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February 2016 //
Canadian Government Executive /
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Internal Audit
medium-sized cities have not established
audit committees.
Audit leaders indicated that having
clear terms of reference for both the au-
dit function and audit committee would
improve governance processes. They
also suggested that members of Council
needed to receive training in governance
processes, such as the role of auditing and
audit committees in particular in public
sector governance.
5. Immature Performance
Reporting Processes
Some audit functions in English Canada
are not conducting performance audits
because they believe it is pointless to do so
until management develops performance
measures and targets and is willing to
hold managers accountable for results.
Others are conducting performance audits
regardless of the maturity of performance
measurement and reporting processes in
place.
In Quebec, immature performance mea-
surement processes are considered to be
an obstacle to performance auditing with-
in smaller and medium-sized cities. Inter-
views indicated that this barrier is seen to
be closely related to immature governance
processes.
6. Insufficient Funding
Most of the survey respondents in Eng-
lish Canada identified concerns about
the funding levels for their functions.
Analyses by the research team indicated
that some audit functions were funded at
much lower levels than others. Large cit-
ies such as Markham, Richmond Hill and
Regina do not have audit functions.
In Quebec, funding issues were identi-
fied as a significant barrier to effective
performance auditing. Provincial legisla-
tion in Quebec requires all municipalities
with populations greater than 100,000 to
establish an auditor general function to
conduct both internal and external audits.
Although funding levels are set out within
the legislation, the levels prescribed are
generally seen to be insufficient for small-
er municipalities.
To address these concerns, the research
team identified separate funding formulas
for English Canada and Quebec to ensure
sufficient funding is available to enable
audit functions to fulfill their existing
mandates and to perform performance
audits if they are not already doing so.
7. Affordable Training
Courses Not Available
Lack of affordable training was identified
as a barrier to performance auditing by
a number of the smaller cities in English
Canada. Respondents indicated that few
affordable courses in performance audit-
ing are available for staff. Cost-effective
training at the intermediate and advanced
levels is particularly difficult to find in
Canada as significant tailoring is required
to adapt courses to the local government
environments.
In Quebec, lack of affordable training is
one of the most significant barriers to ef-
fective performance auditing. Many audit
staff are fluent only in French and, due to
the lack of courses available in French,
they must incur travel costs to receive rel-
evant training in performance auditing.
Budgetary restrictions limit the amount of
training that can be undertaken annually.
8. Internal Audit Not
Sufficiently Understood
or Supported
Lack of support and understanding from
city councils, city staff, the media, and the
public was identified as a significant bar-
rier to performance auditing within most
of the small and medium-sized cities in
Quebec.
Respondents in English Canada had
mixed views on this barrier. Those in
smaller and medium-sized cities identified
it as a more important barrier than those
in larger cities. Orientation sessions with
members of council were seen to be criti-
cal to ensure the role of internal audit and
the auditor general—and the differences
between the two roles—were understood.
9. Inadequate Standards
and Guidelines
Discussions with survey respondents in
Quebec revealed that the value-for-mon-
ey audit standards of Chartered Profes-
sional Accountants (CPA) Canada are used
extensively by half the auditors general
and to some extent by the others. Unfor-
tunately, no guidelines have been issued
to assist practitioners with their imple-
mentation. Respondents in Quebec also
noted that the best-practice text endorsed
by The IIA, Performance Auditing, A Mea-
surement Approach, 2nd Edition, is not
available in French.
Inadequate standards and guidelines
were not seen to be a significant barrier in
English Canada.
10. Effective Training
Courses Not Available
In Quebec, lack of effective training is
one of the largest barriers to perfor-
mance auditing. Respondents reported
that this is mostly a language issue as it
is difficult to obtain relevant training in
French. According to respondents, train-
ing in all levels (basic, intermediate, and
advanced) is needed in Quebec where
performance auditing is still a relatively
new function.
In English Canada, lack of effective train-
ing is not considered to be a significant bar-
rier because participants can access cours-
es from The IIA, CCAF-FCVI, Municipal
Internal Auditors Association (MIAA) and
Association of Local Government Auditors
(ALGA).
The researchers concluded that the ma-
jor barriers to performance auditing within
cities in Canada can be mitigated through
the combined efforts of audit leaders in
these cities, IIA Canada, local chapters of
The IIA, CPA Canada, CCAF-FCVI, MIAA,
and ALGA. They suggested that there is a
need for:
1. Collaboration to develop common leg-
islation to support audit independence
and adherence to audit standards.
2. Coordination to ensure effective, afford-
able training is available in both Eng-
lish and French to improve proficiency
in performance auditing and to provide
councilors with training in governance
to improve their understanding and
support for audit.
3. Commitment to provide guidelines and
authoritative guidance on value-for-
money auditing and performance audit-
ing in both English and French.
4. Co-operation to address the need for
sufficient funding levels within audit-
ing functions in local governments in
Canada.
The other purpose of the research study
was to identify best practices in perfor-
mance auditing. The researchers noted
that audit functions in Winnipeg, Ottawa,
Montreal and Quebec City were following
many of these best practices. Auditors in
Toronto and Edmonton were following al-
most all of them.
R
onald
C. F
oster
,
CPA, CMA, CIA,
CRMA, CISA, PMP, CFE is an audit and
risk management professional with over
25 years of experience.