International Journal of Auditing – July 2007

Developing International Standards and Guidelines for SAIs

Despite their many differences, supreme audit institutions (SAI) around the world agree that they need better general public sector auditing guidelines. A recent survey conducted by INTOSAI’s Professional Standards Committee (PSC) confirmed this long-held assumption.

PSC carried out the survey in December 2006 to identify the standards and guidelines INTOSAI should develop in the future. The survey’s conclusions will be used to target the PSC’s future work to ensure that the greatest number of countries will benefit from international standards and guidelines that define the role and tasks of SAIs.

The PSC Steering Committee developed the survey questionnaire during its meeting in Yaoundé, Cameroon, September 5–6, 2007. The questionnaire was distributed in English, French, Spanish, and Arabic. One hundred SAIs completed the questionnaire, and the results were discussed at the PSC Steering Committee meeting in Bahrain, April 23–24, 2007. (See Inside INTOSAI for a full discussion of the Bahrain meeting.)

Development of Guidelines for SAIs

The completed surveys that the PSC received from around the world reflect the differences
among SAIs and indicate that they apply audit guidelines differently. Despite these differences, SAIs generally agree that their role as public authorities that support parliamentary oversight imposes special requirements on them. Although SAIs frequently use the same financial auditing methodology as private sector auditors, the SAIs acknowledge numerous ways in which public sector auditing demands methodologies and standards that are different from those of the private sector (see figure 1).

Figure 1: SAIs’ Evaluation of Differences between Public and Private Sector
Auditing and the Need for Separate Public Sector Guidance

Figure 1: SAI's Evaluation of Differences between Public and Private Sector Auditing and the Need for Separate Public Sector Guidance

Source: INTOSAI’s Professional Standards Committee (PSC).
Note: The total does not add to 100 because 12 SAIs expressed no opinion or gave a written comment to respond.
Developing International Standards and Guidelines for SAIs

The purpose of public sector auditing is significantly different from that of private sector auditing. Public auditing contributes to democratic insight and monitors the application and use of public funds. Its goal is to ensure that funds are used correctly and efficiently and in accordance with Parliament’s decision. Private sector auditors perform the vastly different task of issuing an audit opinion affirming the accuracy of accounts and certifying that they do not contain any material errors or omissions that would affect the stated value of the company. Also, in most countries, the relationship between the SAI and its “clients” differs greatly from relationships in the private sector, where clients appoint and pay the auditors themselves.

Cooperation with Other Standard Setters

The 100 SAIs expressed a widespread desire for INTOSAI to develop strong guidelines for financial, compliance, and performance auditing. The SAIs generally accepted PSC’s strategy of including material from other standard-setting bodies and drafting supplementary guidance for the public sector. This strategy—known as the dual approach—will allow PSC to focus its development efforts on areas unique to public sector auditing.

The survey showed that INTOSAI auditing standards are widely used by SAIs for auditing tasks and for developing methodology and strategy; 76 of the 100 SAIs indicated that they apply the INTOSAI standards to financial, compliance, or performance audit tasks. However, many SAIs use these standards in combination with national public auditing standards and other guidance. In particular, many SAIs use standards issued by the International Federation of Accountants (IFAC) when performing financial audit tasks. Figure 2 summarizes SAIs’ usage of INTOSAI and IFAC standards in their audits.

Figure 2: Number of SAI's Using INTOSAI of IFAC Standards

Figure 2: Number of SAI's Using INTOSAI or IFAC Standards

Source: INTOSAI’s Professional Standards Committee (PSC).

The survey’s results confirm the appropriateness of the PSC’s strategy of building upon other standard-setting bodies’ guidelines to the greatest extent possible. At its April meeting in Bahrain, the steering committee established the goal of adopting comprehensive guidelines for financial, compliance, and performance auditing by 2010. INTOSAI’s guidelines for financial auditing will be based on IFAC’s standards and will provide supplementary guidance on special conditions that characterize public sector auditing. The PSC also decided to establish a new cooperative effort with the Institute of Internal Auditors (IIA) to further develop INTOSAI guidelines for internal controls in the public sector. The survey shows that a number of SAIs already make use of IIA’s standards and guidelines.

The survey results provided an important platform for the PSC’s efforts to establish and clarify distinct public auditing standards and promote consistency between standards issued by various international organizations.

For additional information on the survey, please contact the author at kb@rigsrevi- sionen.dk. The full report can be found at www.issai.org.