Analysis – Sharman puts audit on public view.

Long after the headlines are forgotten, the Sharman report on central government auditing will have far reaching implications should it be accepted in full.

If Andrew Smith, chief secretary to the Treasury, agrees with Lord Sharman there will be rich pickings for accountants across central government and beyond.

The National Audit Office’s powers of investigation will be widened, with access granted to a range of organisations and companies that are publicly funded but not open to public scrutiny.

As Roger Adams, technical director of ACCA says: ‘There will be plenty of work for the profession – the comptroller and auditor general will be required to outsource an equal number of appointments, so work will not disappear from the private sector.’

The report is very explicit about some particular targets – the BBC and train operating companies are placed firmly in the NAO’s sights – but it also sets out a number of other areas it believes should be subject to investigation.

Throughout 2000 the arguments for and against the current mix of auditing arrangements for non-departmental government bodies were debated at length in parliament, and it was largely as a result of this that Lord Sharman was asked to prepare his report.

David Davis, chairman of the influential parliamentary Public Accounts Committee, was one of the first to congratulate Sharman on his recommendations.

At the time of publication he told Accountancy Age: ‘The fact that I shall be recommending to my committee that we accept the report in full speaks volumes for my support.’

And he was quick to refute accusations the report could be seen as a slap in the face for Andrew Smith as the Treasury had been known to oppose some of the proposals in the past. ‘As chairman of the steering committee that oversaw Sharman’s work, he has been very open minded and listened to the arguments.’

Smith himself has been supportive of the process.

He said: ‘Present arrangements have evolved gradually over the past century and it is valuable to have the benefit of Lord Sharman’s views of how these arrangements should now be developed.’

But the process does not stop here as there will now be a lengthy consultation.

As Smith said: ‘It will be important to consult widely among departments, other bodies which might be affected and other key stakeholders before issuing a formal response.’

This will not happen overnight and it is likely discussions will continue into the next parliament.

Whatever the outcome it is clear Sir John Bourn, as head of the NAO, is to extend his powers.

Departments will be urged to adopt private sector style internal audit and controls.

A spokesman for the NAO said they would wait and see what the consultation period produces.

Sir John as auditor of the BBC was the headline, but the proposals will give him access to a wider section of central government.

They will give him access to 2,000 housing associations, 25 train operating companies, 130 other companies and thousands of private finance initiative schemes.

It would certainly open up opportunities for the private sector, notably the Big Five, who will be well placed to help the NAO.

The report can be found on the Treasury’s website at

More on the role of the NAO, pages 8-9


Corporate governance – departments should apply private sector principles of internal control

Audit and access rights – NAO to audit all non-departmental public bodies

Make the most of audit work – NAO to brief select committees on key financial issues

Financial audit – NAO’s financial audit to be independently checked, with more audit work outsourced

Performance measurement – external validation of published performance data.

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