Transcript Enhancing Accountability and Governance The Comptroller

Structure of Government Auditing Standards
Jonas Hällström
Deputy Director, Financial Audit
Project Director, INTOSAI WG on Financial Audit Guidelines
Riksrevisionen, the Swedish National Audit Office
Sweden
Jeanette M. Franzel
Director, Financial Management and Assurance
Project Director, Government Auditing Standards
U.S. Government Accountability Office (GAO)
U.S.A
19th International Conference on
New Developments in Government
Financial Management
Miami, Florida – USA
May 5, 2005
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Integrity in Government
Our common values of
•
•
•
•
Accountability
Integrity, trust, and reliability
Confidence and credibility
Independence, objectivity and impartiality
Are expressed through our common language of
• Ethics and
• Standards
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International Organization of
Supreme Audit Institutions (INTOSAI)
• INTOSAI
– the professional organization of supreme audit institutions
(SAI) in countries that belong to the United Nations or its
specialized agencies.
– founded in 1953 and has grown from the original
34 countries to a membership of over 185 SAIs, or 185
countries.
– internationally recognized leader in public sector auditing
and issues international guidelines for internal control,
financial management and other areas.
– develops related methodologies, provides training, and
promotes the exchange of information among members.
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INTOSAI Auditing Standards
Committee
• The original task for the Committee was to produce a
set of auditing standards, which has been fulfilled.
Subsequently, the Committee had its terms of reference
extended to:
– approve the standards by updating them and making any
necessary additions (subject to approval of INCOSAI);
– facilitate providing INTOSAI members with practical guidance
material in support of the auditing standards;
– give advice on the development and provision of training
material to support effective application of the standards; and
– consult with the INTOSAI Secretariat and the Regional Working
Groups for administrative support in promulgating the guidance
and training material.
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ASC Goals 2004-2007
• Implementation of the INTOSAI Strategic
Plan
• Develop Financial Audit Guidelines
• Case studies on independence
• Promotion of SAI independence
• Develop guidance on compliance audit
• Review of INTOSAI Code of Ethics
• Website ( www.rigsrevisjonen.dk/asc)
 ASC replaced in 2005 by INTOSAI Accountability
and Professional Standards Committee
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Structure of INTOSAI
STANDARDS
•
Lima Declaration of Guidelines on Auditing
Precepts– 1977, Lima
•
Original INTOSAI Auditing Standards-- June
1992
•
Code of Ethics– 1998, Montevideo.
•
Restructured Code of Ethics and Auditing
Standards– 2001, Seoul.
•
Approval for the Auditing Standards
Committee to develop guidelines for
implementing auditing standards– 1998,
Montevideo
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Structure of INTOSAI
STANDARDS
Level 1
Lima Declaration is the foundation with its comprehensive
precepts on auditing in the public sector.
Level 2
The Code of Ethics contains the values and principles guiding
the daily work of the auditors.
– One of the principles outlined in the Code of Ethics is the
auditor’s obligation to apply generally accepted auditing
standards.
Level 3
The Auditing Standards contain the postulates and principles for
carrying out the audit work.
Level 4
Guidance Material provides practical assistance to SAIs in
implementing the Standards in their individual situations.
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Lima Declaration of Guidelines on
Auditing Precepts
• Orderly and efficient use of public funds is essential for proper
handling of public finances and effective decision-making.
• To achieve this objective, each country needs a Supreme Audit
Institution whose independence is guaranteed by law.
• SAIs are even more necessary as countries expand their
activities into the social and economic sectors.
• The following objectives of auditing are necessary for the
stability and the development of countries in keeping with the
goals of the United Nations
– proper and effective use of public funds;
– development of sound financial management;
– proper execution of administrative activities; and
– communication of information to public authorities and the
general public through the publication of objective reports.
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Lima Declaration of Guidelines on
Auditing Precepts
• Auditing is inherent in public financial administration
as the management of public funds is key to public
trust.
• Audit is not an end in itself but an indispensable part
of a regulatory system whose aim is to
– reveal deviations from accepted standards and
violations of the principles of legality, efficiency,
effectiveness and economy of financial management
early enough to make it possible to take corrective
action in individual cases,
– to make those accountable accept responsibility, to
obtain compensation, or
– to take steps to prevent--or at least render more
difficult--such breaches.
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INTOSAI Code of Ethics
• Contains the basic postulates of ethics.
• National differences of culture, language and legal and social
systems make it necessary adapt the Code to the
environment of the specific country.
• The Code is the foundation for SAIs to use when developing
their respective codes of ethics.
• SAIs Code of Ethics should be a comprehensive statement of
the values and principles which guides the daily work of
auditors.
• The independence, powers and responsibilities of the public
sector auditor place high ethical demands on the SAI.
• The Code reinforces the INTOSAI auditing standards.
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INTOSAI Auditing Standards
The INTOSAI auditing standards
•provide a framework for the establishment of procedures
and practices by SAIs for conducting audits.
•should be viewed in the particular constitutional, legal
and other circumstances of the SAI.
•Set forth the basic principles, assumptions, consistent
premises, logical principles and requirements which help
in developing auditing standards and serve the auditors in
forming their opinions and reports, particularly in cases
where no specific standards apply.
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INTOSAI Auditing Standards
Chapter I • Basic Principles in Government Auditing
Chapter II
• General Standards in Government Auditing
• Standards With Ethical Significance
Chapter III -- Field Standards in Government Auditing
• Planning
• Supervision and Review
• Study and Evaluation of Internal Control
• Compliance With Applicable Laws and Regulations
• Audit Evidence
• Analysis of Financial Statements
Chapter IV-• Reporting Standards in Government Auditing
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INTOSAI Financial Audit Working
Group Partnership with IAASB
• March 2004 agreement (MoU) between INTOSAI and
IAASB
– The INTOSAI Auditing Standards Committee will
provide experts from their member countries to
participate in the work being done by IAASB task
forces.
– The aim of this work is to ensure that the
standards being developed by the IAASB take into
consideration, to the greatest degree possible, the
specific considerations of public sector audits.
– Reference panel of 97 experts from 58 countries
(February 2005) working with the IAASB.
– The guidance developed do not have a mandatory
application in SAIs
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Reference Panel February
2005
97 experts and back-office experts
39 from Europe
24 from Asia
 9 from Africa
 7 from North America
 5 from Oceania
13 from South America
58 countries represented (7 Court-model)
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INTOSAI Financial Audit Guidelines
• Working Group on Financial Audit
Guidelines created as a result of the
agreement with the IAASB
• 9 member countries
• New strategy developed Lima 2005
• Chaired by Sweden
• A project secretariat created to manage
all processes
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Why Cooperation INTOSAI
IAASB
 There is an international focus on the use of
standards in a global economy
 To ensure high quality in standards and audit
work carried out
 To ensure confidence in profession
 INCOSAI recommendation: be based on existing
standards
 Effective and efficient: Many of the core
principles are the same
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Working Group on Financial
Audit Guidelines
• Strategic objective
Develop high quality guidelines that are
globally accepted for the audit of financial
statements in the public sector
• Actions to achieve strategic objectives
Incorporate public sector consideration into
the ISAs
Provide guidance above and beyond what
is provided in the ISA for public sector
audits
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Working Group Goals
2004-2007
• Appoint experts on all ISA Task Forces
• Practice Notes to ISAs following task
forces, and ”old” ISAs
• Comments on IAASB Exposure drafts
• Present first draft guidelines at INCOSAI
2007
• Secure external funding
• Securing diverse expert involvement
• Create routines and structures
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Financial Audit Guidelines
•
The Guidelines for Financial Audit will form in-depth
guidance to the INTOSAI Auditing Standards.
A Guideline will consist of an ISA, which – where
applicable – may contain public sector
considerations at a general level, and a practice
note.
•
–
–
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Practice notes will be prepared by the Working Group for
Financial Audit Guidelines for decision by the INTOSAI
Auditing Standards Committee (ASC).
Practice notes will explain the application of an ISA to the
public sector, the extent to which it is applicable, and what
adjustments need to be made by a public sector auditor.
Where considered necessary, a practice note may contain
detailed guidance on the application of an ISA in the public
sector.
Guidelines may also be developed by the ASC in
areas that are not relevant to the private sector.
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Financial Audit Guidelines
Chapter I
•
•
Introduction and Background
Purpose of the INTOSAI Financial Audit Guidelines and relation to other
regulations and standard setting bodies
Chapter II
•
General considerations in applying the ISA to the Public sector
Chapter III
•
The relation between INTOSAI Auditing Standards and the International
Standards on Auditing (ISA)
–
INTOSAI- ISA, ISA- INTOSAI, Glossary of Terms
Chapter IV
•
Additional guidance
Chapter V
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Guidance on application of ISAs - Practice Notes/ISAs
–
–
General introduction to the use of Practice Notes and relation to ISAs
Practice Note to ISA 120, etc
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Practice Notes
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Practice notes will be issued by
INTOSAI within nine months after a
new or revised ISA is issued by the
IAASB.
Existing ISAs, which are not to be
revised in the near future, will be
considered by the Working Group and
practice notes developed,
The work started in 2004.
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Practice Notes- status
• INTOSAI participation in 7 IAASB
projects to revise existing ISAs
• PN to these ISAs scheduled in 2006/07
• PN to revised ISAs planned 2005- 2008
• Goals:
– 21 PN to be approved and endorsed in
2007
– 9 PN to be approved and endorsed in
2010
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IAASB
ASC
INCOSAI
Issues paper
INTOSAI Governing Board
First read
INTOSAI Auditing Standards Committee
Exposure draft
Sub-committee on
Independence
Project 1
PA Guidelines
Project 2
ASC Website
Project 3
Bibliography
Project 4
Survey
Project 5
FA Guidelines:
Working Group
Project Director and
Project Secretariat
Observers
Reference
Panel
INTOSAI Practice Note
Consideration
Final
IAASB International Standard
on Auditing ISA
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IAASB projects with experts from
INTOSAI
ISA no
• ISA 230, Documentation
• ISA 260, Communication with those charged with governance
• ISA 550, Related Parties
• ISA 580, Management Representation
• ISA 620, Using the work of an expert
• ISA 701, (705,706) Modifications to the Auditors report
• ISA 800, (701,800) Other Historical Financial Information
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Old ISAs
Private Sector
Public Sector
 International
 INTOSAI
Standards on
Auditing (ISA)
Auditing
Standards
Public Sector Perspective in
ISAs
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PN / ISA relation
Private sector
Public sector
 INTOSAI Auditing
 ISAs
Standards
 Practice notes
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GAO’s Government Auditing
Standards-- Yellow Book
• Expands upon the concepts and precepts in the INTOSAI Lima
Declaration, Code of Ethics, and Auditing Standards
• Represents authoritative auditing standards in the U.S. for audits
of government entities, programs, activities, and functions and of
government assistance administered by contractors, not-for profit
entities, and other nongovernmental entities, when required by
statute or when the auditors hold themselves out as following
these standards.
• Used by GAO, state and local government audit organizations,
and auditing firms that audit government programs or activities.
• Is widely used, highly regarded, and has been translated into
many languages.
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GAO’s Government Auditing
Standards-- Yellow Book
• www.gao.gov
– Click on “Government Auditing Standards
(the Yellow Book)
• www.sisepuede.com.ec
(la versión en español)
– Leyes
• Guías, Manuales, etc.
• Normas de Auditoría Gubernamental del la
Contraloría General de los EE.UU. (GAO)
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GAO’s Yellow Book
Chapter 1: Introduction
When generally accepted government auditing
standards (Yellow Book) are required
The concept of accountability for public
resources
The responsibilities of government program
managers, auditors, and audit organizations in
the audit process.
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GAO’s Yellow Book
Chapter 2: Types of Engagements
Financial audits
Attestation engagements
Performance audits
Nonaudit services (not covered by the
standards, but must be considered in
maintaining independence)
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GAO’s Yellow Book
Chapter 3: General Standards
Independence, including personal,
external, and organizational impairments
Professional judgment
Competence of audit staff
Quality control and assurance, including
external peer reviews
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GAO’s Yellow Book
Chapter 3: General Standards
Independence
 In all matters relating to the audit work, the audit
organization and the individual auditor, whether
government or public, should be free both in fact and
appearance from personal, external, and
organizational impairments to independence.
Overarching Principles:
 audit organizations should not perform management
functions or make management decisions
 audit organizations should not audit their own work or
provide nonaudit services in situations where the
services are significant/material to the subject matter
of the audit
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GAO’s Yellow Book
Chapter 4: Financial Audit Fieldwork
Incorporates American Institute of Certified
Public Accountants (AICPA) fieldwork
standards, and adds:
Auditor communication
Considering the results of previous audits and
attestation engagements
Detecting material misstatements resulting from
violations of contract provisions or grant
agreements, and abuse
Audit documentation
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GAO’s Yellow Book
Chapter 5: Financial Audit Reporting
Incorporates AICPA fieldwork standards,
and adds:
Auditor’s compliance with GAGAS
Internal control and compliance
Deficiencies in internal control
Views of responsible officials
Privileged and confidential information, and
Issuance and distribution
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GAO’s Yellow Book
Chapter 6: Attestation Engagements
Incorporates AICPA fieldwork and
reporting standards and the general
standard for criteria
Requirements for fieldwork and
reporting similar to those for financial
audits
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GAO’s Yellow Book
Chapter 7: Performance Audit Field Work
Guidance for conducting performance
audits, including
Planning the audit
Supervising staff
Obtaining sufficient, competent and relevant
evidence
Preparing audit documentation
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GAO’s Yellow Book
Chapter 8: Performance Audit Reporting
Report form
Report contents
Report quality
Report issuance and distribution
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The Need for Standards
• Articulaton of core principles and expectations
• Provides guidance to auditors for the conduct of audits
• Audit judgments can be anchored to the underlying
principles and standards
• Provides a good ”anchor” for the audit process and
reduced ”negotiations” between auditees or principals
• International standards necessary in a global economy
An essential element in building understanding of and
confidence in the audit process
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Key Concepts in Our Profession
• Public trust vs. personal interests
• Recognizing the difference between the floor (e.g., rules,
regulations, laws, accounting standards) and the ceiling
(e.g., principles, values)
• Doing what is right vs. what is acceptable
• Economic substance vs. legal form
• Being concerned with both fact and appearance
(e.g., independence)
• Using judgment vs. completing checklists
• Recognizing that continuing improvement in today’s rapidly
changing world is essential
• Remember that trust is hard to earn, but easy to lose
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Key Personal Attributes Needed By
Government Accountability
Professionals
Leadership
Integrity
Innovation
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For more information
– http://www.gao.gov
– http://www.rigsrevisionen.dk/asc/
Thank You For your Attention
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