An auditor is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound.
– LOPES L.J. In re Kingston Cotton Mill Company
(No. 2)  (1896) (Court of Appeal)

Recently, the much awaited National Audit Act setting up the National Audit Service Commission was passed in Parliament with Amendments. Transparency International Sri Lanka (TISL) releasing a legislative brief on the National Audit Bill detailed some key Amendments to be made in committee stage.

There are three major areas of concern which include: 1.The surcharge powers, being the power to recover monies related to any fraud, negligence, misappropriation or corruption, have been vested in the Chief Accounting Officers (e.g. Secretary to a Ministry or Department Head) instead of the Auditor General; 2. Vast discretionary powers have been vested in Chief Accounting Officers in determining the final surcharge; 3. Persons subject to an inquiry by the Auditor General are entitled to nominate others to appear on their behalf.

It was originally envisaged that the National Audit Bill would grant powers of surcharge to the Auditor General to hold public officials financially accountable for any loss emanating from fraud, negligence, misappropriation or corruption in transactions for which they were responsible. This would have been in line with international best practices as espoused in the Lima Declaration adopted by the International Organization of Supreme Audit Institutions (INTOSAI). The Gazetted Bill however vests the final determination on surcharge with the Chief Accounting Officers (CAOs) – which highlights a potential conflict of interest.

Furthermore, in the event that the CAOs themselves are subject to an inquiry, surcharging power has been vested in the President as the appointing authority. However, should the President choose to impose a surcharge, the Act does not provide a right of appeal for the CAO. While the Audit Service Commission investigates and reports on the amount of loss incurred and the individuals determined to have caused the loss, a CAO can choose to reduce the amount to be recovered, with no restriction and providing no justification.

Additionally, any person who is the subject of an inquiry, is able to nominate any other person ‘conversant on the subject’ to appear on such person’s behalf if they are unable to appear by themselves. This provision could be abused by those seeking to avoid accountability – especially since the refusal to appear before the Auditor General is no longer an offence, as was provided in previous versions of the Bill. The provision making the refusal to appear before the Auditor General a punishable offence must be included as mandatory if the Act is to be effective.

However, the positive revisions incorporated in the gazetted Bill, including the appointment of the surcharge appeals committee being placed under the purview of the Constitutional Council instead of the Audit Service Commission, ensuring the independence of the body from the Auditor General, are commendable
It is apparent that the Appeal Procedure is incomplete in the gazetted Bill as it has a lacuna with regard to the appeal procedure available to an affected Chief Accounting Officer.

Further, empowering the President to impose the surcharge on a Chief Accounting Officer would limit his ability to challenge such decision in the same manner as would any other affected person under the gazetted Bill, because of the unique protection afforded to the decisions of the President. Further there is no explicit provision for the Audit Service Commission to appeal against a decision of the Chief Accounting Officer to the Surcharge Appeal Committee or thereafter to the Court of Appeal, Surcharge Appeal Committee can allow, disallow an appeal, or amend, alter or vary the decision of the Chief Accounting Officer. There is no provision to specify reasons or the basis for the decision. To ensure impartiality it is essential that the Surcharge Appeal Committee record reasons and the basis for their decision.

As quoted at the outset the dicta of Lopes LJ are very relevant and as Lopes LJ in Kingston Cotton Mill Company case further referring to employees noted : ’He (Auditor) is justified in believing tried servants of the company (public officers in this instance) in whom confidence is placed by the company (government in this instance). He is entitled to assume that they are honest, and to rely upon their representations, provided he takes reasonable care.

If there is anything calculated to excite suspicion he should probe it to the bottom; but in the absence of anything of that kind he is only bound to be reasonably cautious and careful.’ In conclusion if the Act is to function smoothly the attitude of the Auditor should not be to go on a witch-hunt but conduct the audit with an open mind.

(The writer is an Attorney-at-Law with LLB, LLM, MPhil (Colombo)
keerthisinghel@yahoo.co.uk