A public sector model
Auditing of private organisations has room for improvement. By Paul Gosling
Wednesday 03 July 1996
A single public audit body would be created to be responsible for auditing all organisations in receipt of public money, if Sir Peter's proposals were accepted. Sir Peter goes on to advocate replacing the current system of private sector auditing, which can encourage cosy relationships between directors and auditors, with the public sector model.
"In my view the public audit system goes further than the private audit system, which doesn't mean private auditors can't do it - 30 per cent of our audits for the Audit Commission are done by private sector auditors. The difference between public and private sector audits is how far the examination goes into the motivations, looking at good behaviour in a wider sense than just legalities.
"The interesting question is whether in the end the private sector is going to have to move towards the public sector approach, with somebody else - a regulatory body which might be the Institute of Chartered Accountants - appointing or approving the auditor, and setting the fee. It is a fiction that auditors report to shareholders."
Good quality auditing, says Sir Peter, is faintly adversarial, which is why public sector auditing, with an externally appointed auditor, is more effective than that of the private sector. The customer for an audit should be recognised as the wider society. While this is particularly true of the public sector, it is also the case with big plcs, which have become so large they should be regarded as social organisations, he says.
The work of the Audit Commission, and district auditors on its behalf, is giving a lead on how auditing in all sectors should develop, Sir Peter believes. Far more attention should be placed on value for money, whether the people in charge have been good citizens, and on environmental impact.
"I have sympathy for those firms of accountants who want limited liability, because it is very unreasonable to ask people to report on environmental matters, with Greenpeace out there suing you at the drop of a hat," says Sir Peter. He believes that the auditing profession should agree with government that in return for limited liability it accepts a wider audit responsibility, with government stipulating the remit. "In the public sector, examinations are done much more profoundly - public interest reports are quite frightening things to local authority people. A public interest report on the behaviour of Shell with Brent Spar might have been an interesting, if very difficult, document," Sir Peter says. But public auditing "still needs to get its act together," believes Sir Peter. He says that, although speaking personally, the Audit Commission believes it is unfortunate that privatisation and the development of quangos have meant that more bodies in receipt of public money are now subject to less rigorous private sector audit standards.
The Government has responded weakly to sensible proposals from the Nolan Committee to strengthen public auditing, Sir Peter adds. The appropriate response would be to amalgamate the National Audit Office - which, Sir Peter says, "I don't think much of" - with the Audit Commission.
A General Audit Office would be responsible for commissioning audits - some in-house, some from the private sector - and reports submitted to an audit committee. Audit committees have been established in NHS trusts, are common in local government, and the Public Accounts Committee could be seen as their equivalent for government departments.
Sir Peter believes that this new national body should have the same powers as those of district auditors, with access to people and files, and could report not only on maladministration, but on policy disasters such as the poll tax and the exchange rate mechanism. This should have the effect of making governments think harder about policy, and ensure that bad advice from permanent secretaries was made public, making the Civil Service more accountable.
"All this ought to happen, and it could happen. I think that eventually if we are going to have public management, and indeed private management, the way it should be - letting chaps get on with the job - the quid pro quo for the state is some kind of idea of how people are appointed, and some kind of audit after the event."
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums
China stock market: My portfolio's in pain, but it was never for the financially faint-hearted
China stock collapse: Five things you need to know about 'Black Monday'
Questions of Cash: 'Our dividends seem to have disappeared when TSB was bought and then born again'
My Tinder date asked for a refund when I declined a second meet up
- 1 Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
- 3 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 4 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Stock up on canned food for stock market crash, warns former Gordon Brown adviser
Labour leadership: Jeremy Corbyn voters most likely to believe 'world is controlled by a secretive elite'
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.