Convergence of public sector audit standards

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Convergence of Public Sector Audit StandardsJan Van Schalkwyk, Acting Corporate Executive - Auditor-General of South AfricaKelly Anerud , Senior Technical Manager, The International Federation of Accountants (IFAC) Gail Flister Vallieres, Assistant Director, Financial Management and Assurance GAOJeanette Franzell, Managing Director, Financial Management and AssuranceGAO, Moderator

Transcript of Convergence of public sector audit standards

  • 1. Convergence of Public Sector Audit Standards December 6, 2010 Jeanette Franzel, Managing Director, GAO Kelly Anerud, Senior Technical Manager, IFAC Jan Van Schalkwyk, Corporate Executive,Auditor-General of South Africa Gail Flister Vallieres, Assistant Director, GAO

2. Background

  • INTOSAI has created a robust set of Financial Audit Guidelines for public sector entities by leveraging international standards and providing relevant guidance for the government environment.
  • A group of experts from the INTOSAI community has developed Practice Notes to be used in conjunction with the International Standards of Auditing (ISAs) issued by IFACs International Auditing and Assurance Board (IAASB).

3. Objectives

  • In this session, we will discuss the guidelines, how they relate to national standards, and how they are being implemented by INTOSAI members.
  • In addition, this session will discuss GAOs Yellow Book in relation to INTOSAI and international standards.

4. Development of INTOSAI Financial Audit Guidelines and Collaboration With IAASB 5. Financial Audit Guidelines Strategy for Development

  • Strategic Objective
  • To develop high quality guidelines that are globally accepted for the audit of financial statements in the public sector.
  • Strategy
  • To leverage the expertise and resources of the IAASB, an internationally respected auditing standards setting organization, in a strategic and cooperative partnership.

6. Financial Audit Guidelines I nternational S tandard onA uditing P racticeN ote + I nternationalS tandards ofS upremeA uditI nstitutions = 7. Financial Audit Guidelines Structure for Development *Led by Swedish National Audit Office. Members include SAIs of Cameroon, Canada, Korea, European Court of Auditors, Mexico, Namibia, Norway, South Africa, United States, United Kingdom INTOSAI Professional Standards Committee INCOSAI INTOSAI Governing Board SAI Independence Accounting Standards & Reporting Internal control Standards Performance Audit Compliance Audit Financial Audit Guidelines* Focus Group Project Director & Project Secretariat Reference Panel Issues Paper First Read Exposure Draft Review of Comments Final ISA PSC IAASB INTOSAI Practice Note 8. Provide Public Sector Perspectives

  • Member and Technical Advisor on IAASB
  • Participation in IAASB Task Forces for ISAs
    • Public sector input to the ISA
    • Parallel development of INTOSAI Practice Note
  • Practice Notes Task Forces for other ISAs
  • INTOSAI input compiled for IAASB meetings
  • INTOSAI representative on IAASBs Compliance Advisory Group

9. Specific Public Sector Considerations

  • Terminology
  • Broader Mandate
  • Inability to Withdraw
  • Terms of Engagement vs. Legal Mandate
  • Quality Assurance
  • Documentation

10. Specific Public Sector Considerations

  • Fraud and error
  • Communication
  • Risk Assessment
  • Materiality
  • Reporting

11. Implementation of Auditing Standards Practical Lessons Learnt 12. Why do we audit?

  • The Auditor-General South Africa has a constitutional mandate and, as the SAI of South Africa, it exists to strengthen our countrys democracy by enablingoversight ,accountabilityandgovernancein the public sector through auditing, thereby buildingpublic confidence .
  • This is our reputation promise!!

13. Standards Defined

  • Set of credible, widely acceptable pronouncements that guide the execution of audits.
  • Public sector options:
    • International Standards on Auditing (ISAs), supplemented by the International Standards for Supreme Audit Institutions (ISSAIS)
    • INTOSAI framework level 3 standards supported by level 4 guidance
    • National Standards

14. SA SAI Situation

  • Adopted ISAs during 2005
  • Believe in early adoption of any work done by standard-setters, as long as these developments do not contradict current baseline
  • Full implementation of clarified ISAs, with first round of independence quality review currently underway
  • Same principle applies to the pro-active adoption of ISSAIs
  • Involvement in standard-setting

15. The Challenge of Implementation

  • Status of developments (standards, methodology, working papers, technical guidance)
  • Conceptual thinking behind manuals and working papers
  • Governance arrangements
  • Manuals (development, maintenance)
  • Working papers (development, maintenance)
  • Training
  • Other considerations

16. Status of Adoption, Methodology and Working Papers

  • Adoption of standards
    • Requires legal standing, possibly after extensive appropriate consultation
    • SA SAI- annual promulgation of Audit Directive in terms of Public Audit Act (adoption of standards AND key decision-making moments)

17. Status of Adoption, Methodology and Working Papers (continued)

  • Development of methodology, manuals and working papers
    • Requires appropriate governance process, confirming:
      • Adherence to auditing standards
      • Practical and relevant
      • Responsive to needs of users (without compromise to independence)
      • Extensive appropriate consultation

18. Status of Adoption, Methodology and Working Papers (continued)

  • SA SAI set governance processes with accounting and auditing profession, national treasury, auditors (through product champions), support staff and stakeholders (Parliament, Legislatures, APAC, media)

19. Conceptual Thinking Behind the Manual and Working Papers

  • Speed of implementation
    • Internal readiness
    • External readiness
    • Is the high requirements associated with ISA implementation a limitation OR an opportunity to give more momentum to transformation?

20. Conceptual Thinking Behind the Manual and Working Papers (Continued)

  • Level of guidance detailed, but then auditors go for compliance rather than thinking about what they want to achieve
  • Cost of implementation (phasing, more guidance to allow for less skilled users/ lower costs)
  • Back-up processes
    • Governance processes
    • Training processes
    • Ongoing guidance
    • Consultation processes (during audits)

21. Governance Arrangements

  • Oversight Technical Committee
  • Extensive stakeholder interaction program that feeds into TC and related meetings
  • Key stakeholders
    • Tri-lateral strategic meeting (AG, ASB and NT future strategic issues)
    • Wednesday meetings (AGSA, ASB and NT ongoing operational issues)

22. Governance Arrangements (Continued)

  • Forums
    • Profession level
      • Accounting SAICA
      • Auditing IRBA / INTOSAI FAS
  • Auditors through product champions (user interface)
  • Support services (as and when required)

23. Audit Manuals

  • Key interpretation of standards
  • Serve as key policy statement, covering all normal aspects of work
  • Talks directly to credibility of work (stand in court principle)
  • Address any unique applications in area, due to mandate, legislation, nature of entities at hand, etc
  • Cant stand alone, need back-up through working papers, training, guidance, etc.

24. Working Papers

  • Make the standards and manual practical
  • Enough guidance to ensure adherence to standards, but to also allow for auditors to still think
  • Give structure to the thinking of the auditor
  • Must include prompts to the REQUIREMENTS of the standards
  • Must ensure documentation of audit work in line with standards
  • Electronic working papers is a must!!!

25. Training

  • Focus on the essence of audit (what do we want to achieve rather than compliance focus)
  • Practical, simulation driven
  • Just-in time / support during cycle
  • Pro-active
  • Structured

26. Other Considerations

  • Executive / top management buy-in
  • S