AN ASSESSMENT OF THE ROLE OF AUDIT IN THE PREVENTION OF CORRUPTION IN THE PUBLIC SECTOR

ABSTRACT

A solid internal control framework is the cornerstone of an organisation’s defence against corruption, and consists of the policies, structures, procedures, processes, tasks and other tangible and intangible factors that enable an organisation to identify and appropriately respond to internal and external operational, financial, or compliance related risks. An effective internal control framework should ultimately help them organisation comply with its mandate and any relevant legislation, safeguard an organisation’s assets, and facilitate internal and external reporting.

Although senior managers are primarily responsible for implementing internal controls and monitoring their effectiveness, all officials in a public organisation, from the most senior to junior, have a role to play in identifying risks, deficiencies and ensuring that internal controls address and mitigate these in a cost-effective manner. Every staff member should be encouraged to continuously contribute to the development of better systems and procedures that will enhance integrity and improve the organisation’s resistance to corruption.

Internal audit is the next pillar of defence against corruption and provides objective assurance that risk management and internal controls are functioning properly. An effective internal audit monitoring and assurance function ensures that internal control deficiencies are identified and communicated in a timely manner to those responsible for taking corrective action. The monitoring process involves establishing a foundation form designing and executing monitoring procedures that are prioritised based on risk, and assessing and reporting the results, including following up on corrective action where necessary.

While risk, control and audit functions are essential in the fight against corruption, they are also necessary ingredients for greater accountability, better management and cost effectiveness. Controls help organisations run more smoothly, reduce costs, and avoid waste. They also help hold officials to account for their actions, and to report to the public and oversight institutions on performance and value-for-money achieved.

Mexico’s Ministry of Public Administration (Secretaría de Función Pública, SFP) is the federal entity responsible for developing and overseeing policies, standards and tools on internal control, including risk management and internal audit functions in the federal administration. The SFP also establishes policies and frameworks and provides guidance to line ministries in collaboration with the Supreme Audit Institution (Auditoría Superior de la Federación, ASF), mainly through the National Auditing System.

Mexico’s recent national anti-corruption system (NACS) reforms have placed a strong emphasis on ensuring that a robust internal control system based on solid risk management and internal audit functions is in place across the public sector. As noted in Chapter 2, the inclusion of the SFP and ASF in the NACS Co-ordination Committee demonstrates the high relevance of the control and audit functions in preventing and detecting integrity violations. This chapter will examine the maturity and integration of internal control functions, as well as the assignment of roles and duties regarding these activities within the three lines of defence model in Mexico’s federal public administration, and the extent to which they are based on the principles of risk management, balanced and cost-effective controls, and effective assurance oversight.