Cover Story


International Journal of Auditing – January 2010

The World Needs International Audit Standards

Claes Norgren

Claes Norgren
Auditor General of Sweden

Supreme audit institutions (SAI) play an important role in strengthening their respective countries’ accountability and governance. SAIs help their governments improve performance, enhance transparency, ensure accountability, fight corruption, promote public trust, and foster the efficient and effective receipt and use of public resources for their citizens. SAI work to reduce waste and abuse of public resources has the indirect effect of making more money available for programs to fight poverty.

SAIs are a central element of good governance and accountability. While their role as watchmen of transparency and accountability is obvious in certain countries, they can play an even more important role in promoting good governance in developing countries or fragile states. Therefore, SAI operations must set a good example as key development actors along with a system that includes a Parliament, freedom of the press, and public access to official records. Active involvement in INTOSAI is one way for SAIs to further develop their perspectives on their role in governance. Learning from the experiences of others also allows SAIs to strengthen this role. This has definitely been proven true in the Swedish experience.

Globalization has placed new demands on public policy. Political decisions must take international factors into account and adopt new forms to be efficient and make a difference. The same is true of auditing. Increased international exchanges today affect such areas as business deals, financial transactions, the transport of goods, the export of services, and taxation. The interaction between the private and public sectors has increased, and new dependencies have been created. The present financial crisis is definitely global in scope and, to a certain extent, has developed due to globalization. As Robert L. Bunting, President of the International Federation of Accountants (IFAC) has observed,

“Governments, standard setters, and the accounting profession need to collaborate closely if common high-quality standards in accounting and auditing are to be established, adopted, and well implemented. And that includes accounting standards for governments, many of which have become major investors in the private sector during the crisis.”

Finding joint international solutions is becoming increasingly important, a trend that is becoming evident in the field of auditing, where the auditor has to focus on what unites rather than what divides across borders and between sectors. The need to create financial and political stability is one common denominator, and harmonized global standards and auditor independence are important prerequisites for this. Thus, SAIs are facing new challenges in their important task of auditing the impact of actions carried out by the executive branches of government.

Public sector auditing has come under intensified scrutiny as its role in strengthening public management, follow-up, and control and supporting good governance has been increasingly recognized. Over the years, INTOSAI members have expressed a clear need for more robust and reliable auditing standards than what has been available to date. Furthermore, the World Bank has emphasized the importance of SAIs and the development of international standards for public sector auditing. INTOSAI has responded by not only pursuing the work on auditing standards but also involving the donor community in the cooperation. New claims from its own members, the donor community, and society at large have created a new and important context for developing auditing standards.

This challenge has been very obvious in the Swedish National Audit Office as it chairs the Subcommittee on Financial Auditing Guidelines (FAS) and hosts the FAS Secretariat and its work to develop internationally accepted standards for financial audit. This work has been carried out in close cooperation with IFAC and the International Auditing and Assurance Standards Board (IAASB) with financial support from the World Bank and the Asian Development Bank. As a result of this unique cooperation between public and private sector auditing, we can be assured that the final product—the development of International Standards of Supreme Audit Institutions (ISSAI) for financial audits—will be state of the art. SAIs around the world also deserve special mention for their generous contributions to FAS’ work by nominating financial audit experts, commenting on exposure drafts, and encouraging us in other ways. Without this invaluable input, the task of the FAS would have been impossible. Thank you all!

Implementing new auditing standards will mean challenges but will greatly benefit all SAIs.

  • For the auditor, it will provide greater confidence and credibility in the audit work being carried out. Internationally accepted standards form the basis for our professionalism as auditors.

  • For the head of the SAI, it will improve the quality and credibility of your organization’s financial audits and allow you to benefit from joint training activities with auditors from the private and public sectors both nationally and internationally. This will save you money.
  • For the stakeholders of each SAI—such as the Parliament, the executive branch, the auditees, the press, and the public—it will increase confidence in the SAI’s work.

Applying INTOSAI financial audit guidelines provides a basis for cooperation and the exchange of experiences between SAIs and auditors in different countries, enabling each SAI to relate its work to that of others operating in accordance with international standards. Globally accepted standards will provide a common language to serve as a basis for professional discourse and cooperation. Mutual experience will benefit all.

To INTOSAI members, implementation of the ISSAIs for financial audits will have a clear impact on our work as it puts new demands on the way we conduct our audits. That will certainly be the case for the Swedish SAI, just to mention one example. It will require an investment in education and routines that will affect our budget for some time and will also to some extent affect our auditees. However, the implementation cost must be seen as a very good investment in a joint international regulation as well as a step towards a healthy domestic and world economy.

After the XX INCOSAI, the INTOSAI congress in South Africa in November this year, the ISSAIs for financial audits will be available to the whole INTOSAI community in five languages. They are already available in English. This means that from the end of this year there will be a global standard for financial audit applicable both in public and private sectors. Over the long run, this will significantly contribute to improved transparency and accountability in the public arena, and I am very proud to have been involved in the process.

Please read more about the ISSAIs and their implementation in the interview with Auditor General Claes Norgren and Arnold Schilder, Chair of the IAASB, on page 11.