TIAPS Module 1 Audit and Assurance workbook

The need for governance arises for two main reasons.
• Accountability. Public sector organizations are managed and led by officials for and
on behalf of citizens. Public resources (money, labor, buildings, land, and other
assets) are used to serve a particular purpose for the common good. Those assigned
to administer those services – whether by election or appointment – have an
obligation to the public to act as diligent stewards of public resources and do
whatever is reasonable to achieve the best outcomes. In many cases, officials take
an oath of office to this effect. Being accountable entails public officials are open to
scrutiny for their behavior and performance and will receive due recognition or
admonishment accordingly. This requires transparency through honest and reliable
reporting together with mechanisms (enforced by the rule of law) for apportioning
rewards and punishments (which may include no longer being able to serve in a
public position) as appropriate.
• Uncertainty. Governance is also required because there are no guarantees wellintentioned
actions will yield desirable results. Resources and systems are finite and
imperfect. People are subjective in their thinking, limited in their knowledge and
reasoning, and unreliable in their behavior. Circumstances are complex, changeable,
interconnected, and chaotic, and ultimately unpredictable. All these factors create
uncertainty, and it is the impact of uncertainty – whether favorable or unfavorable –
on our efforts to achieve goals that is the origin of risk. According to ISO, risk is
simply defined as “the effect of uncertainty on objectives.” 7
Governance aims to restore confidence and trust by stakeholders as well as enabling
managers and leaders to navigate uncertainty by making better decisions based on a clearer
understanding. Accountability and uncertainty are unavoidable. They both require honest
endeavors based on sound judgments. Governance helps an entity fulfil its purpose
economically, effectively, efficiently, ethically, and sustainably.
• Economically: with the least amount of effort and resource, reducing – and ideally
eliminating – unnecessary costs of input.
• Efficiently: with the greatest amount of output, minimizing – and ideally eliminating –
inferior or defective results.
• Effectively: with the greatest success in achieving desired outcomes and value.
• Ethically: in accordance with accepted norms of behavior.
• Sustainably: in a manner that minimizes – and ideally eliminates – negative social
and environmental impacts.
Governance can be regarded in part as an attempt to address risks that exist in the
relationships between stakeholders and those assigned to manage affairs on their behalf.
This is an example of the classic principal-agent situation. In the public sector context,
citizens are the primary stakeholder (or principal) of organizations while elected and
appointed officials are the agents. As noted in A.1, the consequences of errors and abuse in
the management of public resources and pursuit of public policy can be considerable.
7
ISO 31000: Risk Management, 2018.
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