Theme discussion PSC Steering Committee ISSAI International Standards of Supreme Audit Institutions Achieving consistency

All existing documents in one framework – ISSAIs and INTOSAI GOVs Official publication at  

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

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

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.

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.

INTOSAI Professional Standards Committee Agenda How can we best use level 3 (ISSAI )? How can we solve the main inconsistencies in the concepts and definitions? How can we ensure that the ISSAIs are useful for all SAIs? How do we move forward after today’s discussion?

INTOSAI Professional Standards Committee Agenda How can we best use level 3 (ISSAI )? How can we solve the main inconsistencies in the concepts and definitions? How can we ensure that the ISSAIs are useful for all SAIs? How do we move forward after today’s discussion?

INTOSAI Professional Standards Committee 76 % of SAIs use ISSAI INTOSAI (not IFAC) INTOSAI and IFAC Neither INTOSAI nor IFAC IFAC (not INTOSAI) 76 %

INTOSAI Professional Standards Committee - 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

INTOSAI Professional Standards Committee 70 % support ISSAIs on auditing 70 %

INTOSAI Professional Standards Committee ISSAI 1 Founding Principles ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI Fundamental Auditing Principles ISSAI Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOVINTOSAI Guidance for Good Governance The ISSAI Framework

INTOSAI Professional Standards Committee ISSAI 1 Founding Principles ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI Fundamental Auditing Principles ISSAI Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOVINTOSAI Guidance for Good Governance The ISSAI Framework Concern institutional issues Applies only to SAIs Concern auditing Brief statements – aimed at the SAI leadership and stakeholders Provide a ”common language” and key recommendations Elaborate further on the most important auditing tasks Guidance to be used by auditors when performing the tasks

INTOSAI Professional Standards Committee ISSAI 1 Founding Principles ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI Fundamental Auditing Principles ISSAI Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOVINTOSAI Guidance for Good Governance The ISSAI Framework Legality Regularity Performance audits Regularity (financial) audit Performance audit Financial auditing (auditing of financial statements as defined by ISA 200) Performance auditing Compliance auditing

INTOSAI Professional Standards Committee ISSAI 1 Founding Principles ISSAI 10-99Prerequisites for the Functioning of SAIs ISSAI Fundamental Auditing Principles ISSAI Auditing Guidelines Implementation guidelines Specific guidelines INTOSAI GOVINTOSAI Guidance for Good Governance 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

INTOSAI Professional Standards Committee 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

INTOSAI Professional Standards Committee Agenda How can we best use level 3 (ISSAI )? How can we solve the main inconsistencies in the concepts and definitions? How can we ensure that the ISSAIs are useful for all SAIs? How do we move forward after todays discussion?

INTOSAI Professional Standards Committee 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 ? 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

INTOSAI Professional Standards Committee 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)

INTOSAI Professional Standards Committee The public auditing role of SAIs Executive/ Administrative function Budgetary/ legislative function SAI Publicly funded organisations, activities or policy programs Instructions and/or supervision Audits Oversight Insight Foresight

INTOSAI Professional Standards Committee The role of SAIs - using other auditors Executive/ Administrative function Budgetary/ legislative function SAI Publicly funded organisations, activities or policy programs Instructions and/or supervision Audits Oversight Insight Foresight Auditors

INTOSAI Professional Standards Committee The scope of the ISSAIs Executive/ Administrative function Budgetary/ legislative function SAI Publicly funded organisations, activities or policy programs Instructions and/or supervision Audits Auditors The auditor: A SAI (or other auditors performing work on behalf of the SAI) The responsible party: Those entrusted with the management of public funds The intended users: Authorities within the constitutional system exercising monitoring and corrective functions

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

INTOSAI Professional Standards Committee Scope of the ISSAIs: Public auditing ISSAI 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

INTOSAI Professional Standards Committee 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.

INTOSAI Professional Standards Committee 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

INTOSAI Professional Standards Committee 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 Financial auditing Performance auditing Compliance auditing 3 branches of public auditing:

INTOSAI Professional Standards Committee 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

INTOSAI Professional Standards Committee 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 Proces Outcome Reporting 3 kinds of requirements:

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance No 4 (Australia) ´The Auditor-General’s functions include auditing financial statements ´

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance No 20 (South Africa) ‘the reported information relating to the performance of the auditee against predetermined objectives’

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance 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’

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance 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 transactions recorded in the account conform with the authority under which they purport to have been carried out. ’

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance No 9 (Ireland) Records of stocks or stores of any kind (including stocks of securities or 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.

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance ’Regularity audits’

INTOSAI Professional Standards Committee Proces- requirements Outcome- requirements Reporting- requirements Financial Processes of registration and internal controls (Recording in accounts which reflects the financial result) Reporting of historical financial information Compliance Procedures for the processing of cases and internal controls The public funds are obtained and used in accordance with law and propriety (Statements on compliance) PerformanceStrategies, planning and target setting on performance Achievement of the purposes intended in the most cost- effective way Reporting of non-financial information on performance ’Legality’

INTOSAI Professional Standards Committee 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.

INTOSAI Professional Standards Committee 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.

INTOSAI Professional Standards Committee 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.

INTOSAI Professional Standards Committee 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.

INTOSAI Professional Standards Committee 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

INTOSAI Professional Standards Committee 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

INTOSAI Professional Standards Committee 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)

INTOSAI Professional Standards Committee Agenda How can we best use level 3 (ISSAI )? How can we solve the main inconsistencies in the concepts and definitions? How can we ensure that the ISSAIs are useful for all SAIs? How do we move forward after todays discussion?

INTOSAI Professional Standards Committee SAI’s different functions

INTOSAI Professional Standards Committee Different public auditing assignments Express a statement of assurance Provide assessments Conduct inquiries

INTOSAI Professional Standards Committee The public auditing role of SAIs Executive/ Administrative function Budgetary/ legislative function SAI Publicly funded organisations, activities or policy programs Instructions and/or supervision Audits

INTOSAI Professional Standards Committee

No 15 (Norway) By auditing accounts, the Office of the Auditor General shall monitor whether the financial statements give a correct picture of the financial activity, including: a)confirm that the financial statements are free of material errors and omissions, and b) monitor whether the dispositions reflected in the financial statements are in accordance with the decisions and intentions of the Storting and the current regulations and whether they are acceptable in the light of the norms and standards for financial management in the central government.

INTOSAI Professional Standards Committee Entities Consolidated No 2 (Sweden) The audit shall be conducted in accordance with good auditing standards and be intended to assess whether the accounts and the underlying accounting are reliable and the accounting records true and fair. The auditor’s report on the annual accounts of the State shall be submitted to the Government and Parliament

INTOSAI Professional Standards Committee State accounts No 40 (France) The accounts of public administrations shall be lawful and faithful. They shall provide a true and fair view of the result of the management, assets and financial situation of the said public administrations.. Assurance statement on the state accounts

INTOSAI Professional Standards Committee

ISSAI ISSAI 3000 ISSAI

INTOSAI Professional Standards Committee Assurance engagementsRelated Services Subject:Reasonable Assurance Limited Assurance Historical financial information Auditing (ISAs) Review (ISREs) Related services: Agreed- Upon procedures and compiling of financial information (any other)Other assurance engagements (ISAEs) (ISRSs) The IAASB framework

INTOSAI Professional Standards Committee ISSAI ISSAI 3000 ISSAI

INTOSAI Professional Standards Committee ISAs Other assurance engagements

INTOSAI Professional Standards Committee ISA 200: ISAs are relevant to engagements in the public sector. The public sector auditor’s responsibilities, however, may [….] encompass a broader scope than an audit of financial statements in accordance with the ISAs. These additional responsibilities are not dealt with in the ISAs. They may be dealt with in the pronouncements of the International Organization of Supreme Audit Institutions.

INTOSAI Professional Standards Committee ‘The Court conducted its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions, in so far as these are applicable in the European Community context’ The European Court of Auditors annual report for 2007:

INTOSAI Professional Standards Committee Different claims That the SAI performs its duties in accordance with the ISSAIs That a set of standards or manuals conforms to the ISSAIs That a task of auditing has been carried out in accordance with the ISSAIs That a financial auditing task has been carried out in accordance with the ISAs as further elaborated by the ISSAI financial auditing guidelines

INTOSAI Professional Standards Committee Proposed directions The fundamental auditing principles should : Ensure the ISSAIs are applicable to the many different kinds of public auditing assignments, which SAIs in the different regions of the world have been given by their legal mandates Define how claims of compliance with the ISSAIs should be understood

INTOSAI Professional Standards Committee Agenda How can we best use level 3 (ISSAI )? How can we solve the main inconsistencies in the concepts and definitions? How can we ensure that the ISSAIs are useful for all SAIs? How do we move forward after today’s discussion?

INTOSAI Professional Standards Committee Caracteristics of an auditing assignment 1.The object 2.The subject (subject matter or subject matter information) 3.The audit criteria 4.The resolve (result to be achieved by the auditor) 5.The reporting 6.The intended users

INTOSAI Professional Standards Committee Ways to build on other standards “Inspiration”: Consider a variety of documents from different sources but draw up an original new text. “Patchwork”: Merge concepts and text of standards or guidance documents from more than one source in order to arrive at a new text. “Cover version”: Use the concepts and texts from a single source and elaborate or modify in order to arrive at a new text. “Commenting”: Refer explicitly to a specific set of documents and elaborate further on these by drafting additional and detailed guidance. “Gate keeping”: State a few general principles and leave it to another standard setter to provide further standards which are to apply unless they are in conflict with the principles. “Reference”: State as a principle that any standards supplied by a specific standard setter should apply.

INTOSAI Professional Standards Committee Criteria for choice of ”external” standards Applicability Relevance Usefulness Languages and user concerns Reciprocity Wide recognition

INTOSAI Professional Standards Committee Proposed directions The initial assessment - phase 1: Gather information from INTOSAI’s regions on the mandates of SAIs on the following characteristics of the auditing assignments: The object, subject, criteria and resolve of the audit and the reporting to intended users. Develop the necessary and appropriate distinctions between different kinds of assignments (e.g. assignments to provide a statement of assurance vs. other assignments).

INTOSAI Professional Standards Committee Proposed directions The initial assessment - phase 2: Consider standards from the relevant national, regional and international sources which may be of relevance to the assignments identified (“the dual approach”). The dual approach will not be fully applied to assignments designed to provide assurance statements. Instead, the consideration of other standard setters will from the outset be limited to the standards of IAASB/IFAC. The key criteria when considering standards from other standard setters will be: applicability, relevance, usefulness, languages and user concerns, reciprocity and wide recognition.