Auditing the Auditor

Monday, September 10th, 2012

Auditing the Auditor

The 2011/2012 report by the Auditor General, Singapore, provides some fascinating reading. Not least of which is the report into lapses in selection of Firms for Audit Shared Service Scheme.

The Auditor General’s Office (AGO)  audited the “Request for Proposal” (RFP ) called by the Singapore Sports Council  (SSC) to select a panel for its Shared Service Audit Scheme for  the period January 2010 to March 2012. The initial contract was for fifteen months with the option for a twelve month extension.

The RFP instructions declared that incomplete proposals would be disqualified. Of the seven bids received five were incomplete. However, only one of the incomplete bids was rejected. Four were allowed through and three even made it on to the panel.

The RFP clearly stated the evaluation criteria. One of which was “quality of the service proposed”. This was ignored completely in the evaluation.

The report continues to point out that the bidders offered different ranges of Services and these were not adjusted for and were not taken into account. They were not comparing like with like.

Bizarrely the financial analysis only considered the rates submitted for the 12 month option and not the 15 month main contract

Unfortunately the approving authority was provided with an evaluation report and recommendation report containing inaccurate and incomplete information. This is included a statement that only one of the Tenders was incomplete when it was in fact five firms failing to meet this requirement. Also the 12 month extension rates were quoted rather than those for the initial contract period.

In the Memorandum of Understanding between the SCC and the audit firms it contained a requirement that “fees shall not deviate significantly from” the fees quoted in the RFP.

There were a number of things wrong with this. Firstly “significantly” was probably not the best word to use in this case.

Secondly, the users of the audit services were not privy to this requirement and thirdly neither were they made aware of the rates offered in the RFP.

The consequence was 40.9% of the organisations using the panel auditors were charged between 31.6% more to 88.1% more than the quoted rates.

Clearly the Procurement process was at fault but what does the behaviour of the Auditing firms say about the profession? Particularly when they ignore the rules of Tendering and disregard the undertakings given.