of our performance audit practice, we are continuing an
extensive internal review of that practice. Our review is focussed on ensuring the appropriate mix of performance audit products,
and balancing the elements of our performance audit mandate. We are also looking to improve our scoping and management of
individual audits, and generally ensure that we continue to deliver performance audits of the highest quality.
Our human resources
In the coming years, the Office will come under increasing pressure to recruit and retain a strong employee base for a number
of reasons. Our workload will increase due to additions to our Crown corporation and performance audit mandates. Expected turnover
and retirement rates and increased recruitment by federal departments will add to the demand for available talent. Changing
professional standards and more complex audit environments will require additional investment in methodology and training. The
Office has started developing a multi-year recruitment and retention strategy to respond to these pressures.
We also have two significant long-term commitments that we will be updating during the coming three years: sustainable
development and our international program.
Sustainable development
Parliament has asked 31 federal departments and agencies to prepare sustainable development strategies and to update them at
least every three years. While the Office is not required to table such a strategy, we do so voluntarily.
Our 2003–06 sustainable development strategy strives to ensure that the environmental consequences of the
federal government's activities are considered as we plan, conduct, and report our audits. In the coming year we will be reviewing
and updating our strategy for the planning period 2006–09.
Our international program
The Office of the Auditor General now has more than 50 years experience working with the international community in developing
professional standards, building capacity, sharing knowledge, and conducting audits of international institutions.
We have just completed a strategic review of our international program to ensure that we can best contribute to the interests
of Parliament and the Government of Canada. We have established the following four goals for the 2006–09 planning period:
- Increase our involvement in international standard setting and the adoption of international standards.
- Develop with the Canadian International Development Agency an understanding of how we can best target our
capacity-building efforts, consistent with the government's international development priorities, while maintaining our
current level of effort.
- Reduce and re-focus our knowledge-sharing activities to provide maximum benefit to our auditors.
- Work with Foreign Affairs Canada to promote better managed and accountable international institutions through our
involvement in auditing international organizations.
Our governance structure
The Auditor General. The Auditor General leads the Office, and as an Agent of Parliament is accountable to
Parliament for the Office's performance.
The Executive Committee. The Executive Committee provides overall professional and
administrative direction for the Office. It sets policy and oversees all aspects of management and operations in the Office. It
comprises the Auditor General, the Deputy Auditor General, the Commissioner of the Environment and Sustainable Development, and 11
assistant auditors general.
External advice. The Auditor General receives advice from a number of committees with external members:
- The Audit Committee. It oversees the quality of audit practices and internal controls.
It is made up of senior Office auditors and is chaired by a retired senior executive from the private sector.
- The Panel of Senior Advisors. It provides strategic advice on the work of the Office,
and is composed of leading representatives from the private sector, the accounting profession, the academic community, and
other parties.
- The Independent Advisory Committee. It advises the Auditor General on the audits of the
financial statements of the Government of Canada, Crown corporations, territorial governments, and other organizations. The
Committee helps the Auditor General monitor developments in the accounting and auditing profession and considers their impact
on the Office. It is made up of senior accountants and financial consultants.
- Panels on Aboriginal Issues. They advise the Auditor General on matters affecting
Canada's Aboriginal peoples, and include Aboriginal and non-Aboriginal leaders.
The Commissioner of the Environment and Sustainable Development receives advice from one external committee:
- The Panel of Environmental Advisors. It advises the Commissioner on her work and on
environmental and sustainable development matters. It includes leading representatives from environmental groups, the private
sector, and the academic community, as well as former senior public servants.
Audit advisory committees. These committees advise on the objectives and approach of
performance audits or special examinations, and on significant matters and findings to be reported. Members are experts with
relevant experience from inside and outside the Office with a variety of backgrounds, such as former senior public servants, and
leading representatives from the private sector, academia, and First Nations.
Further information on the Office's organization is available in the organization chart in Section III and on our Web
site under About Us.
How we are held accountable
Who audits the Auditor General?
Each year, an external auditor appointed by the Treasury Board Secretariat audits the Office's financial statements. Our
financial statements are prepared on a full accrual basis of accounting, in accordance with generally accepted accounting
principles. These financial statements are included in our performance report, which is submitted to the President of the Treasury
Board for tabling in the House of Commons.
The Office is also subject to scrutiny by the Official Languages Commissioner on language issues, by the Public Service
Commission on staffing and classification practices, by the Privacy Commissioner on adherence to the Privacy Act, and by
the Canadian Human Rights Commission.
We are accountable to Parliament
The Auditor General's reports are reviewed and discussed in hearings of the Standing Committee on Public Accounts and 15 other
parliamentary committees.
The Auditor General submits annual Estimates documents to Parliament. The Public Accounts Committee calls on the Auditor
General to explain the Estimates and discuss our reports on plans and priorities and performance as well as our management
practices.
How we assess our work
Our audit work is guided by a rigorous methodology and quality management framework. The framework provides reasonable
assurance that our audits are conducted in accordance with established standards of professional practice and with due regard for
economy, efficiency, effectiveness, and the environment.
Our audit work is also subjected to internal audits and practice reviews and to external reviews by peers. Each year we publish
summaries of the results of our practice reviews and internal audits on our Web site under About Us.
- Practice reviews. We conduct internal practice reviews of our financial audits,
performance audits, and special examinations by assessing their quality and compliance with Office policies and professional
standards. The reviews assure the Auditor General of the quality of our audits and identify areas for improvement as well as
good practices. We will conduct eight practice reviews in the coming year.
- Internal audits. We audit our management and administration practices. The audits assure
the Auditor General that the Office is complying with government and Office policies. They also provide managers with
assessments and recommendations. Table 6 presents details of our internal audit plan for 2006–07 and
beyond.
- External review of our performance audit practice. In 2003, an international team of
legislative auditors carried out a peer review of the Office's quality management framework for performance auditing. The team
reported that our framework was suitably designed and operating effectively. The team's report highlighted some good practices
and made suggestions for improvement. Its report and our action plan to address its suggestions were presented to the Public
Accounts Committee and are available on our Web site under About Us.
- External reviews of our financial audit practice. In 1999, we hired an audit firm to
assess our quality management system for annual financial audits. Its report is available on our Web site
under About Us.
The provincial institutes of chartered accountants review our compliance with professional standards for financial audits, and
determine whether our training of chartered accounting students meets the requirements for certification. These reviews have
concluded that we are following professional standards and meeting the requirements for certification.
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