Auditing and Auditing Standards

Ms. Meenakshi SharmaDirector General

Auditing

• a systematic and independent examination of data, statements, records, operations and performances (financial or otherwise) of an enterprise for a stated purpose.

• In any auditing the auditor perceives and recognizes the propositions before him/her for examination, collects evidence, evaluates the same and on this basis formulates his/her judgment

• Auditor communicates his judgement through his/her audit report

Broad objectives of audit

Ensure legality, regularity, economy, efficiency and effectiveness of financial management and public administration mainly throughassessment as to:(1) whether the financial statements are properly prepared, are

complete in all respects and are presented with adequate disclosures (Financial audit);

(2) whether the provisions of the Constitution, the applicable laws, rules and regulations made there under and various orders and instructions issued by competent authority are being complied with (Compliance audit); and

(3) the extent to which an activity, programme or organisation operates economically, efficiently and effectively (Performance audit).

Exercise

• Audit & Assurance

• Purpose of Audit

• Audit & Investigation

• Audit & Evaluation

• Who is the ultimate beneficiary

Auditing standards

• prescribe the norms which the auditors are expected to follow in conduct of audit.

• provide guidance to the auditor to help determine the auditing steps and procedures that should be applied in audit; and

• constitute the criteria or the yardstick against which quality of audit results is evaluated.

Session Overview

• What is ISSAI?

• Objective of ISSAIs

• ISSAIs framework

– Four Levels of ISSAIs

– INTOSAI GOVs

• ISSAIs Implementation

6Introduction to ISSAIs

ISSAIs

• I-International

• S- Standards

– (of)

• S-Supreme

• A-Audit

• I-Institutions

7Introduction to ISSAIs

ISSAIs contd.

• Professional standards

• Best practice guidelines for public sector auditors

• Authorised and endorsed by the International Organisation of Supreme Audit Institutions (INTOSAI)

8Introduction to ISSAIs

INTOSAI’s two set of professional standards

• ISSAIs – basic prerequisites

– proper functioning

– professional conduct of Supreme Audit Institutions

– and the fundamental principles in auditing of public entities.

• INTOSAI GOVs (Guidance for good governance)– providing guidance to public authorities

– on the proper administration of public funds.

9Introduction to ISSAIs

• What is the objective of ISSAIs?

10Introduction to ISSAIs

Objective of ISSAIs• to provide easy access to a complete and

updated collection of professional standardsand best practice guidelines for publicsector auditors.

• Increasing SAI

– Credibility,

– quality and

– professionalism

11Introduction to ISSAIs

ISSAIs

• International Standards of Supreme Audit Institutions (ISSAIs) consist of all documents endorsed by INCOSAI with the purpose of guiding the professional standards of SAIs

• Level 1- Founding Principles (ISSAI 1)• Level 2 - Prerequisites for the Functioning of Supreme Audit

Institutions (ISSAIs 10-99) • Level 3 - Fundamental Auditing Principles (ISSAIs 100-999) • Level 4 - Auditing Guidelines (ISSAIs 1000-5999)• INTOSAI GOV ( ISSAIs 9100-9199)

Level 1- Founding Principles (ISSAI 1)

• The Lima Declaration from 1977 calls for the establishment of effective Supreme Audit Institutions and provide guidelines on auditing precepts

• At vision level

LEVEL 2 - PREREQUISITES FOR THE FUNCTIONING OF SUPREME

AUDIT INSTITUTIONS (ISSAIS 10-99)

necessary preconditions for the properfunctioning and professional conduct of SAI –at governance level

principles and guidance on independence,transparency and accountability, ethics andquality control

LEVEL 2 - PREREQUISITES FOR THE FUNCTIONING OF SUPREME

AUDIT INSTITUTIONS (ISSAIS 10-99)

ISSAI No. Description

ISSAI 10 Mexico Declaration on SAI Independence

ISSAI 11 INTOSAI Guidelines and Good Practices Related to SAI Independence

ISSAI 12 Value and Benefits of SAIs - making a difference to the life of citizens

ISSAI 20 Principles of Transparency and Accountability

ISSAI 21 Principles of Transparency - Good Practices

ISSAI 30 Code of Ethics

ISSAI 40 Quality Control for SAIs Implementation guidance and tools

LEVEL 3 - FUNDAMENTAL AUDITING PRINCIPLES (ISSAIS 100-999)

• contain the common pronouncements by INTOSAI’s members of the generally recognized professional principles that underpin effective, independent auditing of public sector entities.

• endorsed in 2001, CAG standards 2002 adapted on this basis

• presently classified as :– Basic principles

– General standards

– Field standards

– Reporting Standards

LEVEL 3 - FUNDAMENTAL AUDITING PRINCIPLES (ISSAIS 100-999)

• New Level 3 ISSAIs are:– ISSAI 100 – Basic concepts

– ISSAI 200 – Financial Auditing

– ISSAI 300 – Performance Auditing

– ISSAI 400- Compliance auditing

• A dimensional change in approach

• Approved by XXI INCOSAI in Nov 2013

ISSAI 100-Fundamental Principles ofPublic-Sector Auditing

• ISSAI 100 establishes fundamental principles which are applicable to all public-sector audit engagements, irrespective of their form or context.

• ISSAIs 200, 300 and 400 defines principles to be applied in the context of financial, performance and compliance auditing respectively. They should be applied in conjunction with the principles set out in ISSAI 100.

• The principles in no way override national laws, regulations or mandates

ISSAI 200-Fundamental Principles ofFinancial Auditing

• developed to address the key principles related to an audit of financial statements in the public sector.

• builds on and further develops the fundamental principles of ISSAI 100 to suit the specific context of audits of financial statements, and

• constitutes the basis for auditing standards related to audits of financial statements.

• should be read and understood in conjunction with ISSAI 100.

ISSAI 300-Fundamental Principles ofPerformance Auditing

• builds on and further develops the fundamental principles of ISSAI 100 to suit the specific context of performance auditing.

• should be read and understood in conjunction with ISSAI 100, which also applies to performance auditing.

• Consists of three section

- framework for performance auditing

- general principles for performance audit engagements

- principles of relevance to the main stages of the audit process

ISSAI 400-Fundamental Principles ofCompliance Auditing

• builds on and further develops the fundamental principles of ISSAI 100 to suit the specific context of compliance auditing.

• should be read and understood in conjunction with ISSAI 100, which also applies to compliance auditing.

• provides detailed information– purpose and authority of the ISSAIs on compliance

auditing– compliance auditing framework and the different ways in

which audits are conducted– elements of compliance auditing– principles of compliance auditing

LEVEL 4 - AUDITING GUIDELINES (ISSAIS 1000-5999)

• specific, detailed and operational guidelines that can be used on a daily basis in the conduct of auditing tasks

• grouped in 2 categories:– General auditing guidelines-

• ISSAI 1000-2999 Financial Audit

• ISSAI 3000-3999 Performance Audit

• ISSAI 4000-4999 Compliance Audit– Specific auditing guidelines- on specified subjects like public debt,

privatization ISSAI 5000-5999

• basis of guidelines for adoption in IA&AD

LeveL 4- Auditing Guidelines (ISSAIs 1000-5999)

• Translate the fundamental principles into more specific, detailed and operational guidelines;

• To be used on a daily basis in the conduct of auditing tasks;

• Each guidelines with a defined scope of application;

• May be fully adopted or adapted

23Introduction to ISSAIs

LeveL 4- Auditing Guidelines (ISSAIs 1000-5999) contd.

• General Auditing guidelines (ISSAIs 1000-4999)

– Financial Audit guidelines (ISSAIs 1000-2999)

– Compliance Audit guidelines (ISSAIs 4000-4200)

– Performance Audit Guidelines (ISSAIs 3000-3100)

• Guidelines on specific subjects (5000-5999)

– International Institutions (5000-5099)

– Environment Audit (5100-5199)

– Privatisation (5200-5299)

– IT Audit (5300-5399)

– Public Debt (5400-5499)

– 5600-5699 (Peer Review)24Introduction to ISSAIs

INTOSAI GOV

• a separate group of pronouncements

• recommendations to governments and others with responsibility for the management of public funds and publicly funded activities

• to advance good governance, including the establishment of effective systems of internal control, reliable internal auditing and adequate standards of accounting and reporting in the public sector

• to guide the Supreme Audit Institutions in their assessment of such measures

• Advocacy and pursuance role of SAIs

Level 2, 3 and 4: LinksLevel 2 Level 3 Level 4

•General statements•Principles on higherlevel•Should not bechanged very often•RegulatesInstitutional issues

•Fundamental principle for carrying out audits of public entities;•Addresses issues related to process of carrying through an audit;

•Translates fundamental auditing principles of Level 3 into more specific, detailed and operational guidelines for use on daily basis for auditing tasks;•Contains implementation guidelines.

26Introduction to ISSAIs

• Status of Adoption of ISSAIs in SAI Oman

Global Initiatives• ISSAI implementation - A strategic priority for INTOSAI (2011-

2016)

• Implementation partners– Professional Standards Committee (PSC)

– Capacity Building Committee (CBC)

– INTOSAI Development Initiative (IDI)

• ISSAI roll out model (consisting of 3 stages)

Stage 1. ISSAI Awareness raising

Stage 2. Facilitate decision-making on ISSAI implementation

Stage 3. Support ISSAI Implementation

28Introduction to ISSAIs

ISSAIs stand for

(a) INTOSAI standards for supreme audit institutions

(b)International standards for supreme audit institutions

(c) Independent Standards of Supreme Audit Institutions

29Introduction to ISSAIs

PSC stands for

(a) Professional Standards Committee

(b) Public Standards Committee

(c) Performance Audit Sub Committee

(d) Public Sector Audit Committee

30Introduction to ISSAIs

The ISSAI Framework consists of

(a) Lima Declaration and Fundamental Principles of Auditing

(b) Four levels of Auditing Standards

(c) ISSAI and INTOSAI GOVs

31Introduction to ISSAIs

ISSAI Level 1 contains the

(a) Mexico Declaration of SAI Independence

(b) Lima Declaration

(c) INTOSAI Code of Ethics

32Introduction to ISSAIs

ISSAI Level 2 contains standards relating to

(a) Independence, Transparency and Accountability, Governance and Ethics

(b) Independence, Transparency and Accountability, Governance and Quality Control

(c) Mandate, Governance, Quality Control and Ethics

(d) Independence, Transparency and Accountability, Quality Control and Ethics

33Introduction to ISSAIs

INTOSAI GOVs contain guidance on

(a) Internal controls, Enterprise Risk Management etc.

(b) Environment Audit, IT Audit and Audit of Public Debt

(c) Accounting Standards to be followed by audited entities

34Introduction to ISSAIs

Thank You