AUDITING

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AUDITING

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To provide certain degree of assurance that the activities reviewed (financial statements, operations, management practices, etc.) have been performed in accordance with applicable standards or practices.

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Nội dung Text: AUDITING

  1. AUDITING q Systematic process of objectively obtaining and evaluating evidence » Regarding assertions about economic actions and events; » To ascertain the degree of correspondence between those assertions and established criteria; and » Communicating the results to interested users (AAA)
  2. Purpose of an Audit To provide certain degree of assurance that the activities reviewed (financial statements, operations, management practices, etc.) have been performed in accordance with applicable standards or practices.
  3. Standards on Auditing q Either: International Standards on Auditing, issued by IFAC (International Federation of Accountants) q or: Standards for Government Auditors, issued by INTOSAI (International Organization of Supreme Audit Institutions)
  4. AUDIT COMPLIANCE TYPES OF AUDITS q Financial q Compliance q Operational
  5. FINANCIAL AUDITS q The Implementing Organization’s Financial Statements q Project Financial Statements q Statements of Expenditures (SOEs) q Special Bank Account (SA)
  6. Implementing Organization’s  Financial Statements Overall objective is to express an opinion on fairness of statements Phases: q Understanding the Organization q Evaluating Internal Controls q Testing Financial Statement Balances
  7. Understanding the Organization q Nature of the Organization’s Activities q Organization’s Background q Significant Trends and Relationships q Staff Appraisal Report (SAR) q Loan Agreement q Other Documents Pertaining to the Project
  8. Evaluating Internal Controls q Purpose: To determine the audit tests required for forming an opinion q How much Reliance on internal controls? q Extent of Validation? » Tests of Compliance » Tests of Transactions Not an endorsement of the overall adequacy of the internal control system
  9. Testing the Balances q Purpose: To determine if information is fairly presented q Examples: » Observation of Inventory-taking » Verification of Fixed Assets » Direct Verification with Third Parties Level of Testing Might Depend on Results from Prior Phases
  10. Audit of Project Financial  Statements q Overall Objectives » Statements fairly presented? – For the period – Cumulatively q Disbursements made in accordance with: » Loan agreement » SAR q Fair presentation of balance sheets, especially assets
  11. Audit of Project F/S (cont.) q Similar to the audit process for the entity’s financial statements, except: » Greater emphasis on inspection of valid supporting documentation » Additional steps, such as physical observation of significant items, to substantiate the validity of expenditures reported.
  12. Audits of SOEs Primary objective is to ascertain that individual expenditures reported in the SOEs are: q Fully supported by proper documentation in files q Properly authorized and eligible q Appropriately accounted for
  13. Audits of SOEs ...Continued q Why? » Because withdrawal requests are not supported by documentation submitted to the Bank q Effect? » Results of audit are basis for determining whether to continue use of SOEs, or if adjustment must be made on subsequent claims
  14. Audits of Special Accounts Primary objectives are to verify that: q SA financial statements are fairly presented, and q disbursements from SAs are proper and in accordance with the respective loan agreements
  15. Audits of Special Accounts  (cont.) q Auditors should: » Review the SA records maintained by the Implementing Institution » Review the SA bank statements » Reconcile (including tracking of in-transit items) » Directly confirm balances with Bank » Examine treatment and disclosure of interest earned on SA
  16. Audits of Adjustment Loans q Primary focus is on the adequacy of procedures used to prepare customs or similar certificates. q Limited to examining certificates on which SOEs have been based and determining reliability of the procedures applied in verifying or issuing such certificates
  17. Audits of Adjustment Loans (cont.) q Important issues: » TOR must satisfy financial covenants » Documentation must not have been used to justify another adjustment loan » Claims must be properly documented » Negative list items must be verified » Cut-off dates must be verified
  18. Requirements for Auditors q Adherence to principles of integrity, objectivity, independence and confidentially q Adequate and Competent Staff q Work performed by personnel who have technical training and proficiency q Proper direction and supervision of work (includes quality control)
  19. Selection of Auditors q Preferably independent auditors who meet ISA criteria and are members of bodies affiliated with IFAC q Government audit institutions should subcontract with audit firms until equivalent independence and technical competence is achieved. The Bank can help them to meet this goal
  20. Determining Auditor  Acceptability q TM should consult with an accounting professional and consider the following: » Evidence of independence » Qualifications and experience of key personnel » Time and personnel reqs. of the audit » Experience with: – Bank projects – Operations similar to the project » Peer review, quality control, CPE
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