Don’t audit election returns – NZICA

Stephen Franks says the New Zealand Institute of Chartered Accountants is warning its members against auditing election returns of expenses required under the Electoral Finance Act.

. . . a member must consider how appropriate it is, applying the Fundamental Principles in the Code of Ethics, to accept an appointment to “audit” subject matter information that is inherently unauditable. . .

We believe that auditors will have little choice but to state that they have been unable to form the required opinion (ie disclaim any opinion) for the following reasons:
§         There is currently significant uncertainty surrounding what constitutes an election advertisement. 
§         The risk surrounding completeness.  It is difficult to envisage any situation where the auditor would be able to perform audit procedures to give assurance that all expenses have been recorded in the returns – how to establish how many advertisements exist and then how to conclude that all expenses associated with each advertisement are included (particularly where some materials or space has been provided at no charge).
§         Difficulties in establishing the commercial value of materials or advertising space provided free of charge.
§         Difficulties in the apportionment of election expenses of election activity between individual candidates and the party as a whole.
§         It is possible that public funds may have been used for electioneering (as the Auditor-General determined to have happened after the 2005 general election).  No auditor reporting under the Electoral Financing Act will be able to obtain assurance that public funds have not been used in advertisements intended to persuade a voter to favour a candidate or party in an election unless they audit the Parliamentary Services.
 
We note that a disclaimer will most likely be the appropriate form of opinion even in situations where the party or third party involved has implemented strict controls and done everything possible to ensure that the return is as accurate as possible.
 
Clearly this is an unfortunate situation and could have negative connotations.  Those reading the report may misinterpret the opinion (or lack of an opinion).  This is of particular concern given the highly politically sensitive nature of the information contained in the returns and the possibility of high media attention.  The Institute has formally raised this with the Electoral Commission and are attempting to meet with the Chief Executive to discuss this further with her.”

Stephen rightly says:

It is a disgrace to New Zealand democracy, that our audit standards body is saying that an election law is so defective that a prudent auditor should refuse to get into the position where they might have to give an opinion on how it is applied.

What a hurdle the law is to challengers to the political establishment wanting to make sure they do not render themselves liable to huge fines or imprisonment. Even if they could afford professional advice, the professionals are saying many of the questions are inherently unknowable. Establishment insiders of course have party structures and systems to form a consensus on what risks are being run.

Every party and every candidate must find some poor sod to give that sign-off opinion if they are to participate in our democracy. Belatedly the accountants are saying – find someone silly, but not us.

What’s going to happen if/when candidates can’t find anyone to sign off their accounts?

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