Supreme audit institutions (SAIs) are the national agencies responsible for auditing government revenue and spending. Their primary purpose is to oversee the management of public funds and the quality and credibility of the government's financial reporting. SAIs supply the information needed by the legislature and the public to hold governments accountable for stewardship of public funds and assets. As such, they can act to limit opportunities for financial malpractice and the abuse of power. SAIs are one of the key pillars of a country's national integrity system.

The legal mandates, reporting arrangements and institutional structures of SAIs vary depending on a country's legal and administrative system. The most commonly used auditing systems are based on one of the following three models (Source: Stapenhurst and Titsworth, 'Features and Functions of Supreme Audit Institutions', World Bank, Prem Note 59, World Bank: 2001). In the Napoleonic system, also known as the "court system", SAIs are part of the judiciary, have both judicial and administrative authority and are independent of the legislative and executive branches. This model is used in some European countries (such as France, Italy, Spain, Portugal and others) and most Latin American and francophone African countries. In the Westminster system, used in many Commonwealth countries, the SAI (referred to as the Auditor General) is an independent body that reports to parliament. The office serves no judicial function but, where this is warranted, its findings may be passed to legal authorities for further action. The board system, prevalent in Asia, is similar to the Westminster model in that it is independent of the executive and helps parliament perform its oversight function. The international body guiding the work of SAIs is the International Organisation of Supreme Audit Institutions (INTOSAI). It issues international guidelines for auditing and financial management, develops corresponding methodologies, provides training, and promotes the exchange of information and know-how among its membership of over 170 SAIs.

The key objective of SAIs is the provision of effective oversight of government spending and public finance management. Audits are thus a central feature of SAIs' work. Audits can contribute to improving government performance not only by identifying faults but also by acting as a deterrent to the abuse of power by providing valuable information about government actions to the legislature and the public.

SAIs can undertake different types of audits aimed at improving government accountability. These include:

• financial audits: assessing the accuracy and fairness of accounting procedures and financial statements;
• compliance audits: scrutinising the use of funds for approved purposes through compliance with laws and regulations;
• performance audits (also known as "value for money" audits): analysing cost-effectiveness and operational efficiency. Sometimes these can extend to reviewing the general effectiveness of government programmes in achieving their objectives and act as impact audits;
• other audits: in addition, specialised audits may be conducted (as part of one of the main audits listed above or separately in their own right) examining issues such as recruitment and management principles, ethics and integrity of the audited work force and others.

The following pages will explore SAIs' role in countering corruption and the challenges undermining their full potential as pillars of integrity. It will also examine and recommend key factors in ensuring their effective functioning as institutions that promote accountability and deter corruption.

Although SAIs are not primarily designed as specialist anti-corruption institutions, they can nevertheless play a central role in deterring corruption and promoting a culture of integrity. Attempts are being made to examine this aspect of SAIs' work more closely. For instance, in their research and publications, INTOSAI, the World Bank and TI have encouraged greater mobilisation of SAIs around the issue of corruption and their role in combating it. SAIs generally consider the following aspects of their work to be of importance in contributing to the fight against corruption (Source: Magnus Borge, 'Supreme Audit Institutions - their Roles in Combating Corruption and Providing Auditing and Accounting Standards and Guidelines', paper presented at the 10th IACC, TI: 2001):

Promoting overall government transparency and accountability

One of the main contributions of SAIs to the fight against corruption is improvement of the overall climate of transparency through enhancement of accountability mechanisms, scrutiny of public funds, and ensuring compliance with regulations. SAIs thus act as a deterrent against overall levels of corruption by limiting the opportunities for acts of corruption and misuse of public funds.

Improving public awareness

SAIs can play an active role in raising awareness of the risks of corruption and the importance of good governance and high standards of conduct. SAIs often develop strong ties with the media as a means of drawing public attention to corruption cases that they have brought to light. This heightens public awareness of SAI findings and thus produces an effective deterrent against future corruption.

Acting as a public complaints mechanism

SAIs sometimes establish well-publicised means to receive and process information from the public on perceived irregularities.

Fostering sound financial management and internal controls

The reliability of financial management systems is central to preventing corruption as it has a deterrent and inhibiting effect on potential perpetrators of corrupt acts. SAIs can make sure that regular evaluations of financial systems and internal control methods are undertaken as part of compliance audits. They can also make sure that their recommendations for strengthening weak or non-compliant systems are acted upon.

Focusing audit planning on high-risk areas

SAIs recognise that some government programmes have more inherent control weaknesses than others. By their nature and function, these high-risk programmes foster an environment that favours fraud and corruption. SAIs generally consider inadequate staff skills and abilities, lack of function separation, procurement of goods and services without competitive bidding, weak internal control systems, low managerial capability and political appointments to be indicative of inherent higher risk. Developing an effective system for identifying such high-risk indicators for fraud and malpractice, and subsequently focusing audit strategies on areas deemed prone to corruption, can be of great value in both deterring and detecting corruption.

Helping identify fraud

Fraud indicators are usually difficult to identify. Although generic indicators are almost always present, auditors must rely on technical experience, professional judgment and knowledge of how fraud is committed to successfully recognise these indicators. Adequate experience and training is essential.

Revealing malpractice and irregularities

SAIs can also be instrumental in revealing various irregularities. In areas such as contract awards and procurement processes, SAIs are well placed to reveal conflict of interest violations, overpayment in the procurement of public goods and services, third-party transactions and others.

In addition to SAIs' indirect contributions to countering corruption through prevention, dissuasion and, in some cases, detection of corrupt practices, SAIs can also develop more direct and proactive anti-corruption responses. These may consist of identifying high-risk areas, establishing relevant task forces and implementing special audits. For example, the Polish SAI has used the information available from its routine audit work to review the threat of corruption by highlighting and mapping government sectors and areas of operation deemed prone to opportunities for corruption.

Much of the work of SAIs is closely related to that of other oversight bodies, particularly those entrusted with parliamentary public finance oversight functions. These can include traditional committees, such as finance and budget committees, as well as less common ones, such as the 'committees of assurances' operating in a number of African parliaments and mandated with holding ministers accountable for statements made to parliament. Such committees can be useful in exposing incidents of corruption. The types of committee with the closest synergies with SAIs are parliamentary public accounts committees (PACs).

PACs exist in systems that follow the Westminster parliamentary model, as opposed to other systems where SAIs report directly to parliament or pass directly enforceable judgements. A standard procedure is for parliament to refer the reports issued by a SAI to the PAC. The committee then conducts public hearings involving the SAI, the financial heads of the institutions under investigation and other witnesses. The PAC then reports upon its conclusions and recommendations to parliament. Often, PACs can also examine questions independently, review relevant draft legislation or ask SAIs to perform specific audits.

PACs perform the following functions relevant to the fight against corruption:

• They design recommendations for action following audit and investigation reports and present them to parliament. Following the discovery of inefficiency or fraud, credible and effective follow-up activities are indispensable for addressing actual reform of the system and for the credibility of the parliamentary system of control as a whole.
• They provide control and scrutiny of the actions of SAIs. By conducting public hearings to verify SAI reports, where witnesses from all stakeholder groups are called, the audit system itself becomes more transparent and the objectivity and legitimacy of reports improved.
• Finally, they play an important role in publicising the results of audits and inquiries. Ensuring public debate about audit reports not only reinforces institutional frameworks, but also creates public pressure to follow-up on reports.

Like any institution, SAIs are susceptible to being captured by corrupt interests. While every corrupt institution damages the fabric of the state, a corrupt SAI can fundamentally undermine a country's integrity system. SAIs are designed to act as a watchdog over the financial management of government bodies. As such they play a major role in auditing government accounts and operations and in promoting sound financial management and accountability within government. If the watchdog's credibility and integrity are questionable, then so is the credibility of its audit. This in turn raises questions as to the integrity of the subject of the audit.

The following factors are among the main challenges that can undermine the ability of SAIs to perform their role as strong pillars of integrity:

Lack of independence from government and clear definition of the scope of government auditing

The independence of SAIs and clear agreement about the scope of their auditing role are necessary to enable the effective auditing of sensitive or high-risk areas. These include investigating issues such as lack of function separation, and conducting performance audits and other examinations involving the highest levels of public office.

Lack of sufficient mandate, power and enforcement of recommendations

Most SAIs consider their mandate and the legal provisions governing their powers of prosecution to be sufficient. Some claim, however, that a strengthening of their investigative powers is required. Where SAIs already have investigative authority, closer collaboration with other investigation and prosecution organisations is deemed key to success. Furthermore, once audit findings and the resulting recommendations have been presented, a lack of follow-up by parliament and relevant executive bodies can seriously hinder the effectiveness and value of audits (Source: Magnus Borge, 'Supreme Audit Institutions - their Roles in Combating Corruption and Providing Auditing and Accounting Standards').

Inadequate staff capacity and training

Auditors must rely on technical expertise, professional judgement and a good understanding of how fraud is committed in order to detect fraudulent practice. Inadequate staff capacity and training can therefore have a severely debilitating effect on the ability of SAIs to address corrupt activity. In particular, capacity for relatively recent or less widespread audit techniques, such as forensic auditing or information technology auditing, is often weak due to a lack of specialised training in many countries.

Breaches in ethical conduct and integrity

Ensuring a high level of ethical conduct among auditors is essential for securing the overall institution against malpractice. SAIs are themselves vulnerable to conflict of interest violations and corrupt practices. Preventing such violations must be viewed as a major challenge when exploring the role of SAIs as anti-corruption agents.