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ACCA Strategic Professional · Advanced Audit and Assurance (International) · The audit of performance information (pre-determined objectives) in the public sector

An audit team is testing a reported indicator for a state education department: 'number of schools inspected during the year: 480'. The department's inspection register lists 480 inspections, but the auditor's sample of 40 register entries finds that 6 relate to follow-up telephone calls, not site inspections as defined in the approved indicator definition. The register contains 480 entries in total. Which conclusion and response is MOST appropriate?

The auditor should conclude the reported figure does not meet the approved indicator definition, project the 15% sample error (about 72 of 480 entries) to the population, and evaluate its effect on the report. Agreement of the register total to the reported number does not show the entries are valid inspections.

  1. AConclude the indicator is reliable because the register total equals the reported figure
  2. BConclude the indicator is not valid or accurate as reported, project the error found in the sample (15%, so about 72 entries) to the population, and consider the effect on the auditor's report on performance informationCorrect
  3. CDisregard the finding because telephone follow-ups are still a form of inspection activity
  4. DRequest that management change the indicator definition to include telephone calls so no misstatement exists

Explanation

The test of 40 entries found 6 errors, which is 15%. Projected over 480 entries this gives about 72 misstated entries. The agreement of the register to the reported number only shows completeness of recording, not compliance with the approved definition. Redefining the indicator after the fact is not acceptable; the auditor must evaluate the misstatement for reporting.

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