Cover Story


International Journal of Auditing – October 2009

SAI Independence: A Founding Principle of INTOSAI

Henrik Otbo

Henrik Otbo
Chairman, INTOSAI Professional Standards Committee, and Auditor General of Denmark

“Supreme Audit Institutions can accomplish their tasks objectively and effectively only if they are independent of the audited entity and are protected against outside influence.”

(The Lima Declaration, ISSAI 1)

I am honored to have been invited to write the editorial for this issue of the Journal, which is dedicated to the theme of independence.

I decided to use the opening quote from the Lima Declaration to emphasize the significance of SAI independence. According to the Lima Declaration, independence is a prerequisite for SAIs performing their tasks; in this sense, it is also a prerequisite for the INTOSAI Professional Standards Committee’s (PSC) work with International Standards of Supreme Audit Institutions (ISSAI) and INTOSAI Guidance on Good Governance (INTOSAI GOV). Consequently, as Chairman of the PSC, I am very engaged in the subject of independence. INTOSAI’s strategic plan also emphasizes the importance of SAI independence—the overall objective of goal 1 is “to promote strong, independent and multidisciplinary SAIs.”

The fundamental importance of independence was further recognized when the 2007 International Congress of Supreme Audit Institutions (INCOSAI) approved the Mexico Declaration on SAI Independence (ISSAI 10). Under the leadership of the Canadian SAI, the PSC Subcommittee on SAI Independence worked out eight principles that flow from the Lima Declaration and decisions made at the XVII INCOSAI (in Seoul, Korea). These eight principles are considered essential for proper public sector auditing:

  1. The existence of an appropriate and effective constitutional/statutory/legal framework and of de facto application provisions of this framework.
  2. The independence of SAI heads and members (of collegial institutions), including security of tenure and legal immunity in the normal discharge of their duties.
  3. A sufficiently broad mandate and full discretion in the discharge of SAI functions.
  4. Unrestricted access to information.
  5. The right and obligation to report on the SAI’s work.
  6. The freedom to decide the content and timing of audit reports and to publish and disseminate them.
  7. The existence of effective follow-up mechanisms on SAI recommendations.
  8. Financial and managerial/administrative autonomy and the availability of appropriate human, material, and monetary resources.

Independence, however, is not just a question of SAIs citing ISSAI 10 and ISSAI 11 and declaring themselves independent. The issue of independence is quite different from other SAI requirements in that it is determined by factors external to the SAIs, such as the legal framework established for the SAI’s work. SAIs are established to provide highly credible and impartial auditing of public funds. This requires special guarantees to shield them against improper political influence and ensure that the interests of taxpayers and citizens remain in focus. This means that each individual country has the responsibility to ensure that a framework for its SAI’s independence is in place. However, at the same time, SAIs are under an obligation to call attention to actions that jeopardize their independence. INTOSAI’s current efforts to have the Lima and Mexico Declarations adopted as United Nations resolutions represent an important step toward providing the best possible basis for SAI independence.

Independence is not only a privilege—it also entails obligations and should not be viewed separately from other SAI values, such as transparency, accountability, ethics, and quality. ISSAI 10 should be viewed in connection with the other level 2 ISSAIs—prerequisites for the functioning of SAIs—in the framework of ISSAIs. A main objective under goal 1 of INTOSAI’s strategic plan has, therefore, been to develop principles on SAI transparency and accountability. I am pleased to report that this goal has now been achieved. Under the strong and committed chairmanship of the SAI of France, ISSAI 20—Principles of Transparency and Accountability—has been developed, and INTOSAI members have commented on its nine following principles:

  1. SAIs perform their duties under a legal framework that provides for accountability and transparency.
  2. SAIs make public their mandates, responsibilities, mission, and strategy.
  3. SAIs adopt audit standards, processes, and methods that are objective and transparent.
  4. SAIs apply high standards of integrity and ethics for staff at all levels.
  5. SAIs ensure that these accountability and transparency principles are not compromised when they outsource their activities.
  6. SAIs manage their operations economically, efficiently, effectively, and in accordance with laws and regulations and report publicly on these matters.
  7. SAIs report publicly on the results of their audits and on their conclusions regarding overall government activities.
  8. SAIs communicate promptly and widely on their activities and audit results through the media, Web sites, and other means.
  9. SAIs make use of external and independent advice to enhance the quality and credibility of their work.

Further prerequisites for the functioning of SAIs were established by ISSAI 30—Code of Ethics—and especially ISSAI 40—Audit Quality Control, which is currently being developed under the chairmanship of the SAI of New Zealand. All these ISSAIs complement each other in relation to the basic requirements that SAIs must meet to conduct objective and effective audits.

That being said, we should not forget that the real test and importance of independence lies in the conduct of our day-to-day work. I am sure that all SAIs have at some point been under pressure from the media or other parties. During the summer of 2009, the Danish SAI, Rigsrevisionen, was at the receiving end of this pressure when the results of a major audit were published. For the first time in its long history, Rigsrevisionen was accused of “politicizing” its work, and the media attacked our integrity, leading to pressure on our independence.

Despite the massive media pressure and the accusations that were made, I am convinced that Rigsrevisionen’s good reputation has not suffered for two reasons: the thorough audit work that we carry out in accordance with international standards and the fact that the public perceives us as a credible institution that lives up to high standards of transparency, accountability, ethics, and quality control. The lesson to be learned is, therefore, that the documentation and quality of our work and our objectives and values require constant attention and development if we want to be in a position to confidently rely on the quality and correctness of our audits when we find ourselves at the heart of a media storm. In other words, focusing on quality, ethics, and related matters will help us stand up to the pressure from media and politicians that we all face now and then. In situations like these, we have the strongest need for the ISSAIs.

I think that the recent Danish example illustrates quite clearly that independence is not a static condition. It cannot be preserved without transparency, accountability, and high standards of ethics and quality control. We have to nurture independence, take a stand on it, and protect it. After all, SAI independence is the prerequisite for being able to perform our tasks objectively and effectively. In other words, independence is the foundation of our work, and the stronger the foundation, the easier it is to build upon it.

Special Focus on SAI Independence

At INTOSAI’s 58th Governing Board meeting—held in Vienna, Austria, in November 2008— the board decided to globally communicate the “role of SAI independence as embodied by the Lima and Mexico Declarations” as a priority theme of INTOSAI for the year 2009. This issue of the Journal focuses on SAI independence. In addition to this editorial, see the article giving a case study of SAI independence in Israel.

INTOSAI’s statements on independence are found in the following International Standards of Supreme Audit Institutions (ISSAI):

ISSAI 1: The Lima Declaration

ISSAI 10: The Mexico Declaration on SAI Independence

ISSAI 11: Guidelines and Good Practices Related to SAI Independence

Read the full text of these ISSAIs on www.issai.org.