4th E Practice Guide
Introduction
The "4th E"
Traditionally our audits have focussed on economy, efficiency, and effectiveness—known as the "three Es." The 1995 amendments to the Auditor General Act added a fourth: the environment.
In conducting an audit, the auditor asks questions such as these:
- Has money been spent with due regard to economy?
- Has money been spent with due regard to efficiency?
- Are procedures in place to measure and report on the effectiveness of programs?
- Has money been spent with due regard to the effects on the environment?
Background
In 1995 Parliament formally expanded the mandate of the Office of the Auditor General to include environmental and sustainable development issues. It also established within the Office the position of Commissioner of the Environment and Sustainable Development. Through our audit work the Office plays an important role in helping to ensure that the federal government's policies, programs, and operations protect the environment and foster sustainable development as intended.
Another change dating from 1995 is the requirement that certain federal departments/agencies each submit a Sustainable Development Strategy (SDS) to Parliament starting in 1997, and update the Strategy every three years (see Exhibit 1 and Appendix 3).
As amended in 1995, section 7(2)(f) of the Auditor General Act directs the Auditor General to call attention to any case in which it has been observed that "money has been expended without due regard to the environmental effects of those expenditures in the context of sustainable development."
When auditing an entity, this means examining whether it has considered the environmental consequences of its operations, programs, and activities.
The current Auditor General has chosen to focus on five areas, three of which have a close connection to environment and sustainable development concerns. They are
- the well-being of Canadians,
- Aboriginal issues, and
- legacy and heritage.
In its 2003–06 Sustainable Development Strategy, the Office committed to better integrating environmental considerations into its performance audit work. Achieving this objective requires the development of tools and guidance that will help auditors throughout the Office to systematically consider environmental issues in long-term audit planning and individual performance audits.
Purpose
The purpose of this guide is to help auditors identify and assess environmental risks in two contexts:
For auditors with little or no environmental expertise, the guide provides practical direction and a structured approach. Entity teams should seek advice from the Office's Internal Specialist—Environment and Sustainable Development, as necessary.
Users of the guide should be familiar with the Office's audit policies and practice requirements.
The guide contains links to key documents and resources that it mentions. Note that some of the on-line resources may not be accessible outside the Office or the Government of Canada.
While not specifically designed for special examinations or annual attest work, this guide could help auditors identify environmental risks and liabilities for Crown corporations. Practice guidance from the Canadian Institute of Chartered Accountants (CICA) is also available for addressing environmental liabilities in financial attest audits.