Feature story from Hungary: Innovative ways to visualise audits - is interactive audit the future?

Two pages and a Twitter message - that's the innovative way to display the future audit findings of the State Audit Office. Behind the substantive evaluation and the infographics supporting the visualisation are, of course, the digital, methodological and technological developments of recent years and the recent shift in focus of the State Audit Office's advisory as well as audit activities and related audit interactivity. In this article, we explain how we have come so far.

As a starting point, one of the strategic objectives of the State Audit Office of Hungary is to ensure that its audit results are clear, consistent and unambiguous at all times through the continuous development of its reports. The broad usefulness of the reports is ensured by the continuous improvement of their structure and content, as well as by the clear messages they convey. In addition, the SAO has continued to produce additional summaries and easy-to-understand briefings for specific stakeholders, such as Parliament and the press, to ensure that its audit messages are effectively communicated.

The strong presence of the State Audit Office's advisory activity and the related audit interactivity naturally implies that reports, as the final product of the audit process, must  change in response to changes and shifts in emphasis in the audit process. As a consequence, the need has arisen to rethink the content and structure of reports in an innovative and modern way.

Methodological developments, the rise of consultancy

The SAO continues its inspections and activities during the coronavirus epidemic, adapting to the changed conditions: it is extending its advisory role, both by virtue of its legal mandate and by a parliamentary resolution, and is also performing a significant part of its inspections more efficiently and effectively, in order to be present with the widest possible range of auditees while at the same time reducing the burden on them.

This is supported by the monitoring type approach, which is the result of methodological developments at the State Audit Office, and which contributes to reducing the risk of corruption among auditees while increasing audit coverage and thus supporting the functioning of a well-governed state. Through these audits, the SAO assesses simultaneously the relevant areas of good management, accountability and transparency at several auditees. As an indication of the scale of this, in 2021 the SAO will be present at nearly 8,500 auditees with this type of audit alone.

The monitoring type approach, based on the methodological basis of compliance audits, provides an up-to-date "snapshot" of the auditee group, i.e. a "present time" audit, based on a small number of relevant audit documents relating to the subject of the audit. It thus aims to assess the 'readiness' of a broad group of auditees.

By focusing on the relevant documents of the current situation, the audits strengthen the advisory role of the State Audit Office by providing a real-time assessment and recommendations for the future, supporting the improvement of the public finance situation of the auditees, strengthening the basic operational and management regulatory environment and the framework of preventive organisational integrity. For the audits, essential documents are identified the absence of which represents a significant public finance risk. A key criterion for the assessment of documents is the definition of criteria, which for monitoring controls primarily relate to the availability of documents and their essential content.

This is also beneficial for the auditees. During the audit, as the SAO assesses a small number of regulatory documents relevant to the area audited, provided by all the organisations in a given audited area, the burden on the auditees is reduced, the amount of data provided is significantly lower than for a detailed audit, the duration of the audit is also shorter so the auditee receives feedback sooner.

Interactivity during audits

During its monitoring audits, the State Audit Office promotes positive public finance change based on the commitment of the auditees, by providing advice and inviting immediate action during the audit process. The SAO identifies the typical deficiencies in organisations operating in the same legal environment during audits and seeks to improve public finance management by drawing the attention of top management to the significant and risky issues identified.

An important and interactive tool to ensure the advisory role of the audits is the management by letter, which is used by the State Audit Office to ensure that the managers of the auditees take prompt action to correct the irregularities and deficiencies detected and thus ensure the proper functioning and management of the organisation they lead. In the management by letter, the SAO describes the irregularities and deficiencies detected which jeopardise transparent and accountable public spending.

The use of awareness letters creates interactivity, as it gives the auditees the opportunity to remedy the deficiencies identified during the audit process - thus the measures taken will trigger positive processes in their operations even before the closure of the audit, and to inform the State Audit Office of this. The SAO will evaluate the auditees' replies to these letters of attention during the audit and will take them into account in the preparation of the report for risk assessment and identification.

How has this affected the presentation of the audit results?

Given that the irregularities detected during the audit are reflected in the attention letters, they are no longer part of the report, reinforcing the fact that the aim is not to find errors but to play an advisory and supportive role. In addition, the advisory function results in the inclusion of evaluations in the reports, which all contribute to a significant reduction in the length of the reports, so that they can contain only the main messages of the audit.

The initial status of the auditee is presented in the evaluation section, as well as the auditees' responses and actions to the letter of attention. In a synthesising manner, and with a view to relevance, the laws used as criteria in the context of the audit are formulated in a concise manner, taking into account compliance or non-compliance with them. The evaluation focuses on the social relevance of the deficiencies identified and draws conclusions in this respect. The evaluation will also show the direction of change and improvement as a result of the measures taken during the audit.

The main message of the audit will also be contained in a summary lead, which will provide a concise, clear and socially relevant conclusion of the evaluation. This provides an appropriate basis for converting the SAO's messages into a Twitter message. In keeping with the spirit and expectations of the times, an infographic summary of the results of the audit will be produced and included in the report.

Summarising the experience of the State Audit Office in 2021, it can be stated that the vast majority of the auditees are cooperative and the level of interactivity during the audits is high as a result of the anti-corruption advisory activities performed by the SAO in its audits using its monitoring type audit approach. The digital and methodological developments of recent years have made it possible for the State Audit Office to publish the results of its audits of up to several hundred auditees; the evaluation and the main message in two pages, illustrated by infographics, with clear messages and in an innovative way.