Professional Documents
Culture Documents
Table of Contents
1 Summary of Workbook and Learning Objectives....................................................................1
2 Concepts of Accountability, Transparency and Control........................................................... 2
Linkage between accountability, transparency and control............................................................................ 2
Accountability............................................................................................................................................ 2
Transparency............................................................................................................................................ 3
Concepts of control.................................................................................................................................... 4
Concept of audit........................................................................................................................................ 4
3 Independent Audit in the Public Sector.................................................................................. 6
The Supreme Audit Institution.................................................................................................................... 6
SAIs and INTOSAI..................................................................................................................................... 8
SAI legal and regulatory framework.......................................................................................................... 11
Types of audit......................................................................................................................................... 17
4 Internal Financial Control...................................................................................................... 20
Introduction............................................................................................................................................ 20
Framework for internal control.................................................................................................................. 21
5 Internal Audit........................................................................................................................ 25
Introduction............................................................................................................................................ 25
International Standards for internal audit.................................................................................................. 27
Relationship between internal and external audit and internal control.......................................................... 27
6 Feedback from information to policy..................................................................................... 30
Introduction............................................................................................................................................ 30
Parliament and PFM................................................................................................................................. 30
PFM and Civil Society participation............................................................................................................ 31
Table of Figures
Figure 1: Linkage between accountability, transparency and control 2
Figure 2: Accountability and agency theory 3
Figure 3: IMF Four Pillars of Fiscal Transparency 4
Figure 4: Audit and accountability 5
Figure 5: SAI within the public sector 6
Figure 6: Types of government audit 8
Figure 7: INTOSAI Auditing Standards 10
Figure 8: Regulatory structure 11
Figure 9: Relationship of SAI to other organisational entities 13
Figure 10: Three dimensions of SAI independence 15
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List of Tables
Table 1: Coverage and learning objective 1
Table 2: Summary of desirable features of an SAI 7
Table 3: Audit comparison 17
Table 4: Audit overview 28
Table 5: Areas of information for communication 33
Table 6: Tools for communicating with CSOs 33
List of Boxes
Box 1: Definition of fiscal transparency 3
Box 2: The INTOSAI Lima Declaration founding principles 8
Box 3: INTOSAI audit standards 10
Box 4: Definition of internal control 20
Box 5: Definition of risk management 23
Box 6: Comparison internal and external audit reporting responsibility 29
Box 7: OECD recommendations for parliamentary participation in the budget 30
Box 8: Case study CSO support action plan 34
Abbreviations
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EU European Union
GDP Gross Domestic Product
GFS Government Finance Statistics
GFSM Government Finance Statistics Manual (published by the IMF)
GGS General Government Sector
GOSL Government of Somaliland
IAS International Accounting Standards
IFAC International Federation of Accountants
IFRS International Financial Reporting Standards
IMF International Monetary Fund
INTOSAI International Organization of Supreme Audit Institutions
IPSAS International Public Sector Accounting Standards
IPSASB International Public Sector Accounting Standards Board
ISA International Standards on Auditing
ISSAI International Standards of Supreme Audit Institutions
MDA Ministry, Department and Agency
MoF Ministry of Finance
MTBF Medium Term Budget Framework
MTEF Medium-Term Expenditure Framework
OECD Organisation for Economic Development and Cooperation
PAC Parliamentary Accounts Committee
PEFA Public Expenditure and Financial Accountability
PER Public Expenditure Review
PFM Public Financial Management
SAI Supreme Audit Institutions
TSA Treasury Single Account
VFM Value For Money
WB World Bank
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This workbook covers two areas of the financial management cycle as described below.
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2 CONCEPTS OF ACCOUNTABILITY,
TRANSPARENCY AND CONTROL
Accountability
Accountability requires the existence of two parties:
A who gives an account - in the public sector this is the government, public sector entity or
an individual official
B who receives the account - in the public sector this is the citizen represented by
Parliament
The concept of accountability is linked to the agency theory of government, in which citizens
entrust their money and other resources to government (their agent). The government then accounts
to the citizens for its policies and management of the country.
A similar concept of accountability can be applied in the private sector. In the case of companies, the
Board of Directors accounts to the shareholders for the use of the latters funds. This model of
accountability is represented in Figure 2 below.
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To be effective accountability must imply some power of B (the citizens or shareholders) over A (the
government or Directors). Whilst this power exists in general for both governments and companies
through the democratic process, it is difficult to apply for specific policies or management actions.
Hence, this model of accountability is difficult to operationalise effectively.
Audit and mechanisms for follow up are essential to make accountability effective, as described within
this workbook.
Transparency
1
The IMF Code of Good Practice on Fiscal transparency (updated in 2014) provides a definition of
fiscal transparency as in Box 1 below.
Fiscal transparency is a critical element of fiscal management and accountability. It ensures that
governments have an accurate picture of their fiscal position and prospects, the long-term costs and
benefits of any policy changes, and the potential risks that may blow them off course. It also provides
legislatures, markets, and citizens with the information they need to hold governments accountable.
The IMF Code of Fiscal Transparency envisages four pillars of fiscal transparency as illustrated in
Figure 3 below.
1
http://www.imf.org/external/np/fad/trans/
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Concepts of control
Control is defined in the Oxford English Dictionary as the power to influence or direct peoples
behaviour or the course of events. In the context of PFM control has a specific and narrower
meaning. A common definition is the policies and procedures put into place by a business or
organization to track, manage and report its financial resources and transactions . A financial control
system as comprises three elements:
1. A set of related dollar denominated variables used by management to control an
organization, the people in the organization, the resources used by the organization
2. The people involved in establishing, maintaining, monitoring and evaluating these variables,
and
3. The process, rules and procedures that govern the establishment, maintenance and
monitoring of these variables.
Financial control will be examined in Section 4 below to apply these concepts.
Concept of audit
An external audit, often referred to as a statutory audit, has been described as the independent
examination of, and expression of opinion on, the financial statements of an enterprise, by an
appointed auditor in pursuance of that appointment and in compliance with any statutory
3
obligations.
3
Auditing Standards and Guidelines, U.K. Issued by the Financial Reporting Council
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For the government of a country the appointed independent auditor is referred to as the Supreme
Audit Institution (SAI). In Somaliland the Auditor General is the SAI.
Audit derives from the concepts of accountability - giving an account to another person. Audit
addresses two of the problems of accountability:
Audit conducted by a small group of persons overcomes the practical infeasibility of giving
every citizen access to the information needed for the exercise of effective accountability.
Audit by independent experts addresses the problem of the lack of technical skills on the part
of most citizens to be able to use and interpret financial information.
Audit provides a structured process through which accountability can be rendered. Auditors have
both access to information and the technical skills to interpret such information. The auditor
becomes intermediary in the process of accountability.
However, technical audit skills do not address the other element in the problem of achieving
accountability - the requirement for citizens to be able to exercise effective control over the
government. Since, as indicated above, this cannot be achieved directly, an elected parliament is
required to receive and take action based on reports rendered by the auditor. In many countries,
such as the UK, the role is exercised through a committee of the legislature (the UK Public Accounts
Committee). The model in Figure 4 below expands the accountability model to include audit,
Parliamentary scrutiny and Civil Society Organisations (discussed later in this workbook).
There is similarity between the concept of audit in the public and private sectors. In both cases, audit
is based on the concepts of accountability of those controlling resources to those providing the
resources.
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The external audit by the SAI can be described as the independent examination of, and public
reporting on, any of the financial transactions, financial statements, or physical operations of a
government organisation, by the auditor acting in accordance with the auditors legal obligations . A
number of specific features of this definition should be noted:
The independence of the SAI is fundamental. Usually this is achieved by Constitutional
requirements, and also by ensuring the security of tenure of the government auditor, e.g. by
an appointment of the Head of the SAI for a long fixed term with no extension allowed.
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The audit examination can embrace the financial statements (certification audit), financial
transactions (compliance audit) or operations (performance or value for money audit).
The SAI expresses his opinion in a report to Parliament, which is published.
The SAIs role, rights and responsibilities are defined by law.
The SAI fulfils a unique role. The SAI should examine every government activity, and to make a
published report on his findings. According to the legal requirements, the auditor may report on
some or all of:
1. The financial statements
2. The financial transactions, or
3. The operational performance of the government organisation.
A person often referred to as the Auditor-General heads the SAI. The key features of the SAI are as
set out in the matrix in Table 2 below.
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The Somaliland Auditor General is in accordance with the independent audit office model. As
indicated below this model is closest to that envisaged in the Lima Declaration.
Principle Explanation
1. Purpose and types of Purpose: Audit is not an end in itself but an indispensable part of a
audit control system whose aim it is to reveal deviations from accepted
standards and violations of the principles of legality, efficiency,
effectiveness and economy of resource management early enough so
as to make it possible to take corrective measures
Types:
Pre-audit and post audit - only post audit is essential
Internal and external audit - SAI carries out external audit and
examines internal audit
Formal and performance audit
4
This and other INTOSAI references can be found on the INTOSAI website: www.intosai.org
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Principle Explanation
2. Independence of SAIs Functional independence fundamental to an SAI. This includes:
and its members Independence of members and officials of SAI
Financial independence
3. Relationship to Should be specified in constitution
Parliament, government
and the administration
4. Powers of SAIs Powers of investigation including access to records, documents and
officials
5. Audit methods, audit Audit in accordance with self-determined programme
staff, international Audit staff should have qualifications and moral integrity
exchange of experiences
6. Reporting Empowered to report annually to Parliament
7. Audit powers of SAIs Specified in constitution. Audit should include:
Public bodies including institutions abroad
Tax audits
Public contracts and public works
Electronic data processing
Industrial and commercial enterprises with public participation
Subsidised institutions
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Constitution
In order for the Auditor-General to have the independence required for there to be confidence that
his reports are free from government interference, it is important that the position and rights are
contained in, and guaranteed by, the constitution.
The constitutional provisions should include:
Existence: the post of Auditor-General and an SAI should be a requirement of the
Constitution.
Status: the Auditor-General should have similar status to a Constitutional Court judge.
Appointment: the Auditor-General should be appointed by the Head of State (e.g.
President) on the recommendation of Parliament.
Tenure: the Auditor-General should be appointed for a fixed term
Removal: the Auditor-General should only be able to be removed for incapacity by a
substantial majority of Parliament (any protection given to judges should also be extended to
the Auditor-General).
Standards and subsidiary legislation: the Constitution should specify that there should
be established audit standards and subsidiary legislation to regulate the operations of the
SAI.
In respect of independence, there are other aspects that should also be included in the
constitution:
Legal protection from political interference;
Financial Independence; and
Powers of Investigation and Reporting.
The guarantee of independence from political interference with adequate legal protection by
the Constitutional Court is an essential element in ensuring the independence of the Auditor-General.
It is also essential for the effective operation of the SAI, that it has financial independence and be
provided with the financial means to fulfil its mandate. Although, the salary of the Auditor-General is
normally guaranteed under the constitution, this is impracticable for all aspects of his staffing or
operational budget. This does not mean that the SAI has a blank cheque, but rather that the
government cannot restrict its operations by limiting its budget.
The most effective way to do this is for the constitution to guarantee adequate financial means; the
SAI should prepare its own budget and to submit this to Parliament (or the Public Accounts
Committee) for approval. Any unreasonable reduction of the SAIs budget proposals would, thus, be
available in the public domain. Within the agreed budget total, the SAI should be free to allocate the
funds how it sees fit.
The SAI also requires independence of access and reporting. The constitution should also ensure
that the SAI has access to all records and documents relating to financial management and that it
should be empowered to request orally, or in writing, any information that it requires.
The constitution should also empower and require the SAI to report annually and independently to
parliament, or other competent public body, on its findings, which should be published. The SAI
should also be empowered to report between annual reports on matters of national importance.
Finally, the Constitution should require that there should be subsidiary audit legislation, and also audit
standards, setting out the manner in which the Constitutional requirements will be implemented.
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Audit Standards
Auditing standards should be based on INTOSAI audit standards (see below).
Regulations
Public finance legislation usually gives the Minister of Finance the power to make Financial
Regulations and Instructions. These contain the details of how the various government systems
work, regulations being much easier to change than acts of parliament.
The absence of sound Financial Regulations and Instructions would also result in the SAI being able
to issue an unqualified certificate on the governments accounts.
Parliament
The Lima Declaration describes the relationship with Parliament as follows:
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The Supreme Audit Institution (SAI) shall be empowered and required by the
Constitution to report annually and independently to Parliament or other
competent public body on its findings; this report shall be published. This will
ensure extensive information and discussion, and create a more favourable
climate for enforcing the findings of the SAI.
The annual report shall cover all activities of the SAI; only in the case of
interests worthy of protection or protected by law shall the SAI carefully weigh
such interests against the benefits of disclosure.
The reports shall present the facts and their assessment in an objective, clear
manner and be limited to essentials. The wording of the reports shall be
precise and generally understandable. The point of view of the audited entity
and institutions concerning the findings of the SAI shall be given due
consideration.
A committee of Parliament (e.g. the UK Public Accounts Committee) typically considers reports of the
SAI. Such committees usually have the power to call witnesses, ministers and ministry staff, to
questions them on the SAIs findings and recommendations. The development of such a process has
greatly added to the standing and credibility of SAIs. In practice, the SAIs effectiveness may be
seriously hampered unless it has the backing of a committee representing different groups committed
to upholding public accountability. Such a committee can be expanded to include people of standing
in the community but who are not elected representatives in order to give added stature to the
committee.
All SAIs should produce audit reports on the accounts of government. Many SAIs also publish
separate performance audit reports on specific topics. The reports of the SAI are important to
Parliament in terms of both assurance that voted funds have been spent legally for the approved
purposes and that they have spent effectively and not wasted.
The SAI audits the activities of the government, its administrative authorities
and any other subordinate institutions. This does not mean, however, that the
government is subordinate to the SAI. In particular, the government bears full
and sole responsibility for its acts and omissions and cannot absolve itself by
referring to audit operations and to expert opinions of the SAI unless such
opinions have been delivered as legally valid and enforceable judgements.
The independence of the SAI means that the government should not be able to direct it to undertake
specific tasks. Where such power exists, it is frequently abused to the detriment of the operational
efficiency of the SAI.
However, the government should be able to request the SAI to undertake specific audit studies. As
these are likely to be areas of important national interest, the SAI should try to accede to government
requests, especially if the government provides additional resources, as long as they do not
compromise the SAIs independence or efficiency.
Good working relationships between the SAI and government ministries are essential for the smooth
running of the audit process, if only because of the help that the auditor needs in such daily matters
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as locating papers and examining files in regular use. In practice, both parties may expect more
extensive benefits where there is a spirit of positive co-operation.
All SAIs liaise with the organisation audited when compiling their reports, but there are different
procedures for obtaining formal agreement. The normal practice is for the SAI to send a draft copy
of its report to the management of the organisation audited for them to review. They will then hold
meetings to agree the facts contained in the report. Frequently, the interpretation of facts will
vary between the audited body and the SAI.
Civil society
As government is financed by taxation paid by its citizens, referred to as Civil Society The
Government should report to Civil Society on how public money has been spent. The SAIs reports is
part of the reporting process.
INTOSAI recommends that all audit reports should be published unless legislation or confidentiality
precludes publication. Any power to prevent publication should be carefully controlled and very
limited in use.
Independence
Independence of the SAI is fundamental to proper performance of its functions. Audit independence
5
can be viewed as having three dimensions , as illustrated in Figure 10 below.
Organisational independence
There are a number of aspects to organisational independence.
5
Audit, accountability and government Fidelma White and Kathryn Hollingsworth, Clarendon Press,
Oxford, 1999
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The SAI should be an office of the legislature, not the executive, but is should be subject to
directions by either arm of government
The appointment and removal of the head of the SAI, the Auditor General, should be
designed to minimise political or bureaucratic involvement, and to ensure a suitably qualified
person of integrity and standing is appointed. The appointment should be for a significant
period of time. Removal should be made difficult and subject to various procedures.
The head of the SAI should have control over the appointment, removal and salary of staff
within the SAI, subject to reasonable constraints.
The budget of the SAI should not be under the control of the Executive. Achieving this is
difficult, but solutions have been found, e.g. by an Audit Commission.
The SAI should be independent of other institutions of government.
Personal independence
This requires that the Auditor General and his staff should be free from any external influence or
pressures. Equally they should avoid situations that create a conflict of interest.
Operational independence
The SAI should be able to conduct its day-to-day operations without interference from any other
government institution. It should not require permission from any organisation to carry out its work.
As part of this operational independence, the SAI should have a right to obtain any information it
requires, to receive any documentation it requires, and to interview any individual it deems
necessary. This wide power may be constrained by individual rights, but otherwise it should be
unfettered.
Independence in practice
6
INTOSAI has carried out a study surveying the situation in some 113 SAIs. This study applied
number of measures of independence, as indicated above. Its conclusions are The interpretation
and effective application of this concept and of related constitutional/statutory guarantees are very
much affected in practice by the particular political and civil society structures and systems of
countries within which SAIs operate. For example, SAI independence has little meaning in an
environment where proper checks and balances do not exist or are severely limited. It is also
dependent, to a considerable extent, on the degree of democratisation of the environment in which
SAIs evolve.
6
Independence of supreme Audit Institutions (SAIs) Project - Final Task Force Report, INTOSAI,
March 31, 2001
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Types of audit
Table 3 below summarises different types of audit.
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On the other hand, reviews of operational systems and procedures are clearly part of the audit, and
are included within the INTOSAI auditing Standards. This audit of operational systems and
procedures can be at either of two levels:
A review of internal control procedures to establish their adequacy and the extent to which
they can be relied upon by the auditor, and
A review of management operations and procedures to evaluate them in terms of economy,
efficiency and effectiveness.
Under the latter approach, the auditor would review the procedures for budget execution, cash and
debt management, accounting, reporting and monitoring in value for money terms.
7
Auditing Standards, op cit, paras 38 through 40. Definitions are paraphrased for brevity.
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Introduction
The definition of internal control is in Box 4 below.
Internal control is broadly defined as a process, affected by an entitys legislative body, management,
and other personnel, designed to provide reasonable assurance regarding the achievement of
objectives in the following categories:
1. Effectiveness and efficiency of operations
2. Reliability of financial reporting
3. Compliance with applicable laws and regulations
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8
Executive Summary of Enterprise Risk Management Integrated Framework (September 2004)
published by the Committee of Sponsoring Organizations of the Treadway Commission
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Other Personnel Internal control is, to some degree, the responsibility of everyone in an
organization and therefore should be an explicit or implicit part of everyones job description.
Virtually all employees produce information used in the internal control system or take other
actions needed to effect control. Also, all personnel should be responsible for communicating
upward problems in operations, non-compliance with the code of conduct, or other policy
violations or illegal actions.
External Parties A number of external parties often contribute to achievement of an
entitys objectives. External auditors, bringing an independent and objective view, contribute
directly through the financial statement audit and indirectly by providing information useful to
management and the legislative body in carrying out their responsibilities. Others providing
information to the entity useful in effecting internal control are those transacting business
with the entity, financial analysts, bond raters, and the news media. External parties,
however, are not responsible for, nor are they a part of, the entitys internal control system.
Risk management
Fundamental to the COSO approach is the concept of internal control as managing risk within an
organisation. Risk in this context means the risk that the entity may not perform as intended.
Risk management is a process, effected by an entitys legislative body, management and other
personnel, applied in strategy setting and across the entity, designed to identify potential events that
may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance
regarding the achievement of entity objectives
Risks are usually categorised as the likelihood of the risk occurring and effect (impact) if the event
does in fact occur. This may be represented as quadrants on a graph as illustrated in Figure 12
below.
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Failure to comply with specified procedure but without any loss resulting
Risk management must be structured to take account of both the impact and likelihood of risk. Risk
avoidance has a cost and this cost must be balanced against the likelihood and potential impact of
the risk event.
As a result of many high-profile business scandals and increased awareness of the level of corruption
in many countries as noted by the Corruption Perception Index published by Transparency
International, calls have been made for enhanced corporate governance and risk management, with
new law, regulation, and listing standards. The need for an overall risk management framework for
the entity as a whole, providing key principles and concepts, a common language, and clear direction
and guidance, became even more compelling. Thus, COSO published Enterprise Risk Management
Integrated Framework in 2001 that fills this need. This framework expands on internal control,
providing a more robust and extensive focus on the broader subject of enterprise risk management.
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5 INTERNAL AUDIT
Introduction
Internal auditing is an independent, objective assurance and consulting activity designed to add value
9
and improve an organizations operations . Internal audit helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of
risk management, control and governance processes.
Internal audit is part of the management process, and therefore it should be controlled by the
managers. In government these are generally the heads of departments or ministries. Any central
direction to internal audit should be in setting standards, providing training and creating operational
documentation.
Internal auditors are employees of a particular public sector organisation. Internal auditors are
responsible to management and their duties may be determined by management. The internal
auditing function is no longer restricted to one of merely checking the arithmetic accuracy of the
records or the efficiency of the system of internal control. Internal auditing is now regarded as
including a service element whereby the auditor can assist the organization through an examination
and evaluation of its activities. The rationale underlying this thought is that the internal auditors
access to all parts of the organization enables them to perform a wider role. This is not limited to
the narrow field of compliance but is concerned with promoting efficiency in policy implementation.
It is therefore important for the internal auditor to be given the necessary status and authority to
carry out these functions and for reports to be made directly to senior government officials who can
act on the recommendations. It is not, however, the auditors responsibility to make and implement
decisions which change the current operations; their task is one of reporting and recommending.
The additional responsibilities placed on internal auditors require the acquisition of new skills. No
longer is internal auditing merely a matter of checking whether transactions have been processed in
the prescribed manner. Internal auditing is a positive process which requires an investigative and
innovative approach to the problems of government. The opportunity now exists for auditors to play
a positive role in improving the performance of government departments. The performance audit is
one way in which the problem can be tackled.
9
Adapted from a Professional Practices Framework for Internal Auditing, Institute of Internal Auditors
from their www.theiia.org website
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Level of government
Internal audit should operate at all levels of government and in all public sector entities. Within each
it is a service to the management of that organisation, but there should be some central direction of
internal audit standards and training.
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Support
The central support provided to internal auditors should include:
Code of Ethics - a standard code of ethics to be observed by all internal auditors
Standards - there should be national standards for internal auditors. These can be based by
international standards developed by the IIA.
Practice and advisory - support and advice on audit operations
Development and practice aids - training and audit tools
10
International Standards for the Professional Practice of Internal Auditing, Institute of Internal
Auditors, www.theiia.org (2004).
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Figure 14: Relationship between internal and external audit and internal control
In summary:
External audit is an independent audit by the Supreme Audit Institution of the country (e.g.
Auditor General) and reports to Parliament.
Internal audit is within an entity and reports to the entity management to improve the
operation and controls of the entity.
Internal control refers to all of the procedures put in place by management to ensure the
entity performs in accordance with objectives.
Although there are major differences between internal and external audit, the types of audit
performed can and do overlap. The areas of difference and overlap are summarised in Table 4
below.
Performance
Operational X
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Because of the importance of the concept of independence, external audit must remain separate from
other financial management processes. External audit may impact on the financial management
process, but cannot be a part of it. Internal audit, on the other hand, is part of the management
process.
This leads to the extent to which internal and external audit may or should coordinate their activities.
In summary:
The external auditor has an independent responsibility to Parliament. This responsibility
cannot allow reliance on the work of the internal auditor.
However, in deciding the scope and nature of audit work the external auditor may and should
take account of the extent and effectiveness of internal audit.
Internal Audit is an independent appraisal activity established within an organisation to examine,
evaluate and report on its accounting, financial and other operations with the objective of assisting
members of the organisation to discharge their responsibilities effectively. The head of a government
department is responsible for establishing systems of control to ensure the propriety, security,
completeness and accuracy of departmental transactions and accounts. Thus, internal audit is a
managerial control which functions by assessing the effectiveness of other controls.
The value of internal audit is enhanced where a central body (e.g. the Ministry of Finance) is
responsible for laying down standards and for monitoring the overall efficiency of internal audit units.
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Introduction
The final stage of the PFM cycle is the feedback from financial and audit reports and information to
policy. Workbook 1 has shown how historic information is utilised as part of the fiscal and strategic
planning process. This Workbook is particularly concerned with issues of Parliamentary scrutiny and
civil society participation.
Parliamentary Scrutiny
The model of accountability in Figure 4 at the start of this workbook indicated the four elements
necessary to achieve effective accountability in the public sector. One of these was Parliamentary
scrutiny. The auditor may report, but there must be a mechanism to ensure that audit
recommendations are turned into actions so as to achieve change. This is the responsibility of
Parliament to scrutinise the actions of the executive, i.e. government.
In most parliamentary democracies there will be a mechanism whereby a Committee of Parliament
regularly reviews actual expenditures against the amounts in the budget estimates. This process may
be linked to review of reports from the supreme audit institution within the country. Government
officers will be called before the committee to explain their actions and any apparent failures. Such
failures would include unauthorised budget overruns.
Therefore, the reporting system must be designed to make relevant information available. Original
budgets, supplementary budgets, and approved virements must be combined to show the final
authorized expenditures, and compared to actual expenditures. Expenditures must be presented
compared to such authority. In some countries legislation may require this comparison to be on a
cash, not accrual, basis.
In the UK the Committee of Public Accounts examines reports from the Comptroller and Auditor
General on value for money studies on the efficiency and effectiveness with which government
departments and other bodies have used their resources to meet their objectives. The Public
Accounts Committee also examines some accounts where the Comptroller and Auditor General has
qualified his audit certificate or made a specific report to Parliament. The Parliamentary Accounts
Committee usually takes oral evidence from departmental officials rather than Ministers, because the
Committee does not generally question policy. Instead, it examines the way in which policy is
implemented.
The UK approach is very good at ensuring the issues are identified and discussed. However, the
Parliamentary Accounts Committee in the UK has no power to enforce its conclusions. The
Committee must rely on the government to implement its recommendations.
A pre-budget report serves to encourage debate on the budget aggregates and how they interact
with the economy. As such, it also serves to create appropriate expectations for the budget itself.
It should be released no later than one month prior to the introduction of the budget proposal
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The governments draft budget should be submitted to Parliament far enough in advance to allow
Parliament to review it properly. In no case should this be less than three months prior to the
start of the fiscal year. The budget should be approved by Parliament prior to the start of the
fiscal year.
Parliament should have the opportunity and the resources to effectively examine any fiscal report
that it deems necessary.
All fiscal reports referred to in these Best Practices should be made publicly available. This
includes the availability of all reports free of charge on the Internet.
The Finance Ministry should actively promote an understanding of the budget process by
individual citizens and non-governmental organisations.
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A number of organisations have been established to track and measure civil society participation
including:
Transparency International: https://www.transparency.org
The Open Budget Index: http://internationalbudget.org/who-we-are/
International Budget Partnership: http://internationalbudget.org/who-we-are/
Transparency International publishes a Corruption Perception Index for countries around the world.
In 2012 Somaliland was placed joint bottom out of 175 countries as the most corrupt country.
The Open Budget Initiative is a global research and advocacy program to promote public access to
budget information and the adoption of accountable budget systems. To measure the overall
commitment of the countries surveyed to transparency and to allow for comparisons among
countries, IBP created the Open Budget Index (OBI) from the Survey. The OBI assigns a score to
each country based on the information it makes available to the public throughout the budget
process. There is no score for Somaliland.
The International Budget Partnership partners with civil society organizations around the world,
leveraging their knowledge of their countrys political context, their experience navigating policy
processes for social change, and their relationships with the public in order to transform their
countrys budget system. The Open Budget Index is another attempt to score countries according to
the openness of their budget. Again Somaliland is not included in the index.
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The second consideration is the mechanism for communicating the information in reports. A number
of communication approaches varying from very simple to sophisticated are available as illustrated in
Table 6 below.
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Assisting the CSO to carry out a situation analysis, identifying the major target groups
needing budget policy information, and their differing needs for raised awareness.
Meetings with key representatives of the media to understand their expectations, interests,
concerns and plans concerning budget policy topics;
Analysis of the way budget topics have been covered by the media in the past, and
recommendations on improved coverage to support a more intensified and productive
interaction between government and citizens.
Arranging press conferences and other media events encouraging CSO to develop productive
working arrangements with the media;
Encouraging the CSO to develop its information materials in collaboration with
representatives of the general public and other CSOs as part of an information and
awareness team.
Assisting the CSO to implement sustainable communication plans.
In each country and for each CSO a different action plan will be required.
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In each of these areas it is the responsibility of the government agencies to support and encourage
CSO participation. Very often this may be perceived as a burden involving additional work and delay.
Many officials dislike revealing information to external organisations. Nevertheless, this approach is
fundamental to the development of civil society participation.
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