What to Expect—An Auditee's Guide to the Performance Audit Process

Performance audits will often include recommendations to point to the direction in which positive changes can be made for the most serious deficiencies reported. Recommendations address areas where there are significant risks to the entity if deficiencies remain uncorrected.

When a recommendation is made, it should be

• fully supported by and flow from the associated observations and conclusions;
• aimed at correcting the underlying causes of the deficiency; and
• directed specifically at the entity or entities with the responsibility to act on it.

A recommendation should be clearly stated. It should be

• succinct, straightforward, and contain enough detail to make sense on its own;
• broadly-stated (stating what needs to be done while leaving the specifics of how to do it to entity officials); and
• positive in tone and content.

A recommendation should also be action-oriented. It should be

• practical (able to be implemented in a reasonable time frame, taking into account legal and other constraints);
• cost-effective (the benefits of implementing it will outweigh the costs);
• efficient (optimizing the use of resources);
• results-oriented (giving some indication of what the intended outcome is, ideally in measurable terms); and
• able to be followed up (the audit team will be able to determine whether it has been acted upon).

To enable the development of clearly stated and action-oriented recommendations and to provide the audited entity with the time required to prepare responses and develop an action plan, the audit team needs to seek the views of entity officials as early as possible, normally at the end of the examination phase.

Publishing an audited entity's response to a recommendation gives the government the opportunity to inform Parliament whether the entity agrees with the recommendation, and what actions the entity intends to take and their timing.

Developing recommendations during the audit. During the examination phase of a performance audit, the audit team will periodically offer to brief entity officials, senior management as required, and, if requested, the departmental audit committee, on emerging findings throughout the examination phase. The team encourages entity officials, including the deputy head or other senior management and the departmental audit committee, as applicable, to participate in the briefings to understand the nature and the implications of the findings and proposed recommendations and obtain answers from the Office of the Auditor General (the Office or OAG) to any questions. The deputy head or other senior management is requested to provide the audit team with input to ensure that the recommendations are practical and feasible to implement.

Sending draft chapters. The audit principal's draft chapter (PX draft) issued to the audited entity contains a complete set of draft recommendations. About three to four weeks after the PX draft is issued, the Assistant Auditor General (AAG) responsible for the audit, or the Commissioner of the Environment and Sustainable Development (CESD), will offer to meet with the deputy head or other senior management (usually at the assistant deputy minister level) to discuss the recommendations. The discussion should include, among other things, the suitability and practicality of the draft recommendations and the probable responses of the entity to them.

Shortly after this meeting (or within one week of receipt of the audited entity's response to the PX draft chapter), the audit team will send a letter including all of the draft recommendations (modified, as appropriate, to reflect the earlier discussions), to the deputy head or other senior management (usually at the assistant deputy minister level). The letter also requests the audited entity's draft responses to recommendations, which should be provided within three to four weeks.

The subsequent deputy minister (DM) transmission draft chapter issued contains the full text of the chapter (modified, as appropriate, to reflect the earlier discussions), the recommendations, and the draft responses of the audited entity. The audit team will ask the deputy head to confirm, within 10 working days, that the facts are accurate and presented fairly and that the responses are final, or comment on areas of disagreement, if any.

The OAG encourages the departmental audit committee to play an active role in reviewing and assessing the adequacy of the entity's responses to the recommendations.

Establishing expectations for responses to recommendations. Responses to recommendations are not intended as a vehicle for disagreeing with the audit findings. The audit team and the audited entity must either resolve any unsettled disputes, or, according to professional audit standards, the audit team must describe the outstanding issues in the main text of the chapter. If a matter has not been resolved by the time the DM transmission draft chapter is issued, the audit team must raise it with the responsible AAG or the CESD immediately.

The OAG has established limits on the content and publication of entity responses and will not normally publish

• general responses or global comments to chapters;
• entity responses where no recommendations have been made; or
• entity responses where, in the case of a follow-up chapter on a previous audit, no new recommendations have been made.

The OAG's expectations for an entity response are as follows:

• From the outset, the response must clearly indicate if the audited entity agrees or disagrees with the recommendation.
• If the entity agrees with the recommendation, it should use no more than 200 words to indicate the actions it intends to take to respond to the recommendation, and when it intends to take these actions.
• If the entity does not agree with the recommendation, it should briefly and clearly indicate why it disagrees.
• Final responses to the DM draft must be received at least seven weeks before tabling of the report in order to be published with the chapter and to meet commitments to brief senior officials at the Treasury Board of Canada Secretariat and the Privy Council Office.

Parliamentarians are more likely to react favourably to responses that are clear and concise and that describe specific actions and their timing.

The OAG reserves the right to edit responses and to decline to publish material that does not respond to a specific recommendation or repeats material that is already in the body of the chapter. Furthermore, because the OAG is associated with everything it publishes and because it must follow professional standards, it will not publish anything that it believes is false or misleading. The audit team will inform the audited entity of any significant changes made to their final responses.

While the OAG does not print entity responses or comments in the Main Points, it briefly describes at the end of that section the entity's commitment (or non-commitment) to take action.

Related information sheets

• Interaction with departmental audit committees
• Reporting phase of a performance audit
• A road map for performance audits
• Glossary of terms

Steps and interaction between the OAG and the audited entity in developing and responding to recommendations