1 / 32

Chapter 32 - External Audit Bilateral Meeting with the EU Commission February 2, 2011

Chapter 32 - External Audit Bilateral Meeting with the EU Commission February 2, 2011. Content. Overview of the National Audit Office (SAI of Iceland) Main tasks Mandate Organisation, audit procedures, standards and guidelines

kaspar
Download Presentation

Chapter 32 - External Audit Bilateral Meeting with the EU Commission February 2, 2011

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 32 - External Audit Bilateral Meeting with the EU Commission February 2, 2011

  2. Content • Overview of the National Audit Office (SAI of Iceland) • Main tasks • Mandate • Organisation, audit procedures, standards and guidelines • Dissemination of audit results and consideration of audit reports by Parliament • Independence • Gap analysis for external audit • Actions taken and next steps External Audit

  3. 1. Overview of the National Audit Office External Audit

  4. Overview of the Icelandic National Audit Office • INAO is an independent body operating under the auspices of Althingi (the Icelandic Parliament) • Part of the legislative branch and its monitoring of the executive branch • The Althingi’s Presidential Committee appoints the Auditor General for a period of six years • Staff: 49 employees, 88% with university degrees • Budget of ISK 427 millions (EUR 2,74 million for 2011) External Audit

  5. INAO‘s main tasks • Financial auditing (including evaluation of internal controls and IT auditing) • Compliance auditing • Performance auditing • Monitoring the implementation of the Government Budget • Monitoring service contracts and grants • Monitoring the finances of “self-owned” organisations (foundations) • Monitoring the campaign finances of political parties and political candidates External Audit

  6. Mandate • Audits (financial, compliance, and performance, incl. environmental) • All ministries, agencies and other state bodies, including companies where the state has majority share • Private bodies, associations, self-owned organizations whose expenses and deficits are defrayed out of public moneys • Contracts with municipalities and private bodies for services that the government is required by law to pay for • Wide access to data, both financial and performance related External Audit

  7. Mandate (cont.) • Other examinations • INAO may call for financial statements from any departments, associations, funds or such other bodies which receive money or guaranties from the government. • Examine all documents and records kept by individuals, firms or institutions in order to support claims for payment by the government in order to verify the content of the invoices and the obligation of the government to pay. • Examine the accounting of munici­palities in relation to joint operations of the government and municipalities. • Examine the accounting of any department or corporation in which government holds a share. External Audit

  8. Organisation, audit procedures, standards and guidelines External Audit

  9. Organisation, audit procedures, standards and guidelines (cont.) • Auditing and accounting legislation • The National Audit Act (86/1997), the Accountant’s Act (79/2008), Government Finance Act (88/1997), Annual Accounts Act (3/2006), and other relevant legislation and regulations. • Auditing standards and guidelines • International Standards of SAIs (ISSAI) as adopted by INTOSAI • International Standards on Auditing (IAS) as adopted by the International Federation of Accountants (IFAC) • Accounting standards • International Financial Reporting Standards (IFRS) and (formerly) International Accounting Standards (IAS) adopted by IASB • International Public Sector Accounting Standards (IPSAS) External Audit

  10. Organisation, audit procedures, standards and guidelines (cont.) • International Standards of SAIs (ISSAI) • Level 1: Founding Principles • ISSAI 1 The Lima Declaration of Guidelines on Auditing Precepts (1977) • Level 2: Prerequisites for the Functioning of SAIs (ISSAI 10-40) • ISSAI 10 The Mexico Declaration on SAI independence (2007) • Level 3: Fundamental Auditing Principles (ISSAI 100-400) • Basic Principles, General Standards, Field Standards, and Reporting Standards • Level 4: Auditing Guidelines (ISSAI) • Implementation Guidelines (ISSAI 1000-4200) are based on ISA with practice notes on how they apply to public sector auditing • Specific Guidelines (ISSAI 5000-5600) on auditing international Institutions, environmental audits, audits of privatisation, IT-audit, audits of Public Debt, audits of disaster-related aid, and guidelines on how to carry out peer reviews of other SAIs. External Audit

  11. Organisation, audit procedures, standards and guidelines (cont.) • Employee Code of Conduct • Based on both the INTOSAI Code of Ethics and the Government Employees Act (70/1996) • The key points of the Code are credibility, independence, integrity and professionalism • Various other internal guidelines and support documents • Human Resources Policy • Communication Policy • Audit manuals/handbooks • Guidelines on report writing, process charts, etc. External Audit

  12. Organisation, audit procedures, standards and guidelines (cont.) • Strategic Development Plan • The INAO has not yet developed a comprehensive strategy paper for its future tasks but has issued work plans for performance audits 3 years ahead • However, the National Audit Office is continuously improving its audit methods and strategies to be better equipped to deal with its tasks • Since 2010, the National Audit Office has been working on its audit methods to get those more in line with both the ISSAI and IAS international auditing standards, and is also reviewing its structure and performance measurements External Audit

  13. Organisation, audit procedures, standards and guidelines (cont.) • External relations • INAO is a member of EUROSAI and INTOSAI. The Auditor General was elected to serve as a member of the EUROSAI board 2005-2011 • INAO appoints a member of the EFTA Board of Auditors • INAO has close ties with the other Nordic SAIs (Denmark, Norway, Sweden, Finland), including by attending and hosting annual meetings and seminars • In some cases the INAO has consulted with other SAIs (e.g. the UK NAO) and external experts, in audit tasks involving international benchmark comparisons • INAO participates in the Network of the EU Candidate Country and Potential Candidate Country SAIs and the ECA. The AG will attend its meeting in Istanbul in March 2011 External Audit

  14. Dissemination of audit results and consideration of audit reports by Parliament • Financial audit reports are given to the audited agency/company and the respective ministry. An annual summary report on the audit is published officially. • According to the Freedom of Information Act, the media and the general public can request to have a copy of all reports (except in limited cases). • All performance audit reports are published in an electronic format on INAO’s website, www.rikisend.is, with press releases and active media relations. • Besides written reports, the INAO is organizing open seminars and conferences in order to reach out with its findings. External Audit

  15. Dissemination of audit results and consideration of audit reports by Parliament (cont.) • Rules on the Parliamentary Review of the Reports of the INAO (2008): • The Speaker of the Althingi decides whether to send a report to a standing committee • Budget committee discusses reports on the audit of the government accounts and Annual report • The AG is entitled to be present at committee meetings • Committees may submit opinions on reports and/or a motion to a parliamentary resolution External Audit

  16. Dissemination of audit results and consideration of reports by Parliament (cont.) • Reports are discussed by standing committees but only a few have passed resolutions on them (the exception being the Budget Committee) • Expert group on Althingi’s monitoring of the executive recommended tighter rules on parliamentary review of INAO reports • Also, the establishing of a Public Accounts Committee to strengthen the monitoring role • The INAO concurs with the group’s recommendations • Bill is pending in Althingi proposing changes to its committee structure External Audit

  17. Independence • The Auditor General and his/her staff must be completely independent of those ministries and organisations they audit • The Auditor General is appointed for a six year term that may be renewed. His remuneration and such other terms and conditions is fixed by the State Salaries Arbitration Court. • The Presidential Committee of Parliament may, with the consent of the Joint Session of Parliament, remove the Auditor General from office. External Audit

  18. Independence (cont.) • The INAO is independent in carrying out its duties. • Never­the­less, the Presidential Committee of Parliament, Althingi, may either of their own initiative or in conformity with requests made by Members of Parlia­ment, call for reports on any specific examinations which fall under the mandate of the National Audit Office. • The budget of the Office is included in the budget proposal submitted annually to Parliament by the minister of finance. Parliament can make modifications to the budget. The AG is free to suggest modifications to the INAO’s budget while it is deliberated in Althingi. External Audit

  19. Independence (cont.) • Milestones in the history of the INAO • 1987 The National Audit Act. Previously the INAO had been an agency under the minister of finance, but the new law stipulated the INAO is an agency of Althingi. Also the INAO was given a wider mandate, e.g. to carry out performance audits • 1995 The constitutional status and office of Accounting Inspectors General was abolished. • 1997 New National Audit Office Act. The INAO given further examination powers and is mandated to carry out environmental audits External Audit

  20. Independence (cont.) • Constitutional status of the INAO The current Article 43 of the Constitution of the Republic of Iceland: “The financial accounts of the State, its institutions and administrative bodies, shall be subject to an audit by, or under the supervision of Althingi, as provided by law.” External Audit

  21. Independence (cont.) • The constitutions of the other Nordic coutries differ somewhat in the way they define the status of SAIs. • The Danish and Norwegian constitution contain similar clauses on auditing as was formerly in the Icelandic constitution • The Finnish and Swedish constitutions mention specifically the status of their SAIs • The content and exact wordings of constitutions often has historical reasons and is based on the constitutional traditions of each country. External Audit

  22. 2. Gap analysis for external audit External Audit

  23. Gap analysis for external audit • External audit requirements for EU candidate states • Requirements should be based on internationally accepted best practices and experiences gained during previous accessions. • Requirements for PIFC and external audits are “soft aquis” and therefore not subject to specific directives. They are none the less very important • The main requirements should guarantee the functional, institutional and financial independence of SAIs and to ensure sufficient administrative capabilities and professional competences External Audit

  24. Gap analysis for external audit (cont.) • The EU Commission’s analysis • EU Analytical Report (February 2010) • DG Budget Mission Report (June 2010) • EU Progress Report (November 2010) • INAO’s own self-assessment External Audit

  25. Gap analysis for external audit (cont.) • Analytical Report (February 2010) • In the area of external audit, the INAO reports to the Icelandic parliament. The INAO is operationally independent, but this is not guaranteed in the constitution. The scope of its responsibilities remains limited to central state interests. No central government institution is responsible for the external audit of municipalities. The INAO is free to determine the scope of its activities but does not follow a strategic development plan. INAO activities relating to improving internal audit in the public sector could, under certain circumstances, conflict with its main role as external auditor. • The INAO’s independence is not anchored in the constitution and its remit is defined narrowly. Iceland’s legislation is largely prepared for the protection of the EU’s financial interests according to the PIF Convention and its protocols. Iceland will need to undertake considerable efforts to strengthen its public internal financial control and external audit capacities. http://ec.europa.eu/enlargement/press_corner/key-documents/opinion-iceland_2010_en.htm External Audit

  26. Gap analysis for external audit (cont.) • DG Budget Mission Report (June 2010) • DG Budget referred to the LIMA Declaration that recommends anchorage of the Supreme Audit Institution in the Constitution of the country concerned. In 1986 the rule in the Icelandic Constitution that three wise men were responsible for checking the national budget and reporting to the Althing was abolished. Instead the NAO was established by law and no need was felt at the time to consider anchorage in the Constitution. Representatives of the NAO gave their opinion that there are still no compelling reasons to anchor the NAO in the Constitution, but as there would be certain benefits involved, the idea could be reconsidered, specially in the case where the Constitution would be changed anyway. External Audit

  27. Gap analysis for external audit (cont.) • Progress Report (November 2011) • No measures have yet been identified to guarantee the constitutional independence of the Icelandic National Audit Office (INAO) or to reform the systems of internal and external audit. http://ec.europa.eu/enlargement/pdf/key_documents/2010/package/is_rapport_2010_en.pdf External Audit

  28. Gap analysis for external audit (cont.) • INAO‘s self assessment • INAO’s administrative strengths • Highly qualified and motivated personnel, low employee turnover • Balanced Scorecard is being introduced as a strategic performance management tool • INAO’s administrative weaknesses • Documentation needs to be improved. INAO is still in the process of implementing electronic systems for working papers • Audit selection needs to be increasingly based on risk analysis • Better quality controls should be adopted, e.g. for work papers External Audit

  29. 3. Actions taken and next steps External Audit

  30. Actions taken and next steps • Independence • The INAO independence is widely respected, but still needs to be strengthened to prepare for accession to the European Union • Action to be taken: The Auditor General is going to notify the Speaker of Althingi of the need to give the INAO’s independence a stronger constitutional anchorage and will suggest this issue to be brought to the attention of the Constitutional Assembly that will convene in February 2011. • External audits are not fully separated from internal audits • Action taken: A new Internal Audit Unit will be established (under the Financial Management Authority, but will be functionally independent). The INAO contract to carrying out internal audits for the Housing Fund has expired and has not been renewed. Its contract with the Central Bank expires at the end of 2011. External Audit

  31. Actions taken and next steps (cont.) • Administrative capacity and professional competence • The INAO has to further examine and strengthen its administrative capacities and professional competences as a candidate country SAI • Action taken: International audit standards (ISSAI and ISA) will be fully adopted by the INAO by the end of 2011 • Action taken: The adoption of electronic audit work paper systems (Descartes & TeamMate) and case management system (OneSystem) will be completed in 2011 • Action taken: The INAO has applied for and been admitted to the Network of the EU Candidate Country and Potential Candidate Country SAIs and the ECA • Action taken: The INAO has asked for TAIEX assistance gain a better understanding of the ways PIFC and internal and external audits are carried out in EU member states. External Audit

  32. Thanks for your attention! External Audit

More Related