Fostering Co-operation Among Supreme Audit Institutions and Internal Control Entities

1. Fostering Co-operation Among Supreme Audit Institutions and Internal Control Entities The Brazilian Federal Court of Audit Experience

2. Presentation Summary What (and why) International Auditing Standards Say Brazilian Government Auditing Legal Framework Brazilian Federal Court of Audits Initiatives CReCER - El Salvador, June 2008 2

3. International Auditing Standards Perspective Government auditing as part of a global context July 2007 - the IIA and Intosai signed a memorandum of understanding stressing: interaction between internal and external audit; common auditing standards. CReCER - El Salvador, June 2008 3

4. International Auditing Standards Perspective IFAC and Intosai have been working together to build in the IAASB Standards the public sector perspective (Memorandum of Understanding - 2006) CReCER - El Salvador, June 2008 4

5. International Auditing Standards Perspective Lima Declaration (1977) sets out, in its Section 3, that: SAIs should assess internal auditor effectiveness; to achieve the most appropriate division or assignment of tasks and co-operation. CReCER - El Salvador, June 2008 5

6. International Auditing Standards Perspective Underlying assumptions of Lima Declaration prescription: primary responsibility for designing and maintaining internal controls lies on management; internal auditors help management assess the effectiveness of internal controls; external audit work relies and starts from the already existing controls of the entity; before implementation, auditing activities should pass the cost-benefit analysis test; (in the same way as control activities) CReCER - El Salvador, June 2008 6

7. International Auditing Standards Perspective Conclusion: the intelligent use of the entity control net justifies, allows and even legitimates the external auditing activity as we know it. CReCER - El Salvador, June 2008 7

8. International Auditing Standards Perspective What does ‘as we know it’ mean? Large number of clients; Diversity of clients; Use of modern audit techniques (including sampling). CReCER - El Salvador, June 2008 8

9. International Auditing Standards Perspective IFAC: International Standard on Auditing 610 – Considering the Work of Internal Audit. International Standard on Auditing 315 – Understanding the Entity and its Environment and Assessing the risks of Material Misstatement. Intosai: General Standards on Government Auditing, items 2.1.11, 3.1.3 e 3.4.3. CReCER - El Salvador, June 2008 9

10. International Auditing Standards Perspective In a nutshell: Know the Business You Audit CReCER - El Salvador, June 2008 10

11. Brazilian Government Audit Legal Framework Brazilian Court of Audits (Supreme Audit Institution) Executive Internal Control Systema (IAA) Legislative Internal Control System (IAA) Judiciary Internal Control System (IAA) IAA IAA State-Owned Enterprises’ Internal Audit Function. Subject to Internal Audit Function of Executive Federal Universities’ Internal Audit function. Subject to Internal Audit Function of Executive Internal Control Entities CReCER - El Salvador, June 2008 11

12. Brazilian Government Audit Legal Framework The main and more constant link among internal control entities and the Brazilian Court of Audit is the accountability process: Accounts rendered by the executive, legislative and judiciary units; Interaction throughout the year among internal control entities and the SAI. CReCER - El Salvador, June 2008 12

13. Brazilian Court of Audit Initiatives Bimonthly meetings with Internal Control Entities: To learn about their risk-based audit plans; To give feedback on their audit reports; To jointly develop audit programmes; To share information on specific auditees; To combine efforts in audit activities. CReCER - El Salvador, June 2008 13

14. Thanks Gualter Ramalho Portella, Msc, CIA®, CGAP® Tribunal de Contas da União 1ª Secretaria de Controle Externo Secretário de Controle Externo e-mail: gualterrp@tcu.gov.br CReCER - El Salvador, June 2008 14