| Goal 1 Report |
Accountability and Professional Standards
Henrik Otbo, Auditor General of Denmark and the chairman of INTOSAI's Professional Standards Committee (PSC), presented the PSC's report to the Governing Board and INCOSAI in November 2007. The report affirmed the PSC's purpose-promoting strong, independent, and multidisciplinary SAIs and encouraging SAIs to lead by example and develop appropriate and effective professional standards. The report also summarized the work of the PSC and its subcommittees since 2004, the PSC's planned work for 2007-2010, and the list of documents presented to the XIX INCOSAI for endorsement. The Congress unanimously approved the report and endorsed the documents.
As demonstrated by the report, the PSC has come a long way since it was formally established in 2004. Mr. Otbo acknowledged several factors that contributed to that progress-first, the fact that some of the subcommittees had already been created and were working very efficiently when the PSC was established and, second, the dedicated work of the PSC steering committee, which was set up at the inaugural meeting in 2005. The steering committee quickly launched new initiatives and formulated a set of strategic goals to safely guide the committee's work. Mr. Otbo reported that all the goals had been accomplished.
PSC Chair Henrik Otbo (right) and his staff
from the Danish SAI made themselves
available at the goal 1 exhibit to discuss the
committee’s work with delegates.
The PSC's 16-member steering committee includes the SAIs of Bahrain, Belgium, Brazil, Cameroon, Canada, China, Denmark, France, Italy, Morocco, New Zealand, Norway, Portugal, Sweden, the United States, and Zimbabwe. Since its inaugural meeting in Oslo, Norway, in August 2005, the steering committee has met three more times, with the latest meeting being held in Manama, Bahrain, in April 2007.
The following sections summarize the PSC's progress in achieving its strategic goals under goal 1 of the INTOSAI strategic plan, the work of the PSC's subcommittees, and the publications endorsed by the congress.
Development of a Common Framework for All INTOSAI Professional Standards
INTOSAI's strategic plan for 2005-2010 proposed that an up-to-date professional standards framework relevant to INTOSAI members be developed. The PSC therefore elaborated a framework of professional standards with the assistance of many INTOSAI members and in cooperation with the chair of goal 3 of the INTOSAI strategic plan. After the PSC steering committee and the INTOSAI Governing Board approved the framework in 2006, it was distributed to all SAIs for comment in December 2006.
All existing and new INTOSAI standards and guidelines have been merged into a common framework called International Standards of Supreme Auditing Institutions (ISSAI). Documents issued by INTOSAI concerning guidance to administrative authorities—on topics such as internal controls and accounting—are called INTOSAI Guidance on Good Governance (INTOSAI GOV). All the standards and guidelines are numbered in accordance with a set of classification principles and published on INTOSAI’s new official Web site for professional standards: http://www.issai.org. Table 1 presents the framework.
The new ISSAIs were made available to
delegates throughout the week at the PSC
exhibit.
While this framework will not affect the content of existing documents, its systematic classification of the documents and new common name will promote general knowledge of the standards and guidelines and facilitate their practical use in the INTOSAI community and in public administration in general. At the same time that the framework was being circulated for comment to all SAIs in December 2006, the PSC surveyed SAIs on needs and priorities in developing professional auditing standards and guidelines. The survey results provided input to the present structure of the framework and the future development of ISSAIs and INTOSAI GOVs. The survey showed that
- about three-quarters of all SAIs use INTOSAI auditing standards, often in combination with standards from other sources;
- almost all SAIs feel that INTOSAI guidelines are needed and should be further developed; and
- there is widespread consensus that differences between public and private sector auditing create the need for special public sector auditing guidance in some areas.
Subcommettee Accomplishments
The chairs of the PSC subcommittees reported on subcommittee accomplishments and projects.
Subcommittee on SAI Independence-Mexico Declaration on SAI Independence (ISSAI 10)
Sheila Fraser (right), Chair of the
Subcommittee on SAI Independence,
presented the Mexico Declaration for
endorsement by the congress. She is
accompanied by key staff member Jean St.
Marie (left).
Sheila Fraser, the Auditor General of Canada, reported on behalf of the Subcommittee on SAI Independence. Over the preceding 3 years, the subcommittee developed a charter on SAI independence (ISSAI 10: Mexico Declaration on SAI Independence) through a collaborative and consultative process that was tested through case studies of selected SAIs and a related survey questionnaire. The adoption of this charter at the XIX INCOSAI was an important milestone in the history of INTOSAI. The congress also approved ISSAI 11-Guidelines and Good Practices Related to SAI Independence and ISSAI 11A-Appendix-Results of Case Studies. With the completion of these publications, the subcommittee's work was completed and the subcommittee was dissolved.
Project on Transparency and Accountability (ISSAI 20)
The INTOSAI strategic plan for 2005-2010 calls for the development of accountability and transparency principles as an integral element of SAI efforts to lead by example. To promote the development of these principles, the PSC established a project on transparency and accountability, which is currently chaired by the SAI of France. Danielle Lamarque, the project chair and representative from France, reported that the project team analyzed topics related to accountability and transparency in the annual reports and on the Web sites of 23 SAIs and identified different methodologies used to report on performance, difficulties in defining quantitative performance indicators, and differences in definitions of stakeholders.
The project team also identified five main areas in which accountability and transparency need to be addressed: SAIs' mandates, responsibilities, missions, and strategies; audit standards and methods; management and finance; ethics; and reporting on activities. The team also plans to (1) draft a list of key information or features related to SAI structure, activities, and accountability that each SAI should make available to the public and (2) disseminate best practices that illustrate the guidelines that INTOSAI has promoted to date. ISSAI 20-Draft Principles of Transparency and Accountability was presented for approval by the congress.
Subcommittee on Financial Audit Guidelines (ISSAI 1000-2999)
Karin Lindell, Auditor General of Sweden, gave the report on the development of financial audit guidelines. In accordance with its strategic goals for 2004-2007, the Subcommittee on Financial Audit Guidelines (FAS) developed globally accepted guidelines for the audit of financial statements. Each guideline comprises an International Standard on Auditing (ISA) developed by the International Federation of Accountants' International Auditing and Assurance Standards Board (IAASB) and a practice note developed by INTOSAI. (Additional ISSAIs not including an ISA will be developed for specific issues.) To date, the FAS has drafted 13 practice notes, 9 of which were presented to and endorsed by the congress:
- ISSAI 1220-Quality Control for Audits of Historical Financial Information
- ISSAI 1230-Audit Documentation
- ISSAI 1260-Communication of Audit Matters with Those Charged with Governance
- ISSAI 1300-Planning an Audit of Financial Statements
- ISSAI 1315-Identifying and Assessing the Risks of Material Misstatements Through Understanding the Entity and Its Environment
- ISSAI 1330-The Auditor's Responses to Assessed Risks
- ISSAI 1450-Evaluation of Misstatements Identified During the Audit
- ISSAI 1800-Special Consideration-Audits of Special Purpose Financial Statement
- ISSAI 1805-Engagements to Report on Summary Financial Statements
Two additional documents were presented as exposure drafts:
- ISSAI 1000-Implementation Guidelines on Financial Audit-Introduction
- ISSAI 1320-Materiality in Planning and Performing an Audit
In addition, INTOSAI experts are currently developing 10 more practice notes (5 in ongoing IAASB task forces, 2 in a practice note task force, and 3 in a special expert team), and new task forces will be established in 2008.
Looking to the future, the subcommittee's goal is to present a comprehensive set of guidelines that will provide in-depth guidance for INTOSAI auditing standards by 2010. Although not compulsory, the guidelines will constitute an INTOSAI recommended best practice.
All guidance developed by the FAS is available for comment on its Web site (http://psc.rigsrevisionen.dk/fas). Each guideline has received between 10 and 20 comment letters, which have been very useful. The SAI community is encouraged to submit further comments to improve the usefulness and quality of the guidance.
Subcommittee on Performance Audit (ISSAI 3000-3999)
The Subcommittee on Performance Audit (PAS) is chaired by the SAI of Brazil and comprises representatives from SAIs in different INTOSAI regions and the European Court of Auditors. Its purpose is to promote INTOSAI implementation guidelines for performance audit and to develop and disseminate other guidance that may be needed by the INTOSAI community to finalize the development of INTOSAI performance audit guidelines (ISSAI 3000-3999).
Since its establishment in 2005, the PAS has consulted with the INTOSAI Development Initiative about its approach to performance audit training and ways that INTOSAI guidelines fit into that training. In addition, technical staff at the Brazilian Court of Audit analyzed the results of the PSC survey on the use of INTOSAI and other standards and concluded that a significant demand exists to develop additional performance audit guidelines beyond ISSAI 3000-Implementation Guidelines for Performance Auditing, which was endorsed by INCOSAI in 2004.
Over the next 3 years, the PAS will continue to follow up on the survey results with the INTOSAI community to identify specific needs for additional guidelines and develop drafts to supplement the ISSAI 3000 guidelines. The PAS will develop draft guidelines on applied qualitative and quantitative methods used in performance audits (ISSAI 3100).
In addition, the PAS intends to use the results of IDI's 2007 needs assessment for future capacity building to identify regional demands for additional performance audit training. The PAS will also continue to promote international cooperation among agencies and provide capacity-building assistance in performance audit for SAIs.
Subcommittee on Compliance Audit (ISSAI 4000-4999)
The Subcommittee on Compliance Audit's (CAS) overall objective is to develop INTOSAI guidelines for compliance audit. Since it was established in 2004 the CAS has presented information and issue papers giving an overview of the different mandates SAIs have regarding compliance audits and clarifying the term "compliance audit." Jørgen Kosmo, the Auditor General of Norway, reported that as the CAS sought to develop practical guidance on how compliance audits should be planned, executed, and reported, it focused its efforts on the integral relationship of compliance audits to audits of financial statements. The CAS presented to the XIX INCOSAI an exposure draft of ISSAI 4100-Compliance Audit Guidelines Related to Audit of Financial Statements.
For 2007-2010, the CAS will incorporate comments received on ISSAI 4100 and finalize the development of a complete set of compliance audit guidelines, including ISSAI 4000-A General Introduction to Guidelines on Compliance Audit and ISSAI 4200-Further Guidance on the Broader Scope of Compliance Audit, which will provide guidance on compliance audit as part of performance audit or as a separate audit type. The complete guidelines will be presented at INCOSAI 2010.
Subcommittee on Internal Control Standards (INTOSAI GOV 9100-9199)
F. Vanstabel, the Senior President of the Court of Accounts of Belgium, presented the report of the Subcommittee on Internal Controls. In 2004-2007, the subcommittee focused on elaborating and marketing INTOSAI GOV 9100-Guidelines for Internal Control Standards for the Public Sector, which was endorsed at the XVIII INCOSAI. A survey of INTOSAI members indicated a need for internal control tools and guidance on governance. Rather than creating new tools and guidance, the subcommittee focused on making existing internal control tools and guidance available to all SAIs through the PSC's Web site, thus creating an electronic platform in the short term. In the future, INTOSAI members will be asked to provide the subcommittee with existing material that can be made available on the platform, leading to the development of a central index.
Given the significant shift in the last few years toward risk management implementation based on the Treadway Commission's COSO Enterprise Risk Management (ERM) framework, the subcommittee introduced the ERM framework as an explanatory document to INTOSAI GOV 9100. The new document endorsed at the congress, INTOSAI GOV 9130-Further Information on Entity Risk Management, explains the relationship between the guidelines and the ERM model and provides an overview of the key features of the ERM model.
In 2008-2010, the subcommittee will carry on its efforts to enhance the application of INTOSAI GOV 9100-Guidelines for Internal Control Standards for the Public Sector by focusing on making existing internal control tools and guidance available to all SAIs through the PSC's Web site, as well as further developing and augmenting the guidelines by monitoring their support and acceptance.
Subcommittee on Accounting and Reporting (INTOSAI GOV 9200-9299)
At the congress, the chairmanship of the Subcommittee on Accounting and Reporting was passed from David Walker, Comptroller General of the United States, to the Auditor General of Canada. The subcommittee has primarily been participating in the accounting standard-setting meetings of the International Federation of Accountants' (IFAC) International Public Sector Accounting Standards Board (IPSASB), which allowed it to provide input during the development of exposure drafts of accounting standards as well as the deliberations on the final standards. During the past 3 years, the IPSASB issued 4 new standards and updated 12 International Public Sector Accounting Standards (IPSAS), including amendments to the standard on the cash basis of accounting.
As the IPSASB looks to future projects-including conceptual frameworks, social benefits, long-term fiscal sustainability, impairment of cash-generating assets, employee benefits, financial instruments, service concession arrangements, external assistance, entity combinations, heritage assets, and improvements to IPSAS-the subcommittee will continue to participate in discussions, update the INTOSAI membership about current activity, and facilitate information exchanges among SAIs.
PSC Goals for 2007-2010
In 2007–2010, the PSC will continue to develop and promote the ISSAIs by providing practical guidelines on financial, compliance, and performance audits and other areas of importance to SAIs.
Specifically, the PSC will work to
- harmonize public sector audit internationally by coordinating with other standard-setting bodies and developing supplementary guidance in areas where SAIs have special needs,
- give high priority to ensuring clear and user-friendly guidance on the special role of SAIs and particular features of public sector auditing, and
- prepare a decision on permanent maintenance of the set of ISSAIs.
The PSC set the following strategic goals to be accomplished before the next INCOSAI in 2010:
- Present a set of principles on transparency and accountability for approval (ISSAI 20).
- Present a set of principles on SAI audit quality control (ISSAI 40).
- Present a comprehensive set of implementation guidelines on financial audit (ISSAI 1000-2999) that, to the greatest extent possible and appropriate, are based on the International Auditing Standards (ISA) issued by the International Federation of Accountants and contain practice notes and supplementary guidance on issues of special importance to SAIs.
- Present a comprehensive set of implementation guidelines on performance audit (ISSAI 3000-3999). In addition to the existing performance audit guidelines (ISSAI 3000), the committee will consider guidelines for smaller scale performance audit tasks, e.g., audits of performance statements.
- Present a comprehensive set of implementation guidelines on compliance audit (ISSAI 4000-4999) that meet the needs of the various tasks of SAIs, taking into consideration the differences in their legal status and mandates.
- Continue to provide and promote INTOSAI Guidance for Good Governance (INTOSAI GOV).
- Continuously make all relevant documents accessible at http://www.issai.org in a user-friendly format. This task will be carried out in close cooperation with the goal liaison and working groups of goal 3, the Capacity Building Committee, and INTOSAI’s General Secretariat.
- Present a proposal for a permanent structure and mandate for the continuous updating and improvement of the ISSAIs that is to be effective after 2010, following approval by the XX INCOSAI.
- Continue partnerships with other external standard setters in order to facilitate knowledge sharing and cooperation.