Internal Audit in Higher Education

Alison Holmes, Sally Brown

• Publisher: Routledge
• Year: 2012
• eBook ISBN:
  9781136360879
• Topic: Education
• Subtopic: Education General

This volume describes a range of experiences of internal audit in higher education institutions from the UK, USA, Australia, New Zealand, South Africa and Germany. It presents approaches to best practice designed to enable readers to assess and develop their own audit procedures.

Part 1

Background and Rationale

1

Quality Audit Issues

Sally Brown and Alison Holmes

Quality audit comprises a range of processes and procedures by which an institution finds out more about itself and uses this data to make improvements to practice. The metaphor comes from the financial sector and is widely accepted as involving rigorous and structured review by colleagues with the aim of establishing an accurate and objective view of the current state of a higher education institution.

In recent years internationally, there has been a noticeable trend in HEIs towards a climate of greater accountability for the quality of educational provision. As part of this process, in a number of countries, external scrutiny has increased to a level at which it is perceived by academics to be burdensome to the point of crisis. Accordingly, in many places, there is a move towards more internal accountability with self-review contributing to a greater extent to measures of performance that are acceptable across the sector. Of particular importance is a move towards internal audit through which institutions can track and record processes and outcomes. This book describes a range of examples of internal audit as part of a process of exchange of good practice, in order to enable colleagues in institutions worldwide to learn from each others’ experiences and to develop appropriate customized practices for their own institutions. In so doing, this will enable HE to provide accurate and meaningful information for all our stakeholders, to market ourselves effectively and to provide demonstrable and valid quality data. The book recognizes existing well-established links with audit theory from other contexts and makes use of theoretical perspectives explored particularly in the financial sector. In addition, the book focuses on means by which internal audit can concentrate on process as well as practice, leading to continuous improvement across the board.

Part 1: Background and Rationale

This part looks first at the application of the principles of financial audit to the academic context. In the first chapter, Simon Horsman opens with an historical review of the term ‘audit’ and a description of how this, originally purely financial process, has become transposed to the domain of quality assurance. It takes readers back to first principles of audit, so that clear links can be made elsewhere in the book.

The next chapter, by Steve Michael, develops this theme further. He provides some background to the history of HE in the United States, before elaborating on the relationship between financial audit and auditing academic programmes. He discusses the peripheral drivers of academic audit and the types of accreditation agency that underlie it. As elsewhere, the US experience highlights the difficulty of developing methodologies acceptable to all types of institution and the complex nature of developing appropriate criteria for making comparisons, that do not concentrate solely on what is easy to measure.

The next two chapters develop perspectives on the UK approach to internal audit. In Chapter 4, Margaret Moran considers the ways in which the UK Quality Assurance Agency’s external scrutiny process can be used to enhance learning and teaching within institutions. She describes the process of subject review and explores examples of how it can be used to prompt continuous enhancement of curriculum design and delivery.

In the final chapter in this section, Barbara Spender provides a sceptical view of audit which, while not completely discarding the benefits, provides some searching questions about the ultimate value of the process and in particular the ways in which audit aims to develop a compliance culture within HE.

Part 2: Diverse Approaches

The second part of this book provides useful insights into the internal audit process at four UK universities: Middlesex, Napier, Oxford Brookes and Northumbria, and demonstrates how, even within a single institution, different approaches can be productively interlinked.

Geoffrey Alderman in his chapter, ‘Internal audit: is it worth the effort?’ provides an overview of the way in which internal audit is used at Middlesex University, bringing insights into the process itself and offering a critique of what he considers a ‘compliance task’.

Máire Brennan and Elizabeth Noonan describe Napier University’s approach to internal audit. Here the authors examine the evolution of internal audit as a prompt for organizational learning during a period of substantial change. A particular focus is on identifying and describing best practice across faculties.

The next chapter examines the experience of internal audit at Oxford Brookes University. Jude Carroll and Marion Temple describe how the particular approach has been designed to move away from what was perceived to be an earlier excessively bureaucratic approach towards one that is both pragmatic and robust.

We next describe an approach we developed at the University of Northumbria as part of an institutional process to build internal audit into quality enhancement processes. We describe a themed approach to audit as we experienced it, and conclude with guidance to others who might wish to modify or use our model.

Maxine Alterio’s, ‘Stories auditors tell’ is a complementary chapter, which uses an external eye to review the University of Northumbrian audit methodology by listening to and recording the stories that those involved in the process told about what they felt had been achieved. The chapter provides a useful counterpoint to the previous one.

Part 3: International Dimensions

In commissioning chapters for this book, it became obvious to us that as well as diverse practice in the UK, there are a number of different approaches of varying complexity in institutions across the world. This section brings together some internal audit experiences from the USA, Australia, New Zealand and Germany. The sophistication of internal audit internationally is widely variable in scope and it is interesting to compare the experiences across the globe with our relatively tentative approaches in the UK.

The first chapter in this part, by Dary Erwin, describes programme review as used for accountability purposes in the United States, with procedures at James Madison University, Virginia, as a central focus. The chapter concentrates particularly on a ‘value for money’ approach, which is where the origins of programme review in the United States lie, as discussed earlier by Steve Michael. Financial accountability is an area that all countries are particularly keen to develop.

In the second chapter Owen Hicks outlines a means by which his university has implemented an audit methodology using an instrument called ‘Ensuring Teaching Quality’ which was designed specifically for the purpose. He describes experiences of its use at the University of Western Australia and details how the process further evolved. This is an approach that we feel is particularly helpful to us in the UK in its highly developed methodology and in the ways in which it is used formatively to affect the culture of the University.

The third chapter, by David Woodhouse, charts the development of the process of audit in the New Zealand university sector and compares it with the parallel approach used in New Zealand polytechnics and colleges under the auspices of the New Zealand Quality Agency. He provides examples of good practice from universities across the country, in a context that is particularly interesting in that, in a small country, all the universities are engaged.

In the final chapter in this part, Annette Jander describes the introduction of a student feedback system as the first stage of a move towards external scrutiny and accountability in German universities, which have traditionally been very powerful autonomous bodies. Other academic communities outside Germany, as well as stakeholders including funders and employers within Germany, are now challenging this independence.

Part 4: Making the Most of Audit

The final part provides four more approaches to the use of internal audit. In the first of these chapters, we focus on the individual and describe a peer approach to audit in which members of staff can take stock of their own working lives, with a view to re-prioritizing and re-valuing different aspects of their work.

In the next chapter, Phil Race describes ways in which individuals can review their own achievements against a set of criteria as part of a personal audit of professional competences. This chapter is very different in its approach to the rest of the book, as it usefully provides a toolkit that can be used for self-audit. This toolkit applies the same principles as have been apparent throughout the book, that is, designing a means to gain information, finding this information, analysing it and exploring ways to bring about improvements.

Tony Mellor and Alison Holmes, in the chapter, ‘Using subject audit towards enhancement of teaching and learning’ describe a subject-based approach to audit in which intensive enhancement work followed an initial audit of practice, with the overt aim of ensuring that teaching and learning undergo continuous improvement.

The penultimate chapter, by Steve Outram, describes Staffordshire University’s methodology to modify existing validation and quality assurance processes to make them responsive to dynamic changes in curriculum design and delivery where flexible learning is the platform used.

The book concludes by using a framework from the rhetoric of financial audit and examining the way the methodologies described in the chapters fit into this framework in order to look at future directions of internal audit.

What has been fascinating about preparing the book for publication has been the diversity of practice we have uncovered in the UK and internationally, and yet the commonality of issues across the examples. No system we have come across is so fully developed that we would recommend widespread adoption. Indeed, what is very clear is the need for quality audit to be devised (or at least customized) locally but we can, with confidence, suggest that the approaches discussed here have much to recommend them to others. We trust readers will find valuable elements in the text and as part of our endeavours to continuously improve practice, we would welcome advice from readers with other experiences in the area.

2

Quality Audit in Higher Education: Lessons from Financial Audit

Simon Horsman

This chapter explores the ways in which the thinking that underpins financial audit has been used to underpin the processes of internal quality audit in HE. It aims to familiarize the reader with the dominant features, terminology and critical issues in financial auditing as a generic practice and considers how these concepts, developed during the 19th century in Britain, have been transferred to the HE quality context.

An Historical Perspective

Early forms of financial auditing were direct master-servant relationships between an owner who received an account from someone who had day-to-day control of the assets. They were also oral; hence the emergence of the term auditing’, as evidence was heard. Since the 19th century, the word has become most closely associated with a particular form of inspection applying to the accounts of limited companies. Even in a climate of laissez faire, this function crystallized as a legal requirement in the UK from the middle of the 19th century. Despite its 150 years’ history, the development of auditing, even in its narrow financial form, is an ongoing process and a function of many different forces. It is a measure of the appeal (or the logic) of what is generally understood by auditing that, at the time of writing, this word gets applied to a whole variety of processes, including the review of quality processes in HE.

The Joint Stock Companies Act 1844 was the first regulation in Britain to require all incorporated companies to have their financial statements audited. The appointed auditor was required by the Act to examine and report on the balance sheet presented by the company to its shareholders. The Act did not require that the auditor be independent of company management, or that he had to be a professional accountant. In most cases he appears to have been a non-accountant elected by the shareholders from among their members. The audit report was to state whether or not the company’s balance sheet gave a full and fair view of its state of affairs, a phrase that was generally taken to mean that the balance sheet properly portrayed the company’s solvency for the benefit of its bankers and creditors. The users/readers are left to make up their own minds as to the meaning of the information and questions of efficiency are excluded.

In addition there was at this time a secondary audit objective: ‘the detection of fraud and error in the company’s accounting records etc’ (Lee 1972, p.22). Lee goes on to draw attention to the Nichols case in 1859, which determined explicitly that it was part of the appointed auditor’s duties to discover fraudulent misrepresentations. The cost of such work weighed increasingly heavily as commerce developed through the 1920s and 1930s, especially on the large companies. Their confidence in the quality of their control systems brought about a shift in the audit objectives away from fraud detection, which in the UK was recognized by the Company’s Act 1948. The balance of responsibility in this respect between the company’s directors and the auditor is an issue that has continued to the present day.

Quality Assurance in HE

The concept of auditing the quality of educational provision is relatively recent in UK HE. Universities have traditionally been largely responsible for establishing appropriate means to assure quality, although pre-1992 universities, when polytechnics, were subject to the requirements of the Council for National Academic Awards (CNAA) on issues such as validation of new programmes and review of existing ones. The Quality Assurance Agency and its antecedent, the Higher Education Quality Council (HEQC), have in recent years taken on the role of quality assurance, undertaking quality audit (latterly continuation audit) of the provision and encouraging the development of internal processes to review quality.

More recently, internal quality audit teams have been set up in a number of universities with responsibility both to ensure that processes and practices that are claimed to operate in an institution to assure the quality of provision actually do exist and work in practice, and to ensure remediation of any identified gaps and deficiencies.

Applying the Metaphor of Financial Audit to the HE Context

It is easy for those new to the world of audit to assume that it is a technocratic, apolitical process and that any doubts they may be feeling reflect badly on them. This view, however much it is fostered by the audit establishment, is not the whole story and modern critiques recognize the problematic nature of auditing.

Michael Power, in his deep and critical examination of auditing The Audit Society: Rituals of verification (1997), describes the audit process as follows:

the way societies call individuals and organizations to account says much about fundamental social and economic values. Power is the ability to demand accounts, to exercise control over performance, whilst at the same time remaining unaccountable (Day and Klein, 1987, p.9). Such accounting arrangements are necessarily contingent and varied, ranging across formal and informal, financial and non-financial, detailed and aggregate measures of performance. Auditing operationalizes a balance of liberty and discipline which is not shaped simply by economic necessity or common sense. Rather, even in its most mundane techniques, it reflects a complex and not always consistent constellation of social attitudes to risk, trust and accountability. The motif of the audit society reflects a tendency for audit to become a leading bearer of legitimacy and this must be so because other sources of legitimacy, such as community and state, are declining in influence. So the audit society is a symptom of the times, coincidentally a fin de siecle, in which a gulf has opened up between poorly rewarded ‘doing’ and highly rewarded ‘observing’. (Power, 1997, p. 146)

Similar deep processes are at work in respect of the public sector. Privatization, the creation of independent agencies, the re-constitution of universities as independent entities, and a wide range of significant shifts in the boundaries between the public and the private sector have all brought market and quasi-market forces into new areas. These changes have been sufficiently systematic and patterned for commentators to speak of ‘New Public Management’ (NPM) (Hood, 1991).

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Table of contents

• Cover
• Half Title
• Title Page
• Dedication
• Copyright
• Contents
• Contributors
• Part 1: Background and rationale
• Part 2: Diverse approaches
• Part 3: International dimensions
• Part 4: Making the most of audit
• References
• Index