LEVEL 6 ASSESSMENT SPECIFICATION

Student name: NURUL AIN FATIHAH Student ID 20200293

BINTI YUSNI number:

Programme: BACHELOR OF ACCOUNTING (HONS)

Module: PUBLIC SECTOR ACCOUNTING

Contribution to
Module code: 40%
BAC6053 Overall Module
Assessment (%):

Lecturer: AZBARIYAH BTE AZIZ Internal Verifier: Dr Cheng

Assignment Accountability and Word count (or 2000-2500 words

Title: Auditing in the Public equivalent):
Sector

Submission Return date of Week 15

deadline: provisional marks
Week 13
& written
feedback:
All written assessments, where practical and possible, must be
Submission
submitted via Turnitin unless otherwise instructed by the Lecturer.
method:
(Please DO NOT put this assessment specification into Turnitin or it
will match many similarities with other students’ submissions.)
Alternative submission method (if applicable):
Late submission of the assessment will result in a late penalty
mark. Penalties for late submission: Up to one week late,
maximum mark of 40%. Over one week late, 0%. Only the
Extenuating Circumstances Panel may approve a change to
submission dates.

Academic Academic honesty is required. In the main body of your submission

honesty / you must give credit to authors on whose research and ideas your
referencing: work is based. Append to your submission a reference list that
indicates the books, articles, etc. that you have used, cited or
quoted in order to complete this assessment.

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Table of Content

No. Content Page no.

1.0 Introduction 3
2.0 Recommendation 3
3.0 Current Scandals 6
4.0 Conclusion 8
5.0 Reference 9

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1.0 Introduction
Auditor General report is defined as written evaluation of the auditor regarding
whether a company's financial statements meet with the Generally Accepted Accounting
Principles (GAAP) and are free of substantial misrepresentation. It comprises either a
declaration of judgment on the financial statements as a whole or a declaration that a
judgment cannot be stated. This standard defines specifications for the substance of the
auditor's written report when the auditor offers an unqualified judgment on the financial
statements. The Auditor General is in charge for auditing the accounts of the Federal and
State Governments, Government Agencies, Public Authorities, and other entities as
required by His Majesty the Yang di-Pertuan Agong, subject to Article 106 of the Federal
Constitution and the Audit Act 1957 (Portal Rasmi Jabatan Audit Negara, 2020). The
Constitutions recognise the post of Auditor General, whose duties include overseeing all
government entities and other state agencies’ financial records on an annual basis,
producing an annual report, and delivering it to the legislature for evaluation and
discussion. In order to ensure the right use of public funds and, if required, to publicly
expose any financial misuse, the officeholder is the important constitutional figure. In an
auditor general report, there are three important elements that must be followed according
to the standardized format specified by the GAAP. The first paragraph describes the
auditor's and directors' duties, while the second paragraph describes the scope, indicating
that a set of standard accounting standards served as the guidance. Finally, the third
paragraph includes an auditor's view on a company's financial statements. A clean audit
report indicates that a corporation complies with the GAAP, but an unqualified report
indicates that inaccuracies may have occurred. The Auditor General report of Malaysia
that are focused in depth in this report is from the years 2019, 2020 and 2021.

2.0 Recommendation
According to the International Auditing and Assurance Standards Board (IAASB), In
the current global corporate world with more complicated financial reporting standards,
consumers of audited financial statements are requesting further relevant information for
their decision-making. The multinational financial disaster has also prompted users,
particularly institutional investors and financial analysts, to study more about individual
audits and obtain a better knowledge of the audited organisation and its financial

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statements. Although the auditor's opinion is respected, many individuals think that the
auditor's report should be much instructive. As a result, change is required. There are
some ways that could be recommended to improve the Auditor General report. The first
way is by incorporating the utilization of performance information in the budgeting
process. Although the idea of performance information is not really new, governments in
the Organisation for Economic Co-operation and Development (OECD) nations have
focused more on incorporating it into the budget process in the last few years as part of
initiatives to enhance decision-making by shifting the focus from inputs about how much
money will be obtained towards observable outcomes of what can be gained with this
money (200 policy brief – OECD, n.d.). The adoption of performance budgeting has been
connected with larger initiatives to strengthen expenditure management as well as the
effectiveness and efficiency of the public sector. In order to give managers more freedom
to choose how to provide public services while yet maintaining higher accountability for
the outcomes, performance budgeting can be linked with more flexibility. Additionally,
the approach offers a deeper and more comprehensive grasp of government priorities and
goals, as well as how various programmes contributes to them. At the same time,
performance data supports placing more focus on planning and provides a clear picture of
what is and is not working. By giving the public and legislators access to more and better
information, this technology also enhances transparency. Ministries and organizations
most frequently utilise performance information to administer programmes. Managers
may explore basic strategic questions regarding how they can offer services by using a
results-focused strategy (Christine, Lonti & Joumard, 2007). In budget discussions
between the finance ministry and spending ministries as well as discussions between
spending ministries and agencies, governments have also attempted to integrate
performance information. Countries claim that using performance data in the budgeting
process has a variety of advantages. Along with emphasising outcomes more, this tool
also offers greater and more comprehensive information on government aims and goals,
as well as how various programmes are assisting in reaching these objectives. The
strategy also promotes placing more of a focus on planning and offers data on what is and
is not working.
The next recommendation is to set the segregation of duties between auditors and the
main sources of financial information. Segregation of duties is a crucial element of
efficient risk management and internal corporate controls. The shared accountability for a
critical procedure, which assigns its important responsibilities to a few parties or

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departments, is the basis of the segregation of duties notion. Without this division in
critical procedures, fraudulent and error issues are far more challenging to manage. Both
of these instances clearly indicate the potential for terrible results without segregation of
duties. Because of this, the risk management objective of segregation of duties controls is
to avoid autonomous acts from happening in crucial processes where the potential
consequences would be too severe for a business to tolerate fraud or mistake (Segregation
of duties, n.d.). The concept behind segregation of duties is that a company's management
duties for a firm should be distributed among several people so that no one has the power
to disrupt the company or indulge in unethical or unlawful actions. The Sarbanes-Oxley
Act (SOX) compliance process and risk management both relate to the separation of
roles. The subject of segregation of roles is most frequently brought up while discussing
information security and accounting procedures. Those in these positions have the
capability to negatively damage a firm, whether deliberately or unintentionally.
Therefore, management in finance and security should be aware of the separation of
duties. It's critical to develop positions with IT security expertise to stop
misrepresentation. The Sarbanes Oxley Act of 2002 is one of the legislations that
mandates separation of duties (Sorenson, 2021). SOX obliged audit committees and
senior executives to be accountable for the validity of their reported financial statements
in relation to a surge of corporate accounting crises. The Securities and Exchange
Commission (SEC) mandated that businesses create efficient internal control systems for
financial reporting, with the separation of tasks being a crucial component of such
controls, as part of its implementation. The majority of financial organisations presently
impose job separation in financial departments, information technology, security, and any
other organisational unit that may have a significant influence on the business or its
financial reporting as a result of SOX and related laws. This can be a great use in the
auditor report as the safety and legality of the report can be ensured.
Last but not least, there has to be more transparency regarding important issues
pertaining to the audited financial accounts, as well as the type of work done in. If any
significant discrepancies among the audited financial statements and other information
have been discovered as a consequence of the auditor's examination of other information,
the auditor's statement should provide particular details about the information they read.
By law, regulation, or convention, additional information, such as financial and non-
financial information, may be added in a document that includes audited financial
statements and the auditor's report. For instance, the organization's annual or financial

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 report. Other information is defined as information that is not included in the operational
and financial review (OFR), management discussion and analysis (MD&A), or other
descriptive portions of the financial report of a company. The statement that no
substantial discrepancies have been found would be substituted with a thorough
explanation of this situation if the auditor has found a material discrepancy for which
modification of the other information is required and management refuses to make the
adjustment. According to the International Standard Auditing 700 (ISA 700), the
explanation of an auditor's duties in the auditor's report must make it clear that the auditor
is obligated to abide by ethical standards (International Auditing and Assurance Standard
Boards, n.d.). However, no explicit reference to ethical standards is necessary when
national law or regulation mandates the auditor use certain terminology for the auditor's
report. Besides that, the auditor of the group financial statements, also referred to as the
group auditor, may ask that one or more additional auditors accomplish work on the
financial information of some organisations or business operations within the bigger
group in audits that encompass more than one entity or business activity. In these
situations, ISAs make it quite evident that the group auditor is in charge of planning,
managing, and carrying out the group audit engagement. If the group engagement team
finds that the performance of other auditors is inadequate, it must decide other extra
processes that must be carried out and whether they should be carried out by the group
engagement team or by the other auditors.

3.0 Current Scandals

Some cases regarding the auditor general report have been circulating which causes
negative impact towards a certain company. There will be two current issues in Malaysia
pertaining to this topic that will be discussed in the report. The first scandal is the
improper payments of RM1.299 billion as a result of financial management violations.
As according to Bernama (2022), financial management violations have led to RM1.299
billion in unusual payments, RM11.45 million in lost for public funds, and RM8.87
million in wasted government expenditures in 2020. The National Audit Department
(NAD) performed compliance audits on five federal agencies last year, according to
Auditor-General Datuk Seri Nik Azman Nik Abdul Majid, and provided 19 proposals for
incorporation. The report that was presented was the Auditor-General's Audit Report
(LKAN) 2020 Series 1 on the financial accounts, compliance audit, and ministry, federal
department, and statutory body operations for the year 2020 (Ag report: RM1.299 billion

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in irregular payments due to non-compliance ..., 2022). Nik Azman said that performance
audits of government operations were carried out in compliance with the International
Organization of Supreme Audit Institutions’ (INTOSAI) Section 6(d) of the Audit Act
1957. According to him, the performance audit was carried out to see whether the goals
of government initiatives, projects, and programmes had been met as well as whether
they had been implemented wisely, properly, and effectively. Ten performance audits
totaling RM39.719 billion were carried out in seven ministries' eight departments, three
government-owned businesses, and four federal statutory organisations and agencies. It
is said that some ministries, departments, and agencies in the public sector have the
authority to collect money for the government. The gathered income is portion of the
government's revenue and will be utilised to fund the national infrastructure goal. All
kinds of money obtained by the government in the sort of taxes, fees, licences, and other
revenues are included in government revenue gathered (Shariman, Nawawi & Salin,
2017). It was claimed that there are still certain issues, such as output objectives and the
inability to attain or assess established results. This is due to the lack of measurable aims,
methods, and indicators, as well as the poor upkeep and updating of necessary data.
Therefore, Nik Azman had provided several ministries, departments, organisations, and
other bodies with suggestions for areas that needed advancement.
For the second example, it was said that public funds of RM620.07 million were
misappropriated or lost in 2020 as a result of federal ministries and departments failing to
follow financial management regulations (Bernama, 2021). Improper payments totaling
RM510.49 million, according to Nik Azman, included RM499.19 million in payments
for repair service claims that had not been approved by the National Security Council
(MKN). The RM104.79 million lost in public funds, however, was made up of RM4.79
million in machinery that was acquired late and was not deployed in Istana Budaya, and
RM81.69 million in unpaid penalties that were not levied by the immigration department.
He noted that three ministries and five federal departments have undergone compliance
audits totaling RM899.44 million. This included contract administration costs totaling
RM772.40 million, RM54.8 million in government expenditures, and RM72.24 million
in revenue acquisition. Meanwhile, Nik Azman noted that the federal government 's debt
in 2020 was RM879.560 billion, or 62.1% of the gross domestic product (GDP), in the
focus of the subject on the federal government's financial statements. In contrast to
RM792.998 billion or 52.4% in 2019, the federal debt climbed by RM86.562 billion or
10.9%. Out of the RM194.555 billion in brand new loans made in 2020, 50.4%, or

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 RM98.058 billion, was used to repay the capital on loans that had already matured. The
utilisation of development fund funds of RM8.265 billion for the reimbursement of
Private Financing Initiative Liabilities and Guarantee Commitments demonstrates the
government's dependence on fresh loans to pay off mature debts. In addition, RM2.65
billion was utilised to cover expenses that were previously covered by operational
expenditure allocations, such as the assistance provided to hospitals and clinics by the
health ministry as well as the upkeep of buildings by the education ministry. In truth,
physical development projects that assist to the production of new capital that may
advance the country's growth and have a strong multiplier impact to produce economic
activity should be funded using development fund money supported by loans. From
RM264.415 billion the year before to RM225.075 billion in 2020, federal government
revenue decreased 14.9%, while Covid-19 expenditures were RM38.019 billion.
Operating expenses dropped by 14.7% to RM224.6 billion, dropping RM38.743 billion
from the previous year, while development expenses came in at RM51.36 billion, down
RM2.813 billion or 5.2% from RM54.173 billion. Consequently, according to Nik
Azman, in 2019, the federal government had a loss of RM87.645 billion from RM51.37
billion, or 6.2% of GDP, up from 3.4%.

4.0 Conclusion
From this report, it is evident that the Malaysia Audit General report needs proper
advancement based on the current scandal examples provided. For the federal
government and statutory bodies, all issues exhibited a declining tendency, which
suggested an advance in management effectiveness and better responsibility shown by
the public workers. Development demonstrates the government's sincere effort to
resolving the problems of leaks and poor budget management. The proliferation of
information and communication technologies (ICT) has altered people's lives, and the
government can take advantage of this to better the effectiveness of government
organisations and to distribute more information to the general public at a lesser cost.
One example is the adoption of enterprise resource planning (ERP), which can
incorporate all operational divisions inside an organisation. Various countries have
several ideas on how to effectively communicate audit results so that they are relevant to
their national contexts. How to convey audit results is frequently prescribed by national
legislation, regulation, and auditing standards, which are influenced by socioeconomic,
cultural, and other environmental variables. Finding a suitable alignment between the

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 need for global coherence and comprehensibility in auditor reporting and the need to
enhance the value of auditor reporting by making the information supplied more
pertinent to users may therefore be challenging. This flexibility is necessary to account
for national circumstances, for instance, those auditor reporting prerequisites that may
occur under local law or regulation or national corporate governance dictatorships. As a
result, the improvements suggested can be a stepping stone for the government to
provide a better Auditor General report in the future.
5.0 Reference

Ag report: RM1.299 billion in irregular payments due to non-compliance ... (2022).

Retrieved from https://www.nst.com.my/news/nation/2022/03/782170/ag-report-
rm1299-billion-irregular-payments-due-non-compliance-financial
Bernama. (2021). RM620MIL lost due to financial management non-compliance, says
auditor ... Retrieved December 30, 2022, from
https://www.freemalaysiatoday.com/category/nation/2021/10/28/rm620mil-lost-due-
to-financial-management-non-compliance-says-auditor-general/
Christine, T., Lonti, Z. & Joumard, I. (2007). Improving Public Sector Efficiency:
Challenges and Opportunities. 7(1). Retrieved from
https://www.oecd.org/gov/budgeting/43412680.pdf
International Auditing and Assurance Standard Boards. (n.d.). Improving the Auditor’s
report invitation to comment - IFAC. Retrieved from
https://www.ifac.org/system/files/publications/files/Auditor_Reporting_Invitation_to
_Comment-final_0.pdf?Division=Victoria&Segment=The+Rest
Portal Rasmi Jabatan audit negara. (2020). Retrieved from
https://www.audit.gov.my/index.php/en/component/content/article/9-
uncategorised/210-faq
Segregation of duties. AICPA. (n.d.). Retrieved from
https://us.aicpa.org/interestareas/informationtechnology/resources/value-strategy-
through-segregation-of-duties#:~:text=Segregation%20of%20Duties%20(SOD),than
%20one%20person%20or%20department.
Shariman, J., Nawawi, A., & Salin, A. S. A. P. (2017). PUBLIC SECTOR
ACCOUNTABILITY – EVIDENCE FROM THE AUDITOR GENERAL’S
REPORTS. Management and Accounting Review (MAR), 16(2), 231. Retrieved
from

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 https://www.academia.edu/43077588/Public_Sector_Accountability_Evidence_from
_the_Auditor_General_s_Reports
Sorenson, N. (2021, July 21). Segregation of duties in your organization. Pathlock.
Retrieved from https://pathlock.com/learn/segregation-of-duties-in-your-
organization/

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