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INTOSAI Auditing StandardsINTOSAI Auditing Standards

DAY 2

SESSION NO.1 (THEORY)

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Learning ObjectivesLearning Objectives

In the previous session we discussed Mandate for performance audit Definition of performance auditing, 3 Es concept,

Equity and Ethics Specific nature of Performance Audit Performance Audit and Programme evaluation Common types of Programme Evaluation Performance Audit Process Expected outcomes of performance auditing.

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Contd..Contd..

Objectives of Performance Auditing Difference between Performance auditing and

Financial auditing. What performance auditing requires from the

auditors. Analyse the performance auditing cycle. Importance of documentation of decisions at various

stages of the performance audits.  Recognize why the impact of the performance

auditing needs to be evaluated.

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Learning ObjectivesLearning Objectives

In this session we will discuss :INTOSAI Auditing StandardsCAG’s DPC ActCAG`s Auditing Standards

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INTOSAI Auditing StandardsINTOSAI Auditing Standards

INTOSAI-International Organization of Supreme Audit Institutions

Each member country has its own standards It is not mandatory But it is the BEST PRACTICES consensus

amounting the member countries. It tends to evolve a current trend issues and

concerns in auditing methodology and practices.

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HistoryHistory

A committee was set up in May 1984Members from Austria, Argentina,

Australia, Brazil, Costa Rica, Japan, Philippines, Saudi Arabia, Sweden, U.K. and U.S. constituted the Committee.

Although the word Standards has been used it serves as a guideline as individual SAIs have their own Standards.

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Basic PostulatesBasic Postulates

General Frame work deduced from Lima and Tokyo declarations.

INTOSAI’s own reports and declarationsUnited Nations Expert Group Meeting in

Public Accounting and Auditing in Developing countries

Formed the basic vision towards this endeavour

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contd….contd….

They are the basic assumptions, consistent premises, logical principles, and requirements which help the auditors to form the audit opinion

SAIs are required to adopt all material standards where necessary subject to local differences.

Some standard may not fit in with the SAI’s own standard

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Contd…Contd…

It is the endeavour of the SAITo ensure public accountabilityAdequate accounting standardsAdequate internal control of the auditeesAdequate safe guards for easy access of the

records for auditAdequate safeguards to avoid conflict

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Audit activitiesAudit activities

SAIs are set under the Act of the supreme legislature of a particular nation

They deal with the duties, functions, conditions of service of the SAI and its related offices

There exists a relation between the jurisdictional activities and the other activities.

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Scope of Govt. AuditScope of Govt. Audit

It includes regularity and performance auditRegularity includes, financial accountabilityThis involves examination and evaluation

of financial recordsAttestation of financial administration of

the auditeeTest check of statutes and regulations

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Contd…Contd…

Ascertainment of internal controlAudit of propriety and probityAudit of economy, efficiency,effectivenessReporting on any other matters considered

necessaryChecking of financial statements of the

auditees for the accuracy

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Due care Due care

SAIs are equipped to handle the standards of the various audits.

They should be handled in a professional manner

The audit should be objectiveThe concern of audit should be to apply the

auditing standard

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General standardsGeneral standards

This deals with the qualification and fitness of the auditor to handle audit in a professional manner

Independence is another standardThe auditor and Sai must be independentThe Sai and auditor should exercise due

care to in effectively using the Auditing standard

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Contd...Contd...

The objective is to conduct an audit objectively and to collect sufficient, adequate and reliable audit evidence to substantiate the audit findings.

Manuals and other writings to support the audit work

Auditor too have sufficient skill to handle the audit subject however difficult it may be.

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IndependenceIndependence

The auditor should do his work independently without fear or favour.

Though independent SAI has to work in close liaison with the Legislature.

SAI helps the Legislature in dealing with its reports

SAI also helps the legislature in preparation of the annual financial statements.

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Contd…Contd…

SAI keeps away from political influenceSAI to observe the dictates of legislationThe legislation should not direct the SAI to

plan and conduct the audit as per certain directives.

SAI should have independence in deciding the manner and method of conducting the audits.

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Contd…Contd…

All the receipts and expenditure of the Govt. would be subject to SAI audit.

But in certain cases other bodies and corporations not having any direct link with the Govt.some times request the Sai to conduct audit

In such cases also it is to be seen that the Auditing standards are kept up

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Responsibility of the LegislatureResponsibility of the Legislature

It should provide all necessary help to the SAI in terms of resources and manpower to which the SAI is accountable.

There should not be any direction from the executive in regard to the performance of the audit mandate

SAI to have uninterrupted access to the records for audit purposes.

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Contd…Contd…

SAI need not be managers to an entity’s execution

Sai may co-operate with bodies having expertise in the matter of audit without affecting the independence of audit.

Competence:Audit should have competence to handle

modern skills and technique of audit.

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Competence contd…Competence contd…

The SAIs competence in forming audit opinion, recommendations and conclusions should possess the standard expected of it.

The opinion should be objective and not biased

The SAI should have coherent view amongst the functionaries.

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Contd…Contd…

In order to maintain the quality of opinion, the SAI should equip itself with the modern techniques, innovations and research

The members should be subjected to periodical sharpening of skills through training, manuals and other publications

Audit planning, structuring of the audits etc should have the necessary logic and standard

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QualificationQualification

General standards stipulate that the auditor should have the necessary qualification

Where found deficient, training should be imparted

SAI should have professional development programmes

The SAI personnel have adequate knowledge about the Govt. their system and position

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Contd…Contd…

SAI should continuously pursue the policy of updating the skills of the personnel through circulars, booklets, manuals, regulations etc.

It should also derive external expertise to enrich its resourcesThere should be good liaison between the

audit and audittee

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Contd…Contd…

SAI should:Confirm that integral quality assurance

processes have operated satisfactorilyThe quality of the AR should be ensuredAvoid repetition of weaknessSAI to approve the system of accounting

and audit

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Field StandardField Standard

The auditor should plan the audit for a high quality audit

The work of audit staff should be supervised

Audit should evaluate the internal controlRegularity and financial audits should bring

irregularities, illegal acts

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Collection of evidenceCollection of evidence

Competent, relevant, and reasonable evidence should be obtained to support the audit’s findings

In analysing the financial statement the audit should ensure that the financial statements do depict a true and fair view

It also discloses the various areas where the accounts do not disclose the correct accounting

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Steps for auditSteps for audit

PlanKnow the entity and projectsDefine objective and scopeDefine audit approachPrepare the budget and schedule fr the auditIdentify the staff requirementsDiscuss the above with the auditee

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Supervision and reviewSupervision and review

Audit should be supervised to ensure achievement of audit objective

Supervision for method and substanceEnsure that audit is conducted as per the

auditing standard Ensure that the working papers are filed They contain evidence to support the

opinion

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Reliability of internal controlReliability of internal control

Ensure that internal control existsEnsure that the laws and regulations are

properly seenEnsure that frauds are not taking placeAudit evidence:All conclusions should be supported by

audit evidence

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Contd…Contd…

Ensure that the evidences reliable, complete and sufficient

Ensure that they support the auditing standards

Helps planning the auditHelp the professional development

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Reporting standardReporting standard

This relates to both regularity audit and certification audit

Findings are to set out in proper formThe opinion should be preceded by a

suitable titleThe report should be dated and signedIt should contain objective and scope

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Contd…Contd…

The report should be complete It should address the auditee Subject matter should be identified Legal base should be included in the report It should conform to the standards It should be issued within the time frame Opinion should be expressed in the standard

format