157094099 Auditing Standards (1)

8/10/2019 157094099 Auditing Standards (1)

1/41

Introduction

Legislation and instructions concerning the activities of the Office of theAuditor General

The activities of the Office of the Auditor General are regulated by Act no. 21 of 7 May2004 relating to the Office of the Auditor General (the Auditor General Act and by the!nstructions concerning the activities of the Office of the Auditor General ado"ted by the#torting on 11 March 2004.

Through auditing$ %onitoring and guidance the Office of the Auditor General shall ensurethat the state&s revenues are "aid as intended and that the state&s resources and assets areused and ad%inistered in a sound financial %anner and in 'ee"ing ith the decisions andintentions of the #torting$ cf. #ection 1 of the Auditor General Act. The duties of the Officeof the Auditor General are also sti"ulated in #ection ) of the said Act and in cha"ters 2$ *and 4 of the !nstructions.

#ection 10 of the Act sets the folloing re+uire%ents for the "erfor%ance of audits, -TheOffice of the Auditor General shall be obective and neutral in the "erfor%ance of itsduties. Audits shall be "lanned$ "erfor%ed and re"orted as "rescribed by the relevantlegislation and instructions and by best auditing "ractices in the Office of the AuditorGeneral/.

Best auditing practices in the Office of the Auditor General auditingstandards

The conce"t of -best auditing "ractices in the Office of the Auditor General/ is dyna%icand ill develo" over ti%e in 'ee"ing ith changes in the legislation$ instructions$international and national standards$ guidelines and acce"ted %ethodology. The obectiveof the auditing standards is to ensure that the conce"t of -best auditing "ractices in theOffice of the Auditor General/ co%"lies ith the general re+uire%ents set by the Office ofthe Auditor General for the "erfor%ance of audits.

The auditing standards are based on the !TO#A! standards. !TO#A!&s -ode of thics/for the relevant standards is given in A""endi3 2$ and the -ode of thics/ in A""endi3 *.-#tandards for auditing and related services/$ issued by the oregian !nstitute of ublicAccountants$ and other international and national standards have also been used as

bac'ground %aterial in the co%"ilation of the standards of the Office of the Auditor

General.

The auditing standards for the Office of the Auditor General a""ly to all ty"es of audit.The use of the standards is ada"ted to the "ur"ose of each ty"e of audit in accordance iththe guidelines for the auditing or'. 5or easy reference$ all the auditing standards can befound in A""endi3 1.

[Type text]


2/41

2006 age 2 of 40

[Type text]


3/41

The relationship between legislation/instructions, auditing standards andguidelines for auditing work

The relationshi" beteen legislation and instructions$ auditing standards and guidelines forauditing or' is shon in the folloing diagra%,

egislation8instructions for the Officeof the Auditor General

Auditing standards for the Office ofthe Auditor General

Guidelines for Guidelines for Guidelines for General guidelines and5inancial "erfor%ance cor"orate control fra%eor' conditionsAuditing auditing for auditing

The figure shos the levels of "rovisions and guidelines that govern the "erfor%ance ofthe auditing or' in the Office of the Auditor General.

The Auditor General Act and the Instructions concerning the activities of the Office of theAuditor General

The Act and the !nstructions "rovide the fra%eor's for the or' of the Office of theAuditor General. 9eference is %ade to the boo'let -Act and !nstructions relating to theOffice of the Auditor General : ith co%%ents/ issued by the Office of the AuditorGeneral in ;une 2004. The Act and !nstructions ado"ted by the #torting ta'e "recedenceover any for% of auditing standard. #tandards and guidelines shall ensure co%"liance iththe intentions of the Act and !nstructions in the "erfor%ance of the auditing or'.

Auditing standards for the Office of the Auditor General

The auditing standards are intended to define the %eaning of the conce"t of -best auditing"ractices in the Office of the Auditor General/. This is a dyna%ic conce"t and ill develo"over ti%e in 'ee"ing ith changes in legislation$ instructions$ international and nationalstandards$ guidelines and acce"ted %ethodology. The re+uire%ents in the auditingstandards %ay therefore be %ore stringent than the detailed re+uire%ents "rescribed in thelegislation and instructions. !n this event the auditing standards are to be observed.

Guidelines for auditing

The re+uire%ents related to auditing or' laid don in legislation and instructions and the

auditing standards are s"ecified in the guidelines for each individual ty"e of audit. Theguidelines describe ho the auditing or' is to be "erfor%ed.


4/41

tructure of the auditing standards

The Office of the Auditor General&s auditing standards are divided into three categories,

general standards

field standards

re"orting standards

All standards are classified under one of these categories.

The general standards "ri%arily describe the funda%ental re+uire%ents that a""ly to allty"es of audit "erfor%ed by the Office of the Auditor General.

The field standards contain the re+uire%ents for conducting the audit or' and describethe essential re+uire%ents that a""ly to the "erfor%ance of all ty"es of audit.

The re"orting standards contain re+uire%ents regarding docu%entation and the re"orting of"erfor%ed auditing that a""ly to all ty"es of audit.

The structure of the auditing standards is shon in the folloing diagra%,

The Office of the Auditor General&s auditing standards

Generalstandards

General "rinci"les forauditing in the Officeof the Auditor General

!rregularities Guidelines


5/41

!t is stated in the standards that the auditors %ust "lan and "erfor% audits ith a"rofessional degree of sce"ticis% and %ust be "re"ared for the "ossibility that they %ayco%e across circu%stances involving financial state%ents or other infor%ation containing%aterial errors and non?co%"liance. The auditors& field of or' ill s"an so %any

different areas that it is not "ossible to lay don a single set of rules or %ini%u%re+uire%ents that ill a""ly in every case. !t is ulti%ately the auditors& "rofessional

udge%ent that is decisive for the conclusions that are dran. This is a funda%ental as"ectof the auditing standards.

All those ho "erfor% audit or' for the Office of the Auditor General have aninde"endent res"onsibility for the +uality of their or' and for ensuring that the auditingstandards are co%"lied ith and that all audit or' is "erfor%ed in accordance ith -bestauditing "ractices in the Office of the Auditor General/.


6/41

2006 age 6 of 40


7/41

General standards

General principles for auditing in the Office of the Auditor General

The "ur"ose of these standards is to lay don the general "rinci"les that a""ly to all ty"esof audit "erfor%ed by the Office of the Auditor General and to ensure that the Office of theAuditor General and8or auditors "erfor% the tas's governed by the o"erative standards andthe re"orting standards efficiently and effectively and in a %anner that assures the +ualityof the results.

!

The Office of the Auditor General shall be independent"

#

Auditors shall e$ercise professional and personal integrit% in the perfor&ance of theaudit"

'$planations

Independence

The Office of the Auditor General&s inde"endence is laid don in #ection 2 of the AuditorGeneral Act hich states, -The Office of the Auditor General shall "erfor% its duties in anautono%ous and inde"endent %anner$ and deter%ine itself ho the or' shall be arrangedand organised/.

The Office of the Auditor General is not subect to the Govern%ent&s authority to issueinstructions. Moreover$ the Govern%ent or ad%inistration cannot introduce rules or "assresolutions that "revent the Office of the Auditor General fro% "erfor%ing auditing or%onitoring and cannot interfere ith the e3ecution of its duties.

The Office of the Auditor General&s "ro"osed budget is sub%itted directly to the #torting$cf. #ection @$ "aragra"h 1 of the Auditor General Act. The Ministry of 5inance cannotinterfere in the budgetary "rocess or set guidelines for the #torting&s allocations to theOffice of the Auditor General.

Only the #torting can establish a fra%eor' for the Office of the Auditor General&sactivities$ both legally (by Acts$ instructions or "lenary decisions and financially (budgetand the A""ro"riations 9egulations. The #torting and the Office of the Auditor Generalhave a co%%on understanding that ithin the established fra%eor' the Office of theAuditor General has an inde"endent status and the res"onsibility to clarify the detailedcontent and e3ecution of its auditing duties. The Office of the Auditor General shall$ fore3a%"le$ deter%ine the %ethodology that is a""ro"riate for the duties that are to be

"erfor%ed.

2006 age of 40


8/41

#ection 10$ "aragra"h 1 of the Auditor General Act states that the Office of the AuditorGeneral shall be obective and neutral in the "erfor%ance of its duties. The Office of theAuditor General shall be "olitically neutral and shall not be influenced by "arty "olitics inthe "erfor%ance of its duties. Boever$ through a "lenary decision the #torting can instructthe Office of the Auditor General to initiate s"ecial investigations$ but the Office of the

Auditor General itself chooses ho the investigation shall be carried out$ cf. #ection )$"aragra"h 7 of the Auditor General Act. !t is assu%ed that the right to issue instructions isa""lied ith caution and in a %anner that gives rise to no doubt as to the inde"endence ofthe Office of the Auditor General.

The Office of the Auditor General %ay de%and any infor%ation or e3"lanations that arenecessary to facilitate the "erfor%ance of its duties$ cf. #ection 12$ "aragra"h 1 of theAuditor General Act. The Office of the Auditor General decides hat constitutes necessaryand relevant infor%ation for the "erfor%ance of its duties.

Professional and personal integrity

ursuant to #ection 1)$ "aragra"h 1 of the Auditor General Act$ auditors shall co%"lystrictly ith the "rinci"les of inde"endence and obectivity and shall "erfor% their dutiesith the interests of the "ublic in %ind.

Auditors shall not have an association ith the audited8%onitored entity that %ay ea'enthe i%"artiality or obectivity of the individual in +uestion in the "erfor%ance of his8hertas's. Any circu%stances that %ay influence i%"artiality shall be considered before anauditing tas' is "erfor%ed.

Auditors shall e3ercise due integrity and care in the "erfor%ance of the audit so that theaudit is "erceived as inde"endent and obective.

Auditors should avoid any conflicts of interest by refraining fro% acce"ting gifts that %ayinfluence or be "erceived as influencing the auditor&s inde"endence and integrity. Auditorsshall not e3"loit their official "osition for "ersonal benefit and shall avoid circu%stancesthat "ose a ris' of abusing their "osition.

The auditor&s duty of confidentially is described in #ection 16 of the Auditor General Act.All infor%ation obtained fro% an audited entity shall only be used in connection ith the

"erfor%ance of the audit. Boever$ the Office of the Auditor General can %a'e a re"ort tothe "olice on sus"icion of a cri%inal offence$ and can coo"erate ith other relevant

su"ervisory authorities before the audit has been co%"leted and ithout re"orting the%atter to the audited entity or the su"ervisory %inistry.

Auditors shall use %ethods and "ractices of the highest "ossible +uality in their auditingor' and shall follo guidelines and "rocedures that have been laid don for this or' toenable the% to carry out their tas's effectively and efficiently.

Auditors have a duty to conduct the%selves in a "rofessional %anner at all ti%es and toa""ly high "rofessional standards in carrying out their or' so that their duties are

"erfor%ed co%"etently and ith i%"artiality.

2006 age 7 of 40


9/41

Auditors %ust "lan and "erfor% audits ith a "rofessional degree of sce"ticis% and %ustbe "re"ared for the "ossibility that they %ay co%e across circu%stances that involveinfor%ation containing %aterial errors and non?co%"liance.

Auditors %ust deter%ine the audit "rocedures that are re+uired to carry out an audit in'ee"ing ith the "rinci"les of best auditing "ractices in the Office of the Auditor General

and in relation to the re+uire%ents given in legislation$ instructions$ the auditing standardsand the guidelines for the audit.

Chen "rocessing infor%ation$ auditors shall follo the instructions for infor%ationsecurity in the Office of the Auditor General and in su""le%entary security "rovisions.

2006 age @ of 40


10/41

(

The conduct of the Office of the Auditor General shall instil trust, confidence andcredibilit% in the torting, the govern&ent ad&inistration, the general public andaudited entities"

'$planations

The general "ublic&s confidence in and res"ect for the auditor&s or' largely results fro%the s'ills$ udge%ents and or' "erfor%ed by auditors as a "rofessional grou". !t istherefore in the interests of both auditors and the general "ublic that the auditor coo"eratesith fello auditors in a fair and balanced %anner.

5or the Office of the Auditor General to attain credibility and to be "erceived as obective

it is i%"ortant that its re"orts and state%ents are regarded as thorough$ accurate andreliable by co%"etent third "arties.

)

The Office of the Auditor General and the auditors shall have the re*uiredco&petence"

'$planations

Auditors shall "ossess ade+uate +ualifications$ ability and e3"erience and have access toall the tools and aids they need at all ti%es to be able to "erfor% an efficient and effectiveaudit. Auditors shall have the co%"etence that fulfils the needs of the sco"e andco%"le3ity of the audit assign%ent.

Auditors shall u"date their s'ills in line ith the develo"%ent ithin their "rofessionalarea and shall be given the o""ortunity to %eet this re+uire%ent.

2006 age ) of 40


11/41

Irregularities

The "ur"ose of these standards is to lay don re+uire%ents regarding the assess%ent of theris' of irregularities on the "erfor%ance of all ty"es of audit underta'en by the Office ofthe Auditor General.

+

Through auditing, the Office of the Auditor General shall contribute to preventingand identif%ing irregularities"

-hen planning and perfor&ing audit procedures and assessing and reporting theresults of these, auditors shall assess the risk that there &a% be irregularities"

.

Auditors shall consider gathering infor&ation in the audited entit% about detectedcases of irregularities and about an% conse*uence these &a% have entailed"

'$planations

#ection )$ "aragra"h 4 of the Auditor General Act states that through auditing the Office ofthe Auditor General shall contribute to "reventing and identifying irregularities and errors.>uring consideration of the Act it as "ointed out that the Office of the Auditor Generalhas an i%"ortant role in the fight against irregularities and corru"tion$ underlined by itso""ortunity to re"ort its findings and sus"icions to the "olice or other su"ervisoryauthorities. !t follos fro% #ection 16$ "aragra"h 4 that the Office of the Auditor Generalcan %a'e such re"orts unconstrained by its duty of confidentiality.

The ter% irregularitiesis used to refer to intentional acts that entail the use of dishonestyor fraudulence to achieve an unfair or unlaful benefit for oneself or others. !rregularitiescan be "erfor%ed by one or %ore "ersons ithin %anage%ent$ by "ersons ho havesu"erior res"onsibility for governance and su"ervision$ or by e%"loyees or others.!rregularities can be distinguished fro% errors by a consideration of hether the underlyingaction has been carried out intentionally or unintentionally.

!n general ter%s$ the folloing ty"es of irregularities are relevant for audits,

corru"tion

breach of trust

e%beDDle%ent

theft false re"orting of financial state%ents and results

2006 age 10 of 40


12/41


13/41

Guidance and advice

The "ur"ose of these standards is to lay don re+uire%ents regarding the advice thatauditors %ay give to audited entities in order to "revent errors and deficiencies in thefuture. #uch advice can be given in connection ith the "erfor%ance of all ty"es of auditunderta'en by the Office of the Auditor General.

In con0unction with the audit work, auditors can advise the audited entit% in areas inwhich the auditors have the re*uired co&petence"

1

-hen advising an audited agenc%, auditors shall conduct the&selves in a &anner thatprevents an% doubt arising as to the independence and ob0ectivit% of the Office of theAuditor General"

!2

Auditors shall take care to act in a wa% that prevents the audited entit% fro&perceiving their advice as a directive"

'$planations

ursuant to #ection )$ "aragra"h 6 of the Auditor General Act$ the Office of the AuditorGeneral has an advisory function in relation to the govern%ent ad%inistration. Thisfunction involves giving the agency advice and reco%%endations founded on "rofessionale3"ertise and 'noledge of the agency and other relevant infor%ation.

The advice is conveyed to the agency through ritten and verbal co%%unication about theaudit and is given on the basis of, audit findings geared toard the obectives of the audit

facts that are revealed during the audit but that are not directly related to theobectives of the audit

re+uests fro% the agency

Advice can also be given in cases here the Office of the Auditor General "artici"ates asan observer in or'ing grou"s or co%%ittees.

The guidance %ust not be for%ally or actually tied to any subse+uent auditing or%onitoring assess%ents and %ust be e3ercised ith caution and in a %anner that does not

"lace the inde"endence and obectivity of the %onitoring in eo"ardy. =nder nocircu%stances should auditors behave in such a ay that the Office of the Auditor

2006 age 12 of 40


14/41

General&s inde"endence and obectivity toards the audited agency is +ueried or i%"aired.The govern%ent ad%inistration has an inde"endent res"onsibility to %a'e its ondecisions$ regardless of the guidance received.

Auditors should only give advice on areas here they have the necessary co%"etence.

5unda%ental +ueries "ut forard by the audited agency or issues that %ay give rise touncertainty on the "art of the auditor about the advice that should be given %ust alays besub%itted to su"erior levels.

=nless recorded elsehere$ advice given by auditors should be recorded in the or'ingdocu%ents.

Auditors %ust assess auditing %atters of interest for governance and su"ervision that arerevealed by the audit and %ust convey this infor%ation to those ho have the "ri%eres"onsibility for governance and su"ervision.

The Office of the Auditor General can "artici"ate as an observer in or'ing grou"s orco%%ittees ith the "ur"ose of "roviding any relevant co%"etence it %ay "ossess. Toensure inde"endence and to avoid conflicts of interest$ auditors %ust e3"lain their advisoryrole and stress that they cannot tie or co%%it the Office of the Auditor General to one

"articular vie regarding "ro"osals for solutions that are "ut forard in the course of thisor'. Boever$ auditors should be able to offer advice and guidance as to hether thesolutions assessed could have unfortunate conse+uences$ i.e. conse+uences that %aysubse+uently generate +ueries or criticis% about the audit.

2006 age 1* of 40


15/41

3ualit% control of auditing work

The "ur"ose of this standard is to lay don re+uire%ents regarding the overall +ualitycontrol of audits in the various de"art%ents and divisions.

!!

3ualit% control shall be carried out to ensure that the auditing work is perfor&ed inaccordance with best auditing practices in the Office of the Auditor General"

'$planations

Quality control entails a syste%atic revie of the divisions& auditing or' andorganisation.


16/41

4ield standards

The planning of audits

The "ur"ose of these standards is to lay don the re+uire%ents regarding the "lanning ofall ty"es of audit "erfor%ed by the Office of the Auditor General.

!#

Auditors shall plan the audit work in a wa% that enables the audit to be perfor&ed ina professionall% satisfactor% and efficient &anner"

!(

Auditors shall draw up the audit plan in accordance with applicable guidelines"

!)

The audit plan shall be an efficient and effective &anage&ent tool"

'$planations

Planning is defined as a "rocess that ai%s to structure$ organise and "rioritise the auditingor'. lanning shall be docu%ented in accordance ith a""licable guidelines.

The sco"e of the "lanning re+uired ill vary according to the siDe of the audited entity orthe e3tent of the "roect$ the audit&s co%"le3ity$ and the auditor&s e3"erience and'noledge of the entity.

The "lanning "rocess ill vary according to the ty"e of audit$ but can include the folloingactivities,

obtaining infor%ation assessing ris'

assessing %ateriality defining obectives

deter%ining sco"e$ a""roach and ty"e$ as ell as the research +uestions a""licableto the investigations

assessing access to data and feasibility

draing u" a budget and schedule for the audit

identifying co%"etence needs and staffing the audit tea%

infor%ing the entity of the sco"e and obectives of the audit and the audit criteriaand if relevant discussing these ith the entity

2006 age 16 of 40


17/41

The folloing %ay be relevant for the "lanning of the audit,

identifying i%"ortant as"ects of the environ%ent in hich the audit entity o"erates

develo"ing an understanding of the accountability relationshi"s in the entity

identifying 'ey "rocesses$ %anage%ent syste%s and controls and carrying out a"reli%inary assess%ent to identify both their strengths and ea'nesses

revieing the internal audit of the entity and its role and or' "rogra%%e

assessing the e3tent of reliance that %ight be "laced on other auditors& or'$ fore3a%"le the internal audit

assessing the e3tent to hich the entity has ta'en action on "reviously re"orted auditfindings and reco%%endations

assessing data sources and "erfor%ance %ethod

The audit plan %ust be sufficiently detailed to constitute a useful %anage%ent tool for the"erfor%ance of each audit assign%ent. The for% and content ill vary according to thety"e of audit$ the siDe of the entity or the e3tent of the "roect$ the co%"le3ity of the audit$and the auditor&s choice of %ethodology and technological solutions.

!n financial audits and cor"orate control$ auditors elaborate further on the "lanning in theaudit programme.

Maor changes to or deviations fro% the "lan shall be recorded in the or'ing docu%entsand shall be a""roved by the %anage%ent of the division or de"art%ent.

Chen auditors "lan a financial audit$ they %ust analyse the financial state%ents to enablethe% to "erfor% an efficient and goal?oriented audit.

2006 age 1 of 40


18/41

5ethodolog%

The "ur"ose of this standard is to lay don re+uire%ents regarding the selection anda""lication of %ethods used in "lanning and conducting all ty"es of audit "erfor%ed by theOffice of the Auditor General.

!+

Auditors shall use generall% accepted &ethods in the planning and perfor&ance of theaudit, and the &ethodolog% applied shall be appropriate for the audit ob0ectives"

'$planations

Methodology is defined as the a""roaches$ techni+ues and8or tools that auditors use to "lanand "erfor% the audit.

There are %aor differences beteen the factors that affect the choice and a""lication of%ethods for collecting data and those for analysing data.

The %ethodology shall be docu%ented$ and it should be "ossible to verify the%ethodological a""roach.

Acce"ted audit %ethods include,

analytical revies

sa%"le audits

docu%ent analysis surveys (intervies and +uestionnaires

financial state%ent analysis

The re+uire%ent that the %ethodological a""roach be a""ro"riate to the audit obectiveentails that in addition to the issues of ti%e and resources$ ele%ents such as the targets forthe audit$ individual "roble%s and other issues as ell as the %eans by hich the resultsare to be re"orted should be considered and co%"ared. Auditors should strive to use the%ost suitable and effective %ethodologies for each audit.

2006 age 17 of 40


19/41

Assess&ent of internal control

The "ur"ose of these standards is to lay don re+uire%ents for the assess%ent of theentity&s ris' %anage%ent fra%eor' on the "erfor%ance of all ty"es of audit underta'en

by the Office of the Auditor General.

!

Auditors shall &ake a preli&inar% assess&ent of the risk &anage&ent procedures ofthe entit% that are relevant for the audit"

!.

hould auditors choose to base the audit on appropriate internal control activities,these activities shall be tested for co&pliance"

'$planations

The obective of auditors& assess%ent of an entity&s ris' %anage%ent is to ensure that theauditing or' is geared toards essential as"ects that are %ost e3"osed to ris'$ therebyenabling an effective$ efficient and goal?oriented audit to be "erfor%ed.

Auditors shall assess the ris' %anage%ent "rocedures of the entity hen considering theris' factors that are relevant to the obectives and definitions of the audit assign%ent. !f theinternal control activities function as re+uired$ these can be used as a basis and %ay reducethe auditors& on control "rocedures.

Auditors use a ris' %anage%ent fra%eor' as an analytical tool to identify and assess hothe entity handles the ris' involved.

The ris' %anage%ent fra%eor' includes the folloing co%"onents,

the internal environ%ent

obectives

identifying incidents

ris' assess%ent ris' res"onse

internal control activities infor%ation and co%%unication surveillance

The fra%eor' is based on the O#O %odel and is described in %ore detail in theguidelines.

Auditors carry out compliance teststo assess hether the entity&s routines and establishedinternal control activities have been ade+uately designed and actually function in asatisfactory %anner. !f auditors decide to use the entity&s control activities as a basis for

their or'$ these activities %ust be tested for co%"liance.

2006 age 1@ of 40


20/41

5aterialit%

The "ur"ose of this standard is to lay don re+uire%ents regarding the assess%ent of%ateriality in the "erfor%ance of all ty"es of audit underta'en by the Office of the AuditorGeneral.

!

Auditors shall &ake assess&ents of &aterialit% to enable the& to perfor& anecono&ical, efficient and effective audit"

'$planations

Materiality ithin "erfor%ance audits is udged on the basis of the conse+uence of anynon?co%"liance identified in an audit. The conse+uence %ust be of funda%ental$ econo%icor %aor social i%"ortance.

Materiality ithin financial audits %ust be regarded in relation to the fact that infor%ation%ay contain errors or deficiencies or %ay be based on discretionary a""raisals. The costsof avoiding all errors and deficiencies can be so large that they e3ceed the benefit of suchhigh "recision. rrors of a certain siDe (based on defined criteria for %ateriality %usttherefore be acce"ted "rovided that this is not of significance for the entity&s ability tocarry out the budget resolutions and intentions of the #torting or is not of criticali%"ortance for the users of the infor%ation. The udge%ent is based on both +uantitativeand +ualitative considerations.

Chen "erfor%ing financial audits$ %ateriality %ust be ta'en into account throughout theaudit "rocess. !f as"ects e%erge during the "rocess that ill influence the defined criteriafor %ateriality$ these criteria %ust be re?assessed against the users& "resu%ed re+uire%entsregarding "recision in financial or other infor%ation.

2006 age 1) of 40


21/41

6isk assess&ent

The "ur"ose of this standard is to lay don re+uire%ents regarding the assess%ent of theris' of %aterial errors and non?co%"liance on the "erfor%ance of all ty"es of auditunderta'en by the Office of the Auditor General.

!1

Auditors shall &ake risk assess&ents for all audit work undertaken b% the Office of theAuditor General, and the assess&ents shall for& part of the process that isi&ple&ented to ensure that the audit is econo&ical, efficient and effective"

'$planations

At su"ervisory level$ ris's shall be assessed across all ty"es of audit. At field level theassess%ent of ris' in connection ith the audit "rocess shall be %ade ithin each ty"e ofaudit. The "ur"ose is to "erfor% an econo%ical$ efficient and effective audit. riority

beteen the audit duties and beteen other tas's ill be assigned on the basis of the ris'assess%ents carried out in the "lanning "hase.

Risk assessment is a syste%atic "rocess that is carried out to evaluate the ris' of errors anddeficiencies in financial state%ents and of non?co%"liance ith the decisions andintentions of the #torting. !n the Office of the Auditor General the ris' assess%ent "rocessshall be the governing factor in the or' of "lanning the audit.

9is' assess%ent at field level is intended to hel" auditors to assign "riorities to theirauditing or'. Auditors shall a%end "lanned or' in the event of ne or differentinfor%ation e%erging.

2006 age 20 of 40


22/41

7se of work perfor&ed b% other auditors and e$perts

The "ur"ose of these standards is to lay don re+uire%ents regarding auditors& use of or'"erfor%ed by other auditors and e3"erts$ for e3a%"le any internal audits carried out by theaudited entity$ in the "erfor%ance of all ty"es of audit underta'en by the Office of theAuditor General.

#2

-hen using work perfor&ed b% others, auditors shall review and assess whether thework in *uestion is pertinent to the audit ob0ectives and &eets the re*uire&ents foraudit evidence"

#!

In entities that have an internal audit function, auditors shall &aintain anappropriate dialogue with internal auditors and shall fa&iliarise the&selves withinternal audit plans and reports" Auditors shall assess an% effects these audits andplans &a% have on the audit that is being planned in the agenc% with the ai&, fore$a&ple, of avoiding unnecessar% double work"

'$planations

!nternal auditing is established by the %anage%ent of an organisation as a %anage%enttool. The areas of activity of internal auditors vary fro% agency to agency.

An expertis a "erson or co%"any that "ossesses "articular s'ills$ 'noledge ande3"erience in s"ecialist areas other than those of the auditors$ and that auditors have usedto "erfor% certain tas's.

Auditors shall assess hether e3"erts ho "erfor% or' for the Office of the AuditorGeneral or for the internal audit have had access to the necessary bac'ground %aterial. Thesco"e$ e3tent$ %ethods and assu%"tions on hich others& or' and conclusions ere

based %ust also be evaluated. 5urther%ore$ auditors should assess any certification or

authorisation as ell as the inde"endence and obectivity of e3ternal auditors or e3"erts.

Pertinent to the audit o!ectives %eans that the conclusions dran on the basis of or'"erfor%ed by others su""ort the auditors& obectives for the audit in hand and fulfil there+uire%ents that a""ly to audit evidence.

Auditors shall not surrender their on "lans and or'ing "a"ers to the audited entity&sinternal auditors. Boever$ the relevant de"art%ent or division of the Office of the AuditorGeneral %ay and should give the% a verbal overvie of "lanned and co%"leted audits.Meetings should be held ith the internal auditors at least once a year or henevercircu%stances arrant this.

2006 age 21 of 40


23/41

Audit evidence

The "ur"ose of these standards is to lay don re+uire%ents regarding the audit evidencethat shall be gathered on the "erfor%ance of all ty"es of audit underta'en by the Office ofthe Auditor General.

##

Auditors shall use professional 0udge&ent in their assess&ent of the audit risk, andshall i&ple&ent the audit procedures that are necessar% to reduce this risk to anacceptable level"

#(

Auditors shall procure audit evidence that is appropriate, sufficient and necessar%and that enables the& to draw conclusions on the ob0ective or the issue involved"

#)

-hen certif%ing accounts, auditors shall alwa%s carr% out substantive tests"

'$planations

Auditors %ust assess both the content and the sco"e of the audit "rocedures that are used.The content %ust be such that the results of the "rocedures are in correlation ith their

"ur"ose$ hile the sco"e %ust be of an e3tent that %a'es the audit ris' acce"table.

Audit evidence is infor%ation auditors have "rocured$ for e3a%"le by carrying out revie"rocedures$ and that is used to su""ort their udge%ents and conclusions.

"ufficient and necessary is a %easure of the sco"e of the audit evidence that auditors shall

"rocure. The volu%e of the audit evidence shall be sufficient to render the audit ris'acce"table. To attain the obective of acco%"lishing an efficient and effective audit$ the"rocure%ent of evidence shall be restricted to that hich is necessary.

Appropriate is a %easure of the +uality of the audit evidence$ i.e. its reliability and relevance. Auditors ill nor%ally find it necessary to %a'e use of audit evidence that is%ore substantive than absolute$ and ill often "rocure audit evidence fro% various sourcesor of various ty"es.

Auditors shall consider the relationshi" beteen the use of resources in the "rocure%ent ofaudit evidence and the sufficiency and a""ro"riateness of the infor%ation that is obtained.Boever$ the fact that it is difficult and resource?de%anding to "rocure audit evidence doesnot in itself re"resent grounds to refrain fro% carrying out a necessary "rocedure.

2006 age 22 of 40


24/41

The reliability of audit evidence is affected by the source (i.e. hether it is internal ore3ternal$ and hether it is visual$ ritten or oral. The folloing factors should be ta'eninto account in auditors& assess%ents of the reliability of the evidence,

3ternal audit evidence (e.g. confir%ation fro% a third "arty is %ore reliablethan audit evidence that has been generated internally.

Audit evidence that has been "roduced internally is %ore reliable if the agencyhas effective accounting and internal control "rocedures.

3ternal audit evidence is %ore reliable if it has been "rocured directly bythe auditors than if it has been obtained by the agency under audit.

Audit evidence in the for% of docu%ents and ritten state%ents is %ore reliablethan verbal state%ents.

#ecurity ill be greater hen there is a correlation beteen audit evidence "rocured fro%different sources and beteen different ty"es of evidence. !f infor%ation fro% one sourcedoes not corres"ond ith infor%ation fro% another$ auditors %ust decide on the additional

"rocedures that are necessary to allo the infor%ation to be used as audit evidence.

"ustantive tests are "rocedures that auditors ill use directly as a basis for assessing thecorrectness of the accounts or the co%"liance of the accounts ith legislation$ "rovisionsand relevant regulations. #ubstantive tests include, detailed testing of decisions regarding allocations$ transactions and balances

analytical revie %ethods

co%"liance ith a""licable las and regulations

Audit "rocedures "erfor%ed and audit evidence obtained shall be docu%ented.

2006 age 2* of 40


25/41

8ocu&entation

The "ur"ose of these standards is to lay don re+uire%ents regarding the docu%entation ofauditing or' on the "erfor%ance of all ty"es of audit underta'en by the Office of theAuditor General.

#+

Auditors shall docu&ent &atters that serve to support the Office of the AuditorGeneral9s internal and e$ternal reports" 8ocu&entation also constitutes evidence thatthe audit has been carried out in accordance with best auditing practices in the Officeof the Auditor General"

#

The scope and content of the docu&entation shall be sufficientl% ade*uate anddetailed to allow full co&prehension of co&pleted audits and the conclusions drawnon the basis of procured audit evidence" All audits shall be docu&ented in accordancewith applicable guidelines"

#.

6outines shall be i&ple&ented to ensure that the docu&entation is appropriatel%

handled and stored and is filed for a period that is both sufficient to &eet the needs ofthe Office of the Auditor General and is in accordance with regulations and statutor%re*uire&ents" All audit docu&entation is the propert% of the Office of the AuditorGeneral"

'$planations

#ocumentation of the audit consists of to co%"onents, or'ing "a"ers and source%aterial. The docu%entation can be co%"iled and stored on "a"er$ fil%$ electronic %ediaor other %edia.

$orking papers constitute %aterial "re"ared by auditors or by the Office of the AuditorGeneral. Cor'ing "a"ers sho hat has for%ed the basis of auditors& "lanning of theaudit$ the "eriod of the "erfor%ance of the audit$ the sco"e and e3tent of "erfor%ed audit

"rocedures$ the results of the audit$ the reasons for the auditors& assess%ents anddiscretionary udge%ent and the conclusions dran.

3a%"les of or'ing "a"ers include,

assess%ents of ris' and %ateriality

audit "lans and audit "rogra%%es

detailed references to sources

co%"rehensive lists of data used in connection ith the collection of data

2006 age 24 of 40


26/41

docu%entation of analyses of data that have been conducted

evaluations of the or' of others (if a""licable and the conclusions dran fro%these.

"ource material is docu%entation that has been co%"iled by others and that auditors haveconsidered relevant to the audit. Material that does not contain relevant infor%ation shall

only be included in the source %aterial if auditors regard as a deficiency the fact that the%atters in +uestion have not been described.

#ource %aterial can include,

the A""ro"riations 9egulations

the 5inancial Manage%ent 9egulations for the entral Govern%ent

the !nstructions for Official #tudies and 9e"orts

the ublic rocure%ent Act and !nstructions

infor%ation about the legal and organisational structure of the agency and e3tractsfro% or co"ies of i%"ortant legal docu%ents$ contracts$ agree%ents and records

the agency&s internal financial instructions or %anual

the chart of accounts and other infor%ation about the agency&s accounting syste%s co"ies of the accounts$ letters of allocation and corres"ondence beteen the agency

and the %inistry

co"ies of letters$ auditing docu%ents and other corres"ondence concerning %attersthat auditors have raised or discussed ith the agency and the agency&s res"onse tothe%$ "lus any annotations

Ade%uate and detailed %eans that the docu%entation shall contain all %atters that arerelevant for the audit in hand so that the results and auditors& conclusions %ay be chec'edand verified. The sco"e and e3tent of the docu%entation is a %atter for the auditors&

"rofessional udge%ent.

Auditors should bear in %ind that the for% and content of the or'ing "a"ers ill beaffected by the folloing factors, the obective$ sco"e and for% of re"orting the audit

the nature and co%"le3ity of the agency and the nature and +uality of the agency&saccounting and internal control syste%s

the audit %ethodology and co%"uter tools used in the "erfor%ance of the audit

!n the case of financial audits$ each audit is docu%ented in the year&s file$ hile source%aterial is 'e"t in "er%anent files. The central archives are used for both cor"orate controland "erfor%ance audits for the storage of docu%ents once the verification or' has beenconcluded.

2006 age 26 of 40


27/41

3ualit% assurance of audit work

The "ur"ose of this standard is to lay don re+uire%ents regarding +uality obectives forthe audit or' in the various divisions and de"art%ents on the "erfor%ance of auditsunderta'en by the Office of the Auditor General.

#

8ivisions and depart&ents shall carr% out *ualit% assurance work that usefull% servesthe individual audit tasks and their perfor&ance"

'$planations

ach individual auditor bears an inde"endent res"onsibility for assuring the +uality of hisor her or' throughout the entire auditing "rocess. This %eans that auditors shall "erfor%their audit or' in accordance ith best auditing "ractices in the Office of the AuditorGeneral and shall follo the standards and guidelines laid don for auditing.

The auditor&s i%%ediate su"erior is res"onsible for assuring the +uality of the audit or'.

>e"art%ent %anage%ent bears the ulti%ate res"onsibility for initiating and %onitoring the+uality assurance ithin its s"here of res"onsibility. The %anage%ent shall ensure that thedivisions have i%"le%ented a""ro"riate and ade+uate routines for +uality assurance thatfulfil the re+uire%ents laid don in the guidelines. The res"onsibility of the de"art%ent%anage%ent also includes,

ensuring that the or' "erfor%ed in the division is "rogressing according to schedule deter%ining hether the division "ossesses the co%"etence necessary to "erfor% the

allocated tas's

ensuring that they are infor%ed about and consider i%"ortant issues that ariseduring the course of the audit

>ivision %anage%ent is res"onsible for initiating a""ro"riate routines for +ualityassurance ithin the individual divisions. This includes,

a) %onitoring the "rogress of the audit to assess hether

the auditors have the re+uired s'ills and co%"etence to "erfor% the tas's

assigned to the% the auditors understand the instructions about ho the audit in hand is to be

"erfor%ed the or' is carried out in accordance ith the "lans s"ecified in the audit "lan

b) %a'ing sure that they are 'e"t infor%ed about and involved in i%"ortant issues thatarise during the course of the audit by deter%ining the %ateriality of issues and%a'ing any necessary changes to the audit "lan

c) resolving any disagree%ents in "rofessional udge%ent a%ong the auditors on theaudit tea%

2006 age 2 of 40


28/41

Chen carrying out +uality assurance$ the duties of division %anage%ent shall includeensuring that,

the chosen %ethodology is being used and that it co%"lies ith the standards forbest auditing "ractices in the Office of the Auditor General

the assess%ents of ris' and %ateriality have been sufficiently substantiated

the audit "lans have been based on the assess%ents of ris' and %ateriality the or' is being "erfor%ed in accordance ith a""roved audit "lans

and "rogra%%es

there is sufficient docu%entation of the or' that has been "erfor%ed and of itsresults

all %aterial factors concerning the audit have either been resolved or included inthe conclusions

the audit obectives and targets have been attained

the final conclusions co%"ly ith the results of the "erfor%ed audit or'

2006 age 27 of 40


29/41

6eporting standards

6eporting

The "ur"ose of these standards is to lay don re+uire%ents regarding re"orting audit or'on the "erfor%ance of all ty"es of audit underta'en by the Office of the Auditor General.

#1

The for& and content of reports shall present all the relevant factors" An% aspectsrevealed b% the audit that warrant criticis& should be clearl% described" Thepresentation of the facts shall be i&partial, ob0ective and constructive" The auditevidence and the perfor&ance of the audit shall be presented in a wa% that enablesthe& to be reviewed and verified"

(2

The Office of the Auditor General reports to the torting and infor&s the auditedentities and the supervisor% &inistr% about the result of the audit pursuant toapplicable guidelines"

'$planations

The Office of the Auditor General&s obligation to sub%it re"orts to the #torting is stated in#ection 11 of the Auditor General Act and in #ections 16 to 17 of the !nstructionsconcerning the activities of the Office of the Auditor General.

The re+uire%ent that all the factors that are "resented shall be relevant%eans that thereshall be agree%ent beteen the assess%ents of ris' and %ateriality underta'en inconnection ith the audit$ the given obectives for the audit$ the ay in hich the auditas carried out$ the audit criteria and the auditors& udge%ents$ conclusions andreco%%endations or suggested %easures.

The re+uire%ent that the for% and content of the audit re"orts should "resent all therelevant factors %eans that all the infor%ation included shall be valid and co%"lete.

The re+uire%ent that any aspects that &arrant criticism that have een revealed ytheaudit should e descried clearly in the audit re"ort entails that all findings and

udge%ents shall be "resented in full and be stated correctly and "recisely.

The re+uire%ent that the "resentation of the facts shall e impartial' o!ective andconstructive entails that the facts are "resented se"arately fro% the o"inions of the Officeof the Auditor General$ and that the audited agency shall verify the facts and be given theo""ortunity to res"ond and %a'e co%%ents. The %inistry is also to be given theo""ortunity to revie and co%%ent on the udge%ents and conclusions of the Office of the

Auditor General.

2006 age 2@ of 40


30/41

Revie& and verification %eans that it %ust be clear hich audit evidence and data the auditas based on. Bo the data as gathered and analysed shall be described$ and the validityand reliability of the data shall be ustified. The udge%ents and conclusions shall bederived fro% the "resented audit evidence and in such a ay that it is "ossible for others tocarry out the sa%e audit and reach the sa%e overall result.

The Office of the Auditor General co%%unicates the results of its financial audits to theaudited agency hen it finds that it has results that are of significance to the agency. Aco"y of the letter to the agency is sent to the su"ervisory %inistry.

Once the annual audit has been co%"leted$ the Office of the Auditor General sends theaudited entity a concluding audit lettersu%%arising the audit for the financial year in+uestion.

erfor%ance audit re"orts are sub%itted to the relevant %inistry for revie and co%%ent$regardless of hether or not the re"ort ill be sub%itted to the #torting. The centralgovern%ent ad%inistration has access to all the "erfor%ance audit re"orts that are notsub%itted to the #torting as an individual issue since the Office of the Auditor General

"ublishes these re"orts.

2006 age 2) of 40


31/41

Appendi$ ! Auditing standards

1 The Office of the Auditor General shall be inde"endent.

2 Auditors shall e3ercise "rofessional and "ersonal integrity in the "erfor%ance ofthe audit.

3 The conduct of the Office of the Auditor General shall instil trust$ confidence andcredibility in the #torting$ the govern%ent ad%inistration$ the general "ublic andaudited entities.

4 The Office of the Auditor General and the auditors shall have the re+uiredco%"etence.

5 Through auditing$ the Office of the Auditor General shall contribute to "reventingand identifying irregularities.

6 Chen "lanning and "erfor%ing audit "rocedures and assessing and re"ortingthe results of these$ auditors shall assess the ris' that there %ay be irregularities.

7 Auditors shall consider gathering infor%ation in the audited entity about detectedcases of irregularities and about any conse+uence these %ay have entailed.

8 !n conunction ith the audit or'$ auditors can advise the audited entity in areasin hich the auditors have the re+uired co%"etence

9 Chen advising an audited agency$ auditors shall conduct the%selves in a %anner that"revents any doubt arising as to the inde"endence and obectivity of the Office of theAuditor General.

10 Auditors shall ta'e care to act in a ay that "revents the audited entity fro%"erceiving their advice as a directive.

11


32/41

on the audit that is being "lanned in the entity ith the ai%$ for e3a%"le$ of avoidingunnecessary double or'.

22 Auditors shall use "rofessional udge%ent in their assess%ent of the audit ris'$and shall i%"le%ent the audit "rocedures that are necessary to reduce this ris' toan acce"table level.

23 Auditors shall "rocure audit evidence that is a""ro"riate$ sufficient and necessary

and that enables the% to dra conclusions on the obective or the issue involved.24 Chen certifying accounts$ auditors shall alays carry out substantive tests.

25 Auditors shall docu%ent %atters that serve to su""ort the Office of the AuditorGeneral&s internal and e3ternal re"orts. >ocu%entation also constitutes evidence thatthe audit has been carried out in accordance ith best auditing "ractices in the Officeof the Auditor General.

26 The sco"e and content of the docu%entation shall be sufficiently ade+uate anddetailed to allo full co%"rehension of co%"leted audits and the conclusions dranon the basis of "rocured audit evidence. All audits shall be docu%ented inaccordance ith a""licable guidelines.

27 9outines shall be i%"le%ented to ensure that the docu%entation is a""ro"riatelyhandled and stored and is filed for a "eriod that is both sufficient to %eet the needs ofthe Office of the Auditor General and is in accordance ith regulations and statutoryre+uire%ents. All audit docu%entation is the "ro"erty of the Office of the AuditorGeneral.

28 >ivisions and de"art%ents shall "erfor% +uality assurance or' that usefullyserves the individual audit tas's and their "erfor%ance.

29 The for% and content of re"orts shall "resent all the relevant factors. Any as"ectsrevealed by the audit that arrant criticis% should be clearly described. The

"resentation of the facts shall be i%"artial$ obective and constructive. The auditevidence and the "erfor%ance of the audit shall be "resented in a ay that

enables the% to be revieed and verified.30 The Office of the Auditor General re"orts to the #torting and infor%s the audited

entities and the su"ervisory %inistry about the result of the audit "ursuant toa""licable guidelines.

2006 age *1 of 40


33/41

Appendi$ # '$tracts fro& I:TOAI9s auditing standards

The !TO#A! auditing standards that have been relevant in the co%"ilation of the auditingstandards for the Office of the Auditor General are re"roduced belo. 5ro% October 2004!TO#A!&s standards have been available in their entirety at #tandards.

!TO#A! auditing standard no. 2.2.1 a relating to inde"endence (cf. auditing standardno. 1,

The auditor and the SAI must be independent.

!TO#A! ode of thics no. 1* relating to integrity (cf. auditing standard no. 2,

Integrity can be measured in terms of what is right and just. Integrity requires auditorsto observe both the form and the spirit of auditing and ethical standards. Integrity alsorequires auditors to observe the principles of independence and objectivity, maintainirreproachable standards of professional conduct, mae decisions with the publicinterest in mind, and apply absolute honesty in carrying out their wor and inhandling the resources of the SAI.

!TO#A! ode of thics no. relating to trust$ confidence and credibility (cf. auditingstandard no. *,

It is of fundamental importance that the SAI is looed upon with trust, confidenceand credibility.

!TO#A! auditing standard no. 2.2.1 c relating to co%"etence (cf. auditing standard no.4,

The auditor and the SAI must possess the required competence.

!TO#A! auditing standard no. *.4.1 relating to co%"liance audits (cf. auditing standards

no.6$ and 7,

In conducting regularity !financial" audits, a test should be made of compliance withapplicable laws and regulations. The auditor should design audit steps and proceduresto provide reasonable assurance of detecting errors, irregularities, and illegal acts thatcould have a direct and material effect on the financial statement amounts or the resultsof regularity audits. The auditor also should be aware of the possibility of illegal actsthat could have an indirect and material effect on the financial statements or results ofregularity audits.

In conducting performance audits, an assessment should be made of compliance with

applicable laws and regulations when necessary to satisfy the audit objectives. Theauditor should design the audit to provide reasonable assurance of detecting illegalacts

2006 age *2 of 40


34/41

that could significantly affect audit objectives. The auditor also should be alert tosituations or transactions that could be indicative or illegal acts that may havean indirect effect on the audit results.

The regularity audit is an essential aspect of government auditing. #ne importantobjective which type of audit assigns to the SAI is to mae sure, by all means put at its

disposal, that the State budget and accounts are complete and valid. This will provideParliament and other users of the audit report with assurance about the si$e anddevelopment of financial obligations of the State. To achieve this objective the SAI wille%amine the accounts and financial statements of the administration with a view toassuring that all operations have been correctly undertaen, completed, passed, paidand registered. The audit procedure normally results in absence of irregularity, in the

granting of a &discharge&.

3"lanation no. *.4. to !TO#A! auditing standard no. *.4.1 (cf. auditing standards no. 6$ and 7,

'enerally, management is responsible for establishing an effective system of internalcontrols to ensure compliance with laws and regulations. In designing steps and

procedures to test or assess compliance, auditors should evaluate the entity(s internalcontrols and assess the ris that the control structure might not prevent or detectnon)compliance.

!TO#A!&s general auditing standard no. 2.2.1 covers factors that are relevant forguidance and advice (cf. auditing standards no. @$ ) and 10,

The general auditing standards include

(a) The auditor and the SAI must be independent.

(b)SAIs should avoid conflict of interest between the auditor and the entity under audit.

(c) The auditor and the SAI must possess the required competence.

(d) The auditor and the SAI must e%ercise due care and concern in complying with theI*T#SAI auditing standards. This embraces due care in planning, specifying,gathering and evaluating evidence, and in reporting findings, conclusions andrecommendations.

3"lanation no. 2.2.27 to the general auditing standard no. 2.2.27 (cf. auditing standardsno. @$ ) and 10,

The SAI should not participate in the management or operations of an audited entity.Audit personnel should not become members of management committees and, ifaudit advice is to be given, it should be conveyed as audit advice or recommendationand acnowledged clearly as such.

!n the ode of thics no. 22 the folloing is "articularly relevant (cf. auditing standardsno. @$ ) and 10,

+hen auditors are permitted to provide advice or services other than audit to an auditedentity, care should be taen that these services do not lead to a conflict of interest. In

2006 age ** of 40


35/41

particular, auditors should ensure that such advice or services do not includemanagement responsibilities or powers, which must remain firmly with themanagement of the audited entity.

!TO#A! auditing standard no. 2.1.2@ relating to +uality control (cf. auditing standard no.

11,

As a further means of ensuring quality of performance, additional to the review of auditactivity by personnel having line responsibility for the audits concerned, it is desirable

for SAIs to establish their own quality assurance arrangements. That is, planning,conduct and reporting in relation to a sample of audits may be reviewed in depth bysuitably qualified SAI personnel not involved in those audits, with consultation with therelevant audit line management regarding the outcome of the internal qualityassurance arrangements and periodic reporting to the SAIs top management.

1TO#A! auditing standard no. *.1.1 for "lanning (cf. auditing standards no. 12$ 1*$14 and16,

The auditor should plan the audit in a manner, which ensures that an audit of highquality is carried out in an economic, efficient and effective way and in a timely manner.

!TO#A! auditing standard no. 2.2.* relating to co%"etence (cf. auditing standard no.16,

Since the duties and responsibilities thus borne by the SAI are crucial to the conceptof public accountability, the SAI must apply to its audits, methodologies and practicesof the highest quality. It is incumbent upon it to formulate procedures to secureeffective e%ercise of its responsibilities for audit reports, unimpaired by less than fulladherence by personnel or e%ternal e%perts to its standards, planning procedures,methodologies and supervision

3"lanation no. 2.2.*7 to !TO#A! auditing standard no. 2.2.1 (cf. auditing standardno.16,

()))* The SAI should equip itself with the full range of up)to)date audit methodologies,including systems)based techniques, analytical review methods, statistical sampling,

and audit of automated information systems.

!TO#A! auditing standard no. *.0.* c for assess%ent of internal control (cf. auditingstandards no. 1 and 17,

The auditor' in determining the extent and scope of the audit' should study and evaluatethe reliaility of internal control+

3"lanation no. *.1.*. f to !TO#A! auditing standard no. *.1.1 relating to "lanning (cf.auditing standard no. 1@,

2006 age *4 of 40


36/41

-etermine the materiality of matters to be considered.

3"lanation no. *.1.4 a to !TO#A! auditing standard no. *.1.1 (cf. auditing standard no.1@$ 1),

ollect information about the audited entity and its organisation in order to assessris and to determine materiality.

1TO#A! auditing standard no.*.0* a for "lanning (cf. auditing standards no. 1)$ 20 and21,

The auditor should plan the audit in a manner, which ensures that an audit of highquality is carried out in an economic, efficient and effective way and in a timely manner.

3"lanations no. *.1.* g and h to !TO#A! auditing standard no. *.1.1 (cf. auditingstandards no. 20 and 21,

/eview the internal audit of the audited entity and its wor program.

Assess the e%tent of reliance that might be placed on other auditors, fore%ample, internal audit.

3"lanation no. 2.2.46 to !TO#A! general standard no. 2.2.1 (cf. auditing standards no.20 and 21,

+hen the SAI uses the wor of another auditor!s", it must apply adequate proceduresto provide assurance that the other auditor!s" has e%ercised due care and complied withrelevant auditing standards, and may review the wor of the other auditor!s" to satisfyitself as to the quality of that wor.

3"lanation no. *.1.4 g to !TO#A! auditing standard no. *.1.1 (cf. auditing standards no.20 and 21,

0amiliarise the audited entity about the scope, objectives and the assessment criteriaof the audit and discuss with them as necessary.

!TO#A! auditing standard no. *.6.1 for audit evidence (cf. auditing standards no. 22$ 24$26$ 2 and 2),

ompetent, relevant and reasonable evidence should be obtained to support theauditor(s judgement and conclusions regarding the organisation, program, activity or

function under audit.

!TO#A! auditing standard no. *.2.1 relating to +uality assurance (cf. auditing standardno. 2),

2006 age *6 of 40


37/41

The wor of the audit staff at each level and audit phase should be properlysupervised during the audit, and documented wor should be reviewed by a seniormember of the audit staff.

3"lanation no. *.6.6 to !TO#A! auditing standard no. *.1.6 (cf. auditing standards no.26$ 2 and 27,

Auditors should adequately document the audit evidence in woring papers, includingthe basis and e%tent of the planning, wor performed and the findings of the audit.

!TO#A! auditing standard no. 4.0.7 for re"orting (cf. auditing standards no. 2) and *),

a)At the end of each audit the auditor should prepare a written opinion or report, asappropriate, setting out the findings in an appropriate form1 its content should be easy

to understand and free from vagueness or ambiguity, include only information which issupported by competent and relevant audit evidence, and be independent, objective, fairand constructive.

b)It is for the SAI to which they belong to decide finally on the action to be taen inrelation to fraudulent practices or serious irregularities discovered by the auditors.

+ith regard to regularity audits, the auditor should prepare a written report, whichmay either be a part of the report on the financial statements or a separate report, onthe test of compliance with applicable laws and regulations. The report should containa statement of positive assurance on those items tested for compliance and negativeassurance on those items not tested.

+ith regard to performance audits, the report should include all significant instancesof non)compliance that are pertinent to the audit objectives.

2006 age * of 40


38/41

Appendi$ ( I:TOAI9s ;ode of 'thics

The !TO#A! ode of thics can be found on !TO#A!&s ebsite.

hapter I

Introduction

;oncept, background and purpose of the ;ode of 'thics

1. !TO#A! has dee%ed it essential to establish an international ode of thics for auditors in the"ublic sector.

2.A ode of thics is a co%"rehensive state%ent of the values and "rinci"les hich should guidethe daily or' of auditors. The inde"endence$ "oers and res"onsibilities of the "ublic sectorauditor "lace high ethical de%ands on the #A! and the staff they e%"loy or engage for audit or'.A code of ethics for auditors in the "ublic sector should consider the ethical re+uire%ents of civil

servants in general and the "articular re+uire%ents of auditors$ including the latter&s "rofessionalobligations.

3.Cith the i%a >eclaration of Guidelines on Auditing rece"ts1as its foundation$ the !TO#A!ode of thics should be seen as a necessary co%"le%ent$ reinforcing the !TO#A! Auditing#tandards issued by the !TO#A! Auditing #tandards o%%ittee in ;une 1))2.

4.The !TO#A! ode of thics is directed at the individual auditor$ the head of the #A!$ e3ecutiveofficers and all individuals or'ing for or on behalf of the #A! ho are involved in audit or'.Boever$ the ode should not be inter"reted as having any i%"act on the organisational structureof the #A!. >ue to national differences of culture$ language$ and legal and social syste%s$ it is theres"onsibility of each #A! to develo" its on ode of thics hich

best fits its on environ%ent. referably these national odes of thics should clarify the ethicalconce"ts. The !TO#A! ode of thics is intended to constitute a foundation for the nationalodes of thics. ach #A! has the res"onsibility to ensure that all its auditors ac+uaint the%selvesith the values and "rinci"les contained in the national ode of thics and act accordingly.

5.The conduct of auditors should be beyond re"roach at all ti%es and in all circu%stances. Anydeficiency in their "rofessional conduct or any i%"ro"er conduct in their "ersonal life "laces theintegrity of auditors$ the

#A! that they re"resent$ and the +uality and validity of their audit or' in an unfavourable light$and %ay raise doubts about the reliability and co%"etence of the #A! itself. The ado"tion anda""lication of a code of ethics for auditors in the "ublic sector "ro%otes trust and confidence in theauditors and their or'.

6. !t is of funda%ental i%"ortance that the #A! is loo'ed u"on ith trust$ confidence andcredibility. The auditor "ro%otes this by ado"ting and a""lying the ethical re+uire%ents of theconce"ts e%bodied in the 'ey ords !ntegrity$ !nde"endence and Obectivity$ onfidentiality ando%"etence.

Trust, ;onfidence and ;redibilit%

." The legislative and8or e3ecutive authority$ the general "ublic and the audited entities are entitledto e3"ect the #A!&s conduct and a""roach to be above sus"icion and re"roach and orthy ofres"ect and trust.

15ro% the !Eth ongress of !TO#A!$ %eeting in i%a. an be obtained fro% the !TO#A! General

#ecretariat in Austria.

2006 age *7 of 40


39/41

8.Auditors should conduct the%selves in a %anner hich "ro%otes co?o"eration and goodrelations beteen auditors and ithin the "rofession. The su""ort of the "rofession by its %e%bersand their co?o"eration ith one another are essential ele%ents of "rofessional character. The "ublicconfidence and res"ect hich an auditor enoys is largely the result of the cu%ulativeacco%"lish%ents of all auditors$ "ast and "resent. !t is therefore in the interest of auditors$ as ellas that of the general "ublic$ that the auditor deals ith fello auditors in a fair and balanced ay.

9.The legislative and8or e3ecutive authority$ the general "ublic and the audited entities should befully assured of the fairness and i%"artiality of all the #A!&s or'. !t is therefore essential that thereis a national ode of thics or si%ilar docu%ent hich governs the "rovision of the services.

10.!n all "arts of society there is a need for credibility. !t is therefore essential that the re"orts ando"inions of the #A! are considered to be thoroughly accurate and reliable by 'noledgeable third

"arties.

11.All or' "erfor%ed by the #A! %ust stand the test of legislative and8or e3ecutive scrutiny$"ublic udge%ents on "ro"riety$ and e3a%ination against a national ode of thics.

;hapter #

Integrit%

12.!ntegrity is the core value of a ode of thics. Auditors have a duty to adhere to high standardsof behaviour (e.g. honesty and candidness in the course of their or' and in their relationshi"sith the staff of audited entities. !n order to sustain "ublic confidence$ the conduct of auditorsshould be above sus"icion and re"roach.

13.!ntegrity can be %easured in ter%s of hat is right and ust. !ntegrity re+uires auditors toobserve both the for% and the s"irit of auditing and ethical standards. !ntegrity also re+uires

auditors to observe the "rinci"les of inde"endence and obectivity$ %aintain irre"roachablestandards of "rofessional conduct$ %a'e decisions ith the "ublic interest in %ind$ and a""lyabsolute honesty in carrying out their or' and in handling the resources of the #A!.

;hapter (

Independence, Ob0ectivit% and I&partialit%

14.!nde"endence fro% the audited entity and other outside interest grou"s is indis"ensable forauditors. This i%"lies that auditors should behave in a ay that increases$ or in no ay di%inishes$their inde"endence.

15.Auditors should strive not only to be inde"endent of audited entities and other interestedgrou"s$ but also to be obective in dealing ith the issues and to"ics under revie.

16.!t is essential that auditors are inde"endent and i%"artial$ not only in fact but also ina""earance.

17.!n all %atters relating to the audit or'$ the inde"endence of auditors should not be i%"aired by"ersonal or e3ternal interests. !nde"endence %ay be i%"aired$ for e3a%"le$ by e3ternal "ressure orinfluence on auditorsF "reudices held by auditors about individuals$ audited entities$ "roects or

"rogra%%esF recent "revious e%"loy%ent ith the audited entityF or "ersonal or financial dealingshich %ight cause conflicts of loyalties or of interests. Auditors have an obligation to refrain fro%

beco%ing involved in all %atters in hich they have a vested interest.

2006 age *@ of 40


40/41

18.There is a need for obectivity and i%"artiality in all or' conducted by auditors$ "articularly intheir re"orts$ hich should be accurate and obective. onclusions in o"inions and re"orts should$therefore$ be based e3clusively on evidence obtained and asse%bled in accordance ith the #A!&sauditing standards.

19.Auditors should %a'e use of infor%ation brought forard by the audited entity and other"arties. This infor%ation is to be ta'en into account in the o"inions e3"ressed by the auditors in an

i%"artial ay.The auditorshould also gather infor%ation about the vies of the audited entity and other "arties. Boever$ theauditors& on conclusions should not be affected by such vies.


41/41

;hapter +

;o&petence

28.Auditors have a duty to conduct the%selves in a "rofessional %anner at all ti%es and to a""lyhigh "rofessional standards in carrying out their or' to enable the% to "erfor% their duties

co%"etently and ith i%"artiality.

29.Auditors %ust not underta'e or' they are not co%"etent to "erfor%.

30.Auditors should 'no and follo a""licable auditing$ accounting$ and financial %anage%entstandards$ "olicies$ "rocedures and "ractices.

i'eise$ they %ust "ossess a good understanding of the constitutional$ legal and institutional"rinci"les and standards governing the o"erations of the audited entity.

157094099 Auditing Standards (1)

Documents