Tuesday, December 28, 2010


Ub Post
December 28, 2010

Аuditus is a Latin word meaning heard or accepted. In English language, it is widely used as auditing or examination and review and was developed as a definite management tool in those countries where private property relations developed highly.

It can be defined as an art of communication to provide evaluation and conclusion by a third party into the utilization of a private property when an owner of the property is different from the user of the property.

As Mongolia undergoes rapid development of private property relations, there is an emerging challenge to carry financial and operational examinations into business establishments and the role and importance of internal and third or independent auditing is growing.

The terminology ‘internal and independent auditing’ is gaining wide acceptance in the private sector and as private companies get bigger and bigger their owners tend to become more reliant on the traditional management approach and entrust the management of their firms to professional people. Undergoing such examination on annual basis is a ‘must-do’ in every country in order to sell shares in capital markets. As for the public or government sector, auditing is still just on paper and developing auditing in its real context is almost like committing suicide for our politicians. Our politicians, who are responsible for transparency and openness of all government activities, speak out about theory very glamorously.

Unfortunately, it is the total opposite in reality. A primary and most important tool to maintain transparency in the government activities is a true independent auditing. Indeed, the Government has specialized agencies institutions in order to control or audit its activities. These are internal auditing and because they are appointed by political parties to which they belong, they serve only their parties not citizens who are owners of property. Such internal auditing is more appropriate only in a country with a strong opposite political force.

State-run business entities of Mongolia really need a true independent auditing. A foreign professional institution would be the right option to assess business activities of state-run firms in a true and complete way.

It should be noted here that MP Ya.Batsuuri last week submitted a definite proposal regarding the hiring a foreign auditing organization for this purpose.

“Election-winning party appoints only its own persons to preside over important state-run firms such as the Erdenet ore-processing factory, the railway system and the national airline MIAT. In this way, the parties continue compensating the costs spent to win elections and raising funds to finance next elections from the so-called state milk-cow. In this situation, it is not possible to place trust on internal auditing. Thus, it is essential to bring an in internationally accepted prestigious auditing firms immediately in order to charge punishment to guilty officials” Batsuuri said.

If the MP’s proposal gets approved and each of above-mentioned “milk-cows” undergo auditing by a foreign professional firm to find and punish those guilty officials, “it will cause the stopping of functioning of the Mongolian state in many areas”.
A war might break out in Mongolia, where guilty ones are not punished, instead, the Cabinet would be changed if the foreign auditing firm would reveal and publicize only a small portion of big deficiencies which are hidden by domestic auditing examination. For this reason, Mongolian politicians talk about internal auditing reports only when they share state property for own wallet or when they cannot deal over how to share their gains. They become silent if they reach a deal after making some noise in the newspapers.

In our government, there is no deal possible, only the price is negotiable. Besides, there is no office tradable because they can create as many new sub-offices as they wish to. Precisely for this reason, foreign auditing must be brought to examine state-run factories and companies, prior to inviting a foreign management team.

Only in this way can we determine where exactly do deficiencies occur and who makes mistakes, after which it will be possible to punish guilty persons based on evidence. It would be cost-efficient to appoint a new management and results would be seen immediately as the tasks are clear. If we are able to make business activities of these “milk-cows” more transparent, then the people’s real interest and requirement to penetrate into politics would disappear, thereby the number of public officials would automatically decrease, opening up the path to receive many public services through Internet.

Only in this manner will a business-like attitude revive, encouraging the young people try their strength in the business sector.

Only Sweden, which managed to develop independent auditing and make government activities transparent under pressure of its people (all-level auditors are appointed and financial and operational auditing is carried into all-level government institutions and its report is published), Norway and Finland (auditing is carried mostly by certified auditors), Denmark (Auditing is responsible for controlling and examining the Government and audit reports are introduced to all-level councils. Since 1997, it passed law on operation auditing), had practically managed to eliminate corruption. These countries have proved that corruption and government have proportional relationships.

The people and taxpayers of Mongolia support, and are demanding the authorities also support, a proposal to bring foreign auditing into state-run big companies, into the State Property Committee and into the Ulaanbaatar City Administration.

Translated By P.Shinebayar

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