Pakistan operates under a federal system of government. The state administration is divided into federal, provincial, tribal, and territorial governments. These governments are then divided further into a third level of local governments.

Federal Level

Pakistan is governed by a federal Government located in Islamabad. The Parliament of Pakistan, according to the Constitution of 1973, is bicameral and consists of the President and two Houses known as the National Assembly and the Senate. Based on the Westminster system, the government is made up of 3 major branches: Legislature, Executive, and Judiciary. Two major figures of the government are the President and the Prime minister who run the government with support from Cabinet, Ministers, Civil Service, federal agencies and departments.

Provincial Level

Pakistan is divided into four provinces (Punjab, Sindh, Khyber Pakhtunkhwa & Baluchistan), federally administered areas such as Gilgit Baltistan and associated government Azad Jammu and Kashmir. Each province has its government, with Executive, Legislative, and Judicial powers like the Federal Government. Provinces have a significant degree of autonomy and are responsible for a wide range of areas including education, healthcare, agriculture, and law enforcement.

Territorial

Islamabad is the capital of Pakistan and functions as a territorial administrative area under the control of the Federal Government. Islamabad Capital Territory also has its local government system as well that manages local issues.

Local Level

At the local level, Pakistan is divided into Districts, each of which is administered by a Deputy Commissioner or District Coordination Officer (DC/DCO). Districts are further subdivided into towns or tehsils, which are then divided into Union councils which are further divided into villages or urban areas.

Local governments exist at district, tehsil, and union council levels. Local governments of Major cities are named as Metropolitan corporations/Municipal corporations depending on the size of the population. While district and tehsil governments are named.

Districts are administrative units consisting of multiple Tehsils or Talukas. The head of a district is called the "District Nazim or district chairman". Each district also has a District Coordination Officer (DCO), who is a civil servant responsible for coordinating the activities of various departments. Tehsils (in Punjab and Khyber Pakhtunkhwa) or Talukas (in Sindh and Balochistan) are the next level down. They consist of multiple Union Councils. Union Councils (UCs are the basic units of local government in Pakistan. Each Union Council typically consists of several villages or neighborhoods.

Public sector audit at the local level is conducted centrally by SAI Pakistan which has one or two Directorates headed by Director Generals. Directorates have regional directorates headed by Regional Directors.

The Constitution of the Islamic Republic of Pakistan 1973 & the Auditor General of Pakistan Ordinance, 2001, provides the legal framework for the functioning of the Auditor General of Pakistan (SAI Pakistan). Local government laws also empower the Auditor General of Pakistan to conduct various types of audits.

Types of Audits

SAI Pakistan conducts various audits in all public authorities (financial audit, performance audit, compliance audit, specific audit engagement, impact audit, information system audit, environmental audit etc.). Different types of audits are not normally combined in one inspection. However, the head of institutions has the authority to combine different types of audits

Quality Assurance

The Auditor General of Pakistan ensures the quality of audits through a systematic approach outlined in the Financial Audit Manual. Continuous training and professional development programs equip auditors with the necessary skills, while rigorous quality control measures, documentation requirements, and supervisory oversight ensure accuracy and completeness of audit work.  Audit reports are scrutinized by the Internal quality control committee and External quality control committee before the approval of the Auditor General.

Audit Outcome and Follow Up

The reports, opinions, and other outcomes resulting from local audits are submitted to the Governors of each province. Audit reports are then presented in the respective Provincial Assemblies for further discussion by the Public Accounts Committees (PAC) of Provincial Assemblies.

SAI Pakistan oversees the implementation of audit results through a structured process. After discussing audit opinions with management, critical issues are reported to Principal Accounting Officers^[1] (PAOs) for remedial measures. Reports on unresolved issues are presented to the Public Accounts Committee (PAC) for further scrutiny.

Cooperation with external agencies

SAI Pakistan cooperates with external experts or other public institutions during the auditing but that is not a common phenomenon. Joint engagements with law enforcement agencies are also not a regular feature.

^[1] The principal accounting officer is responsible for all financial matters relating to all offices under his administrative control and is custodian and operator of the financial resources.