13.1 Introduction to auditing in the public sector and regulatory provisions

Auditing in the public sector in Kenya involves the examination and evaluation of financial statements, operations, and performance of government entities at the national and county levels. The objective is to ensure accountability, transparency, and proper use of public resources. In Kenya, auditing in the public sector is governed by various regulatory provisions, including the following:

1. The Constitution of Kenya:
   • The Constitution establishes the framework for public sector auditing in Kenya. It outlines principles of public finance management, including transparency, accountability, and integrity.
2. Public Finance Management Act (PFMA) 2012:
   • The PFMA provides guidelines and procedures for financial management, accounting, and auditing of public funds. It sets out the roles and responsibilities of auditors and establishes the Office of the Auditor General (OAG) as the supreme audit institution in Kenya.
3. Public Audit Act 2015:
   • The Public Audit Act defines the powers, functions, and duties of the Auditor General. It governs the conduct of audits, reporting requirements, and the relationship between the OAG and audited entities.
4. International Standards on Auditing (ISA):
   • The International Auditing and Assurance Standards Board (IAASB) issues ISAs, which provide guidance on auditing standards and procedures. These standards are adopted or adapted for use in Kenya to ensure quality and consistency in public sector audits.
5. Government Financial Management Regulations:
   • These regulations provide detailed guidance on financial management practices, including budgeting, accounting, procurement, and reporting in the public sector. Compliance with these regulations is a key focus of public sector audits.
6. County Government Audit Regulations:
   • Kenya has a devolved system of government, and each county has its own government structure. County Government Audit Regulations establish audit procedures and reporting requirements specific to county governments.

Key Considerations in Public Sector Auditing in Kenya:

• Compliance Audits: Auditors in Kenya’s public sector conduct compliance audits to ensure adherence to laws, regulations, and financial management guidelines.
• Performance Audits: Performance audits assess the economy, efficiency, and effectiveness of public programs and projects to enhance service delivery and resource utilization.
• Independence and Objectivity: Auditors must maintain independence and objectivity in their work to provide unbiased and credible audit opinions.
• Audit Reporting and Communication: Audit reports are issued by the OAG to communicate audit findings, recommendations, and any instances of financial impropriety or mismanagement.