The appointment of New Brunswick's new auditor general has "shocked" a governance expert, who says the selection violates the auditing profession's code of ethics.
Kim MacPherson was named the province's new auditor general on Monday as a part of a deputy minister shuffle announced by Premier David Alward.
MacPherson is moving to the independent office from her position as New Brunswick's comptroller, which is the internal auditing office for the provincial government.
This is the second time in a row that the comptroller has been appointed the province's auditor general and the third such selection in New Brunswick history. MacPherson is replacing Mike Ferguson, who is to become the deputy minister of finance.
Steve Salterio, the director of the CA-Queen's Centre of Governance, said the appointment is flawed for many reasons.
Ethics standards set by the Institute of Chartered Accountants state that auditors must be separate from the organizations they were once employed by, he said.
"It is about as basic and a fundamental rule in accounting that exists," Salterio said.
"This goes back well into the 1800s and we expect it goes back even further. The position of the auditor had to be completely separate from the position of the bookkeeper."
He said in the private sector, especially in the United States, a person would be expected to observe a one- to three-year cooling-off period before transitioning from corporate financial officer for a company to its auditor.
Salterio also said the way MacPherson was appointed raises concerns about the independence of the auditor general.
"The way that the new auditor general was appointed, they treated it as if the Auditor General's Office was just another deputy minister. That is not the case," Salterio said.
"The auditor general reports to the legislature and is not a cabinet appointee.… There is a problem of creating a perception that the auditor general is another career path in the civil service and the auditor general position is equivalent of a deputy minister."
Conflict perception not factual
The auditor general's appointment is not drawing the same degree of criticism from the province's association of accountants.
Jack Blackier, the executive director of the New Brunswick Institute for Chartered Accountants, said three provincial comptrollers have moved directly to the auditor general's office. Blackier said those auditors have performed their jobs well.
"I don't think Mike Ferguson took it easy on the government when he was auditor general," he said.
"I have every expectation that Kim MacPherson will do the job that is required."
When Ferguson switched offices in 2005, Blackier said the auditor general did not sign off on the province's financial statement, which he would have been involved in reviewing as the comptroller.
He said he expects MacPherson will likely make the same decision to stay out of the review of the financial statements.
Simply avoiding the audited financial statement does not go far enough, according to Salterio.
He said auditors general are also responsible for performing operational audits, which are similar to internal audits conducted by the comptroller's office.
"So it is very difficult to see what exactly the auditor general could be auditing either financially or operationally that would not bring them in conflict through what they previously worked on in the books of the province," Salterio said.
The perception of conflicts of interest could be avoided in the future if the New Brunswick government altered its appointment process.
'Managers don't get to pick their auditors. This loses the idea that the auditor general is a servant of the legislative assembly not of the government.' — Steve Salterio
Salterio said there should be an independent committee struck to search for a new auditor general. And because the position is an independent officer of the legislature, he said it should be a bipartisan process.
Donald Arseneault, the opposition's finance critic, said the Liberals were not consulted on the auditor general's appointment. In 2005, the Bernard Lord government had the support of the opposition when Ferguson was selected.
As well, Salterio said government deputy ministers should be automatically excluded from consideration.
When Ferguson was picked to be the auditor general, the Lord government hired an external search firm to create a short list and then those individuals were interviewed by a panel of deputy ministers.
Salterio said the idea of having deputy ministers interview an auditor general is also problematic.
"The deputy ministers are by definition management. So there is no way they should be picking who audits them," he said.
"Managers don't get to pick their auditors. This loses the idea that the auditor general is a servant of the legislative assembly not of the government."