Compliance audit is an assessment as to whether the provisions of the applicable laws, rules and regulations made there under and various orders and instructions issued by the competent authority are being complied with.
This audit by its very nature promotes accountability, good governance and transparency as it is concerned with reporting deviations, identifying weaknesses and assessing propriety.
Seen from the perspective of public sector audit, compliance with rules, regulations and applicable authorities is the primary and most important requirement for ensuring accountability of the public executive, which primarily relate to safeguard and use of resources – financial, natural, human and other material resources.
Compliance audit also performs the function of deterrence, especially in situations where internal controls are not as effective. The objective of public-sector compliance auditing, therefore, is to enable the CAG to assess whether the activities of public-sector entities are in accordance with the authorities governing those entities.
It is concerned with regularity and propriety audit:
Regularity–that the subject matter of the audit adheres to formal criteria emanating from the relevant laws, regulations and agreements which are applicable to the auditable entity.
