EAAPAC

EAAPAC TRAINING FOR MEMBERS OF NEW PACs – JUBA SOUTH SUDAN

February 6 – 8, 2013

External Audit

• Audit Concept:The word audit comes from the Latin word "audire" which means to hear or listen. Translates an old custom: the presenting problem situations to a wise man who, after listening attentively, gave his judgment. The current definition of audit retained several aspects of this ancient practice

External Audit……….

• Audit is the review of evidence collected on one or more aspects of the audited institution according to previously defined standards and in order to express an opinion.

• The auditor collects empirical evidence on the subject of audit. For this purpose you can apply various techniques to collect information and data, for example, interviews, document review and research.

• The audit may be directed to various aspects of the institution. For example, it can be a financial audit, legal/regularity, computer or environmental audit.

External Audit……..

• To form an opinion audit evidence need to be reviewed against a standard.

• The opinion need to be issued by an auditor who is recognized as a professional. Audit opinion gives credibility and confidence in on the financial reports being audited.

• In many countries there is specific legislation that recognizes the audit profession and its institutions

Types of Audit:

• Financial Audit

• Regularity Audit

• Compliance Audit

• Performance / Value for Money Audit

Types of Audit ……

• FinancialChecks the accuracy and fairness of the financial statements based on observation of accounting documents in order to establish the authenticity of transactions in the books of accounts and consolidated financial statements;

• Audit observations are recorded in an audit report that lists all errors and irregularities that were detected and accompanied by formal opinion on whether the financial statements give a true and fair view of the financial position of the Government and if the receipts and payments have been applied according to the budget approved by respective authority.

Types of Audit……

• Regularity Audit Refers to the review, verification and evaluation of

controls and operating procedures of an entity;

• Determines if the following conditions were met: The expense was authorized by a competent authority?

• The expense was authorized by law and budget and held in accordance with the terms of the Act?

• Is the expenditure in accordance with the procedures (rules, regulations and orders) promulgated under the country's laws and several other public finance regulations?

Types of Audit……

• PerformanceThis is a wider examination of the administration, technical resources and performance of an entity;

• Measures the degree of achievement of the entity's activities in relation to its objectives;

• It implies that the auditor is familiar with the technical aspects and management programs – this is a costly audits;

• Performance audit reports on the following three factors: Economy, Efficiency and Effectiveness

Audit Opinions:

• Opinion without Qualifications

When the auditor believes that all aspects mentioned above were all achieved. That is, there are no material aspects that may affect the auditor's judgment and the quality of financial statements

Audit Opinions….

• Emphasis on Matter

When the auditor wishes to emphasize a particular issue in the financial statements but that does not affect their opinion itself (which in these cases is in general qualified to adverse). This emphasis is presented in a separate paragraph in the audit report.

Audit Opinions

• Qualified Opinion When the auditor believes that the financial

statements and other information results in a misleading reflection of the facts.

• Adverse Opinion When the auditor has concerns materially

relevant in relation to the financial statements and they do not give a true and fare view.

Audit Opinions….

• No Opinion

When the auditor failed to gather evidence and insufficient evidence to issue its opinion. It happens when the auditor does not have access to all books and records of accounts and transaction details.

Audit models:

Major Models of Auditor

Westminster or Anglo-Saxon or Parliamentary • Assume the roles of "driver"; Requires an active role of Parliament and gives

opportunity for CEOs participation in this way; Requires commitment and action of the Government

in implementing the recommendations

Audit models…….

Countries using the Westminster or Anglo-Saxon or Parliamentary:

UK and most Commonwealth countries including some countries in Sub - Saharan Africa, Caribbean and a few countries in Europe and Latin America.

Audit models…….

Judicial or Napoleonic or Francophone• Public managers are personally liable for acts done; The interaction with the Parliament is limited and

only requires the submission of the audit to the Court of Audit

Assume also control functions of public expenditure: prior approval and subsequent review;

The follow-up implementation of the recommendations is limited;

Audit Model…..

Countries using the Judicial or Napoleonic or Francophone

Most francophone countries and a number of Latin American countries, including Brazil and Colombia, Mozambique.

Audit models…….

Department or College Model very close to the parliamentary model;

This model is very inclusive Executive participation is very high;

Audit models…….

Countries using Department or College

• Most countries of Southeast and East Asia and a few Latin American countries such as Argentina.

Thank you

• Ahsante sana