Does the SAI issue an opinion of the status of the internal control system?

PIFC Worshop8-9.07.2008 Turkey

Tõnis SaarNAO of Estonia

Key learning points

Theory• SAIs in the accountability circle• Giving assurance and taking assurance

Practice• What PiFC is in Estonia (critical view)• NAOE role 5 years ago, today and tomorrow

Some recommendations

ReportOpinion

Money

SAIs in the accountability circle

Parliament

SAI Government

Auditing

Is that a PIFC?

ReportOpinion

Money

Principal

Auditor Agent

Auditing

ReportOpinion

Money

Principal

Auditor Agent

Auditing

ReportOpinion

Money

Principal

Auditor Agent

Auditing

ReportOpinion

Money

Principal

Auditor Agent

Auditing

ReportOpinion

Money

Principal

Auditor Agent

Auditing

???

RISK

SAI

ICS

How to make it work?

Conclusion• SAIs must evaluate, assess, monitor and take assurance from the

internal control systems constantly (in every audit)• Approach - Everybody are auditing everyring! – must be avoided,

it is waste of resources• Take a risk based approach

Today• Is NAO giving overall (horizontal) opinion on IC system – NO

• Is NAO giving recommendations – YES and MUST do• Is IA giving overall opinion on IC system – streching target• Is management giving overall assurance on IC system – MUST

Tomorrow

• Will NAO give overall opinion on IC systems? Serious dobts• Will NAO evaluate IC and make recommendations? It´s a MUST

PiFC in Estonia (Critical view)

• “God we believe, everything else we audit?”• Difficult start- no standards, no help, no interest• Guidelines - One “girl” show and one time exercise with weak

underling processes• Mistakes pay back • Management accountability did not really work• IA audit was a campain and “luckily” took off - some mistakes

helped• External pressure was important• EU money still has different PiFC than rest of the budget• Management is still not sure what is the sense of this

nonsense?

Role of the NAO of Estonia

5 Years ago• Get the accountability in the place• Push the standards and internal audit• Improve NAOs own quality• Budgeting process, accounting reform, commission roadmap(s)

Today • Understanding really the key issues and trying to make accountability

work• Valuing experience, quality of people and transparency• Addmiting mistakes and change step by step

Tomorrow• Financial audit shift – SAI as a “Group auditor”• Sertification – IA and EA, havent really acheived yet• Capacity building of NAO and IA

Reccommendations

• Help MoF by creating extra pressure to them and to gov.• Never forget the parliament• You always need a case – hard evidence to justify the change.

Nobody likes the theory!• It is easy to change the law, difficult to change processes, takes

time and leaders to change thinking (culture and values)• Take it from the start as a ongoing process – forget the

“chapters” you need it anyway• Find help and define your own needs – talk to people• PUSH, learn and admit mistakes, PUSH, learn and admit

mistakes, PUSH ... etc• It is not the audit what matters, but the communication• Value the people and experience