External Audit of Public Internal Financial Control System Dr. Mohsen A. Shawarby

1. External Audit of Public Internal Financial Control System Dr. Mohsen A. Shawarby Senior Expert; Financial & Audit Information Systems American Association of International Management, NY International Executive Service Corps IESC, Washington, DC Alakhawayn University mas@aaimglobal.com Second Pan African Conference of Auditor Generals Tangier (Morocco)14 – 16 December 2009

2. Outline of the Presentation Goals and Facts Why Automate Management & Audit Procurement INTOSAI Auditing Standards Design Gov Financial & Audit System Internal & External Audit

3. Why Automate Financial System? • Perform Accounting & Accountability • Monitor Financial Transfers from MOF to all Others • Effective, Economic and Efficient Utilization of Resources • Strategic Planning • Performance-Based Budgeting • Multi-annual Budgeting • Financial Transparency • Effective Internal & External Audit Control • Law Enforcement Interfaces • Improve Business Processes • Develop Financial Resources • Comply with IDB, IMF, World Bank

4. Gov Fin Mgmt Reform

5. Changes in Internal Control System • Create centralized financial system to enable MOF to plan budgeting, transfers & allocations of resources. • Create centralized financial system to enable Auditor General to perform internal and external audit. • Audit function is not merely the audit of accounts of accounting offices, but, the audit of activities, transactions, decisions and resources of public institutions. • Expansion in the scope of external audit has made it obligatory to include new elements such as assessing internal controls of existing audit processes.

6. Purpose of Auditing The Audit Should Achieve: • Credible information about the activities of public administration and their results to MOF. • Executing public financial management in line with laws and protecting public resources. • Improving the public management. • Encouraging the public administrations to evaluate their own performance. • Establishing and expanding accountability. • Fraud Detection, Prevention & Deterrent.

7. How to Perform Audit? a) Determining whether the revenues, expenditures, properties and other accounts and transactions of the public administrations are in accordance with the laws. b) Evaluating the accuracy of the current financial reports and statements of the public administrations, c) Evaluating whether the financial decisions and the transactions of the public administrations and the programs and activities are in compliance with the laws or not, d) Evaluating the financial management and internal control systems.

8. Auditing Standards • Audit expertise and external audit can be carried out according to international auditing standards of International Organization of Supreme Audit Institutions -- INTOSAI is located in Vienna, Austria • www.intosai.org • Umbrella organisation for the external government audit community. For more than 50 years it has provided an institutionalised framework for supreme audit institutions to promote development and transfer of knowledge, improve government auditing worldwide and enhance professional capacities.

9. Morocco is a Member • Dr. M. Ahmed El MidaouiPremier Président de la Cour des ComptesCour des ComptesSecteur 10, rue EttouteHay Riyad - B.P 208510100 RabatMaroc • Tel: +212 537 56 37 33, 57 67 77Fax: +212 537 71 18 65, 71 31 19E-mail: ccomptes@courdescomptes.ma, ccomptes_maroc@yahoo.comWWW: http://www.courdescomptes.ma

10. INTOSAI Auditing Standards • The auditor should review and assess the reliability of internal control of auditee when deciding on the scope and extent of an audit. • In planning an audit, the auditor should identify key management systems and controls and carry out a preliminary Evaluation to identify both their strengths and weaknesses. • Study and Evaluation of Internal Control : “The auditor, in determining the extent and scope of the audit, should study and evaluate the reliability of internal control.”

11. Evaluation of Control Environment Auditor should understand and assess the control environment through applying methods for understanding internal control by examining following factors: Integrity and ethical values Approach of the management Managerial structure Competency commitment HR management Internal audit

12. Evaluation of Information and Communication • Auditor evaluates the environment in which information is produced or obtained, and communicated to those concerned accurately, timely and properly.

13. Monitoring Auditor examines and evaluates high management’s monitoring activity on controls.

14. Methods in Understanding Internal Control System • Interview with administrators and personnel at various level • Examination of records and documents, • Observing activities, • Following work-flow and process maps, • Examining method and system documents, • Communication with internal auditors, • Attestation from third persons and/or experts, • Visits to facilities and regions of the institution, • Comparison of internal control mechanisms and examples of good practices, • Reviewing studies of Internal Control Central Harmonization Unit

15. Advantageous Aspects of Existing Internal Control System for TCA • That internal control system is established with the leadership of MoF within a centralized structuring shall not make any difference among institutions in terms of TCA’s evaluation of weaknesses and strengths of the system. This situation shall ensure resource and time saving for TCA. • In case of reporting deficiencies of system by TCA corrective measures applicable to the whole system can be taken centrally by competent authorities.

16. THANKS