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Theme discussion PSC Steering Committee

ISSAI International Standards of Supreme Audit Institutions. Achieving consistency. Theme discussion PSC Steering Committee. . . All existing documents in one framework – ISSAIs and INTOSAI GOVs Official publication at www.issai.org. . . All existing documents in one framework

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Theme discussion PSC Steering Committee

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  1. ISSAI International Standards of Supreme Audit Institutions Achieving consistency Theme discussionPSC Steering Committee

  2.  All existing documents in one framework – ISSAIs and INTOSAI GOVs Official publication at www.issai.org

  3.  All existing documents in one framework – ISSAIs and INTOSAI GOVs Official publication at www.issai.org By 2010: Comprehensive set of guidelines Reliable maintenance in a due process  

  4.  All existing documents in one framework – ISSAIs and INTOSAI GOVs Official publication at www.issai.org By 2010: Comprehensive set of guidelines Reliable maintenance in a due process After 2010: Consistency in the full set of ISSAIs and INTOSAI GOVs  

  5. What the PSC is striving for… Harmonizing public sector auditing internationally. Recognizing, utilizing and building on standards issued by other standard setting bodies and developing supplementary guidance in areas where SAIs have special needs.

  6. What the PSC is striving for… Harmonizing public sector auditing internationally. Ensuring clear and user-friendly guidance on the special role of SAIs and public sector auditing. Recognizing, utilizing and building on standards issued by other standard setting bodies and developing supplementary guidance in areas where SAIs have special needs. Where the tasks are the same, the standards should be the same, where the tasks differ the standards should differ.

  7. Agenda • How can we best use level 3 (ISSAI 100-999)? • How can we solve the main inconsistencies in the concepts and definitions? • Howcanweensurethat the ISSAIsareuseful for all SAIs? • How do we move forward after today’s discussion?

  8. Agenda • How can we best use level 3 (ISSAI 100-999)? • How can we solve the main inconsistencies in the concepts and definitions? • Howcanweensurethat the ISSAIsareuseful for all SAIs? • How do we move forward after today’s discussion?

  9. Neither INTOSAI INTOSAI IFAC INTOSAI (not IFAC) and IFAC (not INTOSAI) nor IFAC 21 55 5 19 76 % of SAIs use ISSAI 100-400 76 %

  10. - Describing the tasks and obligations of the SAIs to external parties (50 % of the SAIs) - Reference for evaluation of the SAI, e.g. in peer reviews (30 % of the SAIs) - Establishing the legal framework of the SAI (38 % of the SAIs) - Developing audit strategy and methodology (69 % of the SAIs) - Formulation of national standards and guidelines (56 % of the SAIs) - Education and/or certification in public sector auditing (54% of the SAIs) - International donors (24 % of the SAIs) - Applied directly by auditors (58 % of the SAIs) - Referred to in audit reports (49 % of the SAIs) - Describing obligations to other auditors (subcontractors) (36 % of the SAIs) Different purposes

  11. 70 % support ISSAIs on auditing 70 %

  12. The ISSAI Framework ISSAI 1 FoundingPrinciples ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI 100-999 Fundamental AuditingPrinciples ISSAI 1000-5999 Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOV INTOSAI Guidance for GoodGovernance 9100-9299

  13. The ISSAI Framework Concerninstitutionalissues Appliesonly to SAIs ISSAI 1 FoundingPrinciples ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI 100-999 Fundamental AuditingPrinciples ISSAI 1000-5999 Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOV INTOSAI Guidance for GoodGovernance 9100-9299 Concernauditing Brief statements – aimed at the SAI leadership and stakeholders Provide a ”commonlanguage” and keyrecommendations Elaboratefurtheron the most importantauditingtasks Guidance to be used by auditors when performing the tasks

  14. The ISSAI Framework Legality Regularity Performance audits ISSAI 1 FoundingPrinciples ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI 100-999 Fundamental AuditingPrinciples ISSAI 1000-5999 Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOV INTOSAI Guidance for GoodGovernance 9100-9299 Regularity (financial) audit Performance audit Financial auditing (auditing of financial statements as defined by ISA 200) Performance auditing Complianceauditing

  15. The ISSAI Framework • A possible new outline: • ISSAI 100 Basic concepts of public auditing • ISSAI 200 Fundamental principles of financial auditing • ISSAI 300 Fundamental principles of performance auditing • ISSAI 400 Fundamental principles of compliance auditing ISSAI 1 FoundingPrinciples ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI 100-999 Fundamental AuditingPrinciples ISSAI 1000-5999 Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOV INTOSAI Guidance for GoodGovernance 9100-9299

  16. Proposed directions The fundamental auditing principles should: • Provide a “common language” which can be used for explaining and comparing the tasks of SAIs across their different national settings. • Bridge the gap between the Lima Declaration and the guidelines of FAS, PAS and CAS by providing a coherent definition of public auditing and its three branches - financial, performance and compliance auditing

  17. Agenda • How can we best use level 3 (ISSAI 100-999)? • How can we solve the main inconsistencies in the concepts and definitions? • Howcanweensurethat the ISSAIsareuseful for all SAIs? • How do we move forward after todays discussion?

  18. ISSAI 100 Basic concepts of public auditing Provide a coherent definition of public auditing and its three branches - financial, performance and compliance auditing – and define what “regularity” and “legality” audits mean. ISSAI 200 Fundamental principles of financial auditing - State the principle that the ISAs should be used for financial auditing - Other general principles in the practice notes of ISSAI 1000-1999? ISSAI 300 Fundamental principles of performance auditing - State the most important principles on how to conduct performance auditing based on ISSAI 3000 (and the suggested new guidelines) ISSAI 400 Fundamental principles of compliance auditing - State the most important principles on how to conduct compliance auditing based on ISSAI 4000-4200

  19. The public auditing role of SAIs • The concept and establishment of audit is inherent in public financial administration as the management of public funds represents a 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. • ISSAI 1/Section 1. (Lima Declaration)

  20. The public auditing role of SAIs Budgetary/ legislative function Oversight Insight Foresight Executive/ Administrative function SAI Audits Instructions and/or supervision Publiclyfunded organisations, activitiesor policy programs

  21. The role of SAIs - using other auditors Budgetary/ legislative function Oversight Insight Foresight Executive/ Administrative function SAI Audits Auditors Instructions and/or supervision Auditors Publiclyfunded organisations, activitiesor policy programs Auditors

  22. The scope of the ISSAIs The responsible party: Those entrusted with the management of public funds Budgetary/ legislative function The intended users: Authorities within the constitutional system exercising monitoring and corrective functions Executive/ Administrative function SAI Audits The auditor: A SAI (or other auditors performing work on behalf of the SAI) Auditors Instructionsand/or supervision Auditors Publiclyfunded organisations, activitiesor policy programs Auditors

  23. The scope of the ISSAIs The responsible party: Those entrusted with the management of public funds Budgetary/ legislative function The intended users: Authorities within the constitutional system exercising monitoring and corrective functions Executive/ Administrative function SAI Audits The auditor: A SAI (or other auditors performing work on behalf of the SAI) The criteria: Requirements that follow from the responsibility for the management of public funds Auditors Instructionsand/or supervision Auditors Publiclyfunded organisations, activitiesor policy programs Auditors

  24. Scope of the ISSAIs: Public auditing ISSAI 100-5999 applies to public auditing assignments. Public auditing is a function within a constitutional arrangement with a distribution of powers and responsibilities between bodies ascribed with budgetary, legislative, judicial or executive authority or with a general responsibility for upholding the constitution. The purpose of public auditing is to enhance the oversight, insight and foresight with the use of public funds of those authorities exercising monitoring and corrective functions and encourage continuous improvement in the management of public funds. Public auditing is conducted in a three-party relationship between: - those responsible for the management of public funds - those authorities within the constitutional arrangement, which exercise monitoring and corrective functions - the independent auditing function mandated to carry out public auditing in order to facilitate the monitoring

  25. Scope of the ISSAIs: Public auditing A public auditing assignment is defined as: The tasks which are to be performed by the auditor according to an auditing mandate in order to reach a conclusion supported by sufficient appropriate evidence on whether public authorities and other publicly funded entities have observed the requirements that follow from their responsibility for the management of public funds.

  26. The audit criteria • The purpose of the requirements may be to ensure: • Reliable recording and reporting of historical financial information on the use of public funds • That public funds are obtained and used economically, efficiently and effectively • That public funds are obtained and used in accordance with law and propriety

  27. The audit criteria • The purpose of the requirements may be to ensure: • Reliable recording and reporting of historical financial information on the use of public funds • That public funds are obtained and used economically, efficiently and effectively • That public funds are obtained and used in accordance with law and propriety 3 branches of public auditing: Financial auditing Performance auditing Compliance auditing

  28. The audit criteria • The requirements may concern: • The processes and systems to be used in the management of public funds (measures to ensure sound financial management) • The outcome to be achieved as a result of the management of public funds • Reporting on the use and management of public funds

  29. The subject to which the criteria apply • The requirements may concern: • The processes and systems to be used in the management of public funds (measures to ensure sound financial management) • The outcome to be achieved as a result of the management of public funds • Reporting on the use and management of public funds 3 kinds of requirements: Proces Outcome Reporting

  30. No 4 (Australia) ´The Auditor-General’s functions include auditing financial statements´

  31. No 20 (South Africa) ‘the reported information relating to the performance of the auditeeagainstpredeterminedobjectives’

  32. No 47 (Belgium) ‘The Court of auditors performs ex-post reviews of the sound administration of public resources; it ensures they were used in compliance with the principles of economy, effectiveness and efficiency’

  33. No 8 (Ireland) (i) whether the receipts and expenditure recorded in the account are supported by substantiating documentation, (ii) whether the amounts expended have been applied by the Department concerned for the purposes for which the appropriation made by the Oireachtas was intended (iii) whether the transactionsrecorded in the accountconformwith the authority under whichtheypurport to have beencarried out.’

  34. No 9 (Ireland) Records of stocksor stores of any kind (includingstocks of securitiesor stamps: (i) whether any record is accurate, and (ii) whether the systems, procedures and practices (including the system of stock-taking) employed by the Department concerned for controlling the stocks or stores to which the record relates are adequate and whether the manner in which the systems, procedures and practices are employed and applied is adequate.

  35. ’Regularity audits’

  36. ’Legality’

  37. Scope of the ISSAIs: Public auditing A public auditing assignment is defined as: The tasks which are to be performed by the auditor according to an auditing mandate in order to reach a conclusion supported by sufficient appropriate evidence on whether public authorities and other publicly funded entities have observed the requirements that follow from their responsibility for the management of public funds.

  38. Tentative definitions Financial auditing is a branch of public auditing where the audit criteria are requirements serving the purpose of ensuring reliable recording and reporting of historical financial information on the use of public funds. Performance auditing is a branch of public auditing where the audit criteria are requirements serving the purpose of ensuring that public funds are obtained and used economically, efficiently and effectively. Compliance auditing is a branch of public auditing where the audit criteria are requirements serving the purpose of ensuring that public funds are obtained and used in accordance with law and propriety.

  39. Tentative definitions A public auditing assignment may combine auditing objectives from all three branches of public auditing. Financial auditing may concern process and reporting requirements. Performance and compliance auditing may concern outcome requirements as well as process and reporting requirements. The process, outcome and reporting requirements may follow from a direct responsibility or supervisory responsibility for the management of public funds.

  40. Tentative definitions As stated in the Lima Declaration a traditional task of Supreme Audit Institutions is to audit the legality and regularity of financial management and of accounting. (Cf. ISSAI 1/Section 4). Legality and regularity audits are specific ways to organize the auditing activities of a SAI. Auditing objectives of a financial, compliance or performance auditing nature may also be performed in other combinations.  

  41. Tentative definitions As stated in the Lima Declaration a traditional task of Supreme Audit Institutions is to audit the legality and regularity of financial management and of accounting. (Cf. ISSAI 1/Section 4). Legality and regularity audits are specific ways to organize the auditing activities of a SAI. Auditing objectives of a financial, compliance or performance auditing nature may also be performed in other combinations.   Legality audit Auditing objectives are the outcome requirements that the use of funds is in compliance with the applicable law

  42. Tentative definitions As stated in the Lima Declaration a traditional task of Supreme Audit Institutions is to audit the legality and regularity of financial management and of accounting. (Cf. ISSAI 1/Section 4). Legality and regularity audits are specific ways to organize the auditing activities of a SAI. Auditing objectives of a financial, compliance or performance auditing nature may also be performed in other combinations.   Legality audit Auditing objectives are the outcome requirements that the use of funds is in compliance with the applicable law Regularity audit Auditing objectives are: - Requirements to report historical financial information (reporting requirements) - Process requirements concerning the systems for accounting and registration and internal controls, and - Outcome requirements concerning the compliance with law and propriety of the transactions reflected in the reported historical financial information

  43. Proposed directions The fundamental auditing principles should: • Provide a brief statement of the most important general recommendations contained in the over 800 pages of implementation guidelines on financial, performance and compliance auditing. • “Regularity” and “legality” audits should be treated as one particular way to organizing the audits (but not be especially recommended over other ways to organize financial and compliance auditing)

  44. Agenda • How can we best use level 3 (ISSAI 100-999)? • How can we solve the main inconsistencies in the concepts and definitions? • Howcanweensurethat the ISSAIsareuseful for all SAIs? • How do we move forward after todays discussion?

  45. SAI’sdifferentfunctions

  46. Different public auditing assignments • Express a statement of assurance • Provide assessments • Conduct inquiries

  47. The public auditing role of SAIs Budgetary/ legislative function Executive/ Administrative function SAI Audits Instructions and/or supervision Publiclyfunded organisations, activitiesor policy programs

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