International Journal of Auditing – July 2005

Auditing Standards Committee: Development of Financial Audit Guidelines

Through the Journal, the INTOSAI Auditing Standards Committee (ASC) regularly updates the INTOSAI community on progress being made in the development of financial audit guidelines. The work is carried out in close cooperation with the International Federation of Accountants’ (IFAC) International Auditing and Assurance Standards Board (IAASB) with the aim of including public sector considerations in the International Standards on Auditing (ISA).

Meetings of Financial Audit Guidelines Working Group in Lima, Peru

The ASC’s Working Group on Financial Audit Guidelines met March 2-4, 2005, in Lima, Peru. The Peruvian audit office hosted the meeting, which was chaired by the Swedish National Audit Office. Representatives from the SAIs of Canada, Namibia, Norway, the United Kingdom, and the United States attended the meeting. The working group was pleased to welcome to the meeting one member of the IAASB technical staff and two IAASB public members.

The attendees to the meeting dealt with such issues as drafting (1) a practice note for ISA 240, Fraud and Corruption, and (2) working group comments on the IAASB exposure drafts of ISA 320, Audit Materiality, and ISA 540, Audit of Accounting Estimates. The working group also discussed the gaps identified between the INTOSAI auditing standards and IFAC’s ISAs and actions needed to close those gaps to provide as complete financial audit guidelines as possible for INTOSAI members.

The working group set goals it plans to achieve by the 2007 INCOSAI in Mexico City. These goals include drafting practice notes for a number of existing (already revised) ISAs and general considerations for applying all ISAs in public sector audits.

The IAASB held a full board meeting in Lima following the working group meeting. This meeting was attended by several members of the Working Group on Financial Audit Guidelines and experts from the reference panel who participate in the task forces for the ISAs that were being discussed. These ISAs include the following:

  • ISA 260 – Communications with Those Charged with Governance (approval of proposed exposure draft)
  • ISA 800 – The Independent Auditor’s Report on Other Historical Financial Information and Summarized Audited Historical Financial Information (approval of proposed exposure draft)
  • ISA 701 – Modifications to the Opinion in the Independent Auditor’s Report (approval of proposed exposure draft)

Renewal of the Reference Panel

The working group is very pleased to report on the renewal of the reference panel and would like to recognize the contributions of the SAIs who have volunteered the time and expertise of their very best audit experts. The reference panel now consists of 96 experts and back-office experts from 61 SAIs, who represent all INTOSAI regional groups, official INTOSAI language groups, and audit systems.

Work in Progress on ISAs

Work is in progress on the following ISAs where INTOSAI experts are involved:

ISA 230 – Documentation

  • Expert: Ms. Kelly Ånerud, Norway
  • Back-office experts: Mr. John Fretwell, United States; Mr. Inge Danielsson, Sweden
  • Final version expected in September 2005 and Practice Note expected in June 2006

ISA 705 – Modifications to the Opinion in the Independent Auditor’s Report, and ISA 706 – Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent Auditor’s Report

  • Expert: Ms. Bettina Jacobsen, Denmark
  • Back-office experts: Ms. Mary Radford, United Kingdom; Ms. Marcia Buchanan, United States
  • · Final version expected in March 2006 and Practice Note expected in December 2006

ISA 260 – Communications with Those Charged with Governance

  • Expert: Ms. Tove Myklebust, Norway
  • Back-office experts: Mr. Filip Cassel, Sweden; Mr. John Fretwell, United States
  • Final version expected in March 2006 and Practice Note expected in December 2006

ISA 800 – The Independent Auditor’s Report on Other Historical Financial Information, and a proposed ISA 810– The Independent Auditor’s Report on Summarized Audited Historical Financial Information

  • Expert: Mr. Jonas Hällström, Sweden
  • Back-office experts: Mr. Demsash Betemariam, Ethiopia; Mr. Martin Dees, the Netherlands; and Mr. Robert Cox, New Zealand
  • Final version expected in March 2006 and Practice Note expected in December 2006

ISA 550 – Related Parties

  • Expert: Mr. John Thorpe, United Kingdom
  • Back-office experts: Ms. Zainun Taib, Malaysia; Mr. Uwe Schreiner, Germany; and Ms. Goranka Kiralj, Slovenia
  • Final version expected in June 2006 and Practice Note expected in February 2007

ISA 580 – Management Representation

  • Expert: Ms. Vijaya Moorthy, India
  • Back-office experts: Mr. Martin Garrido, Chile; Mr. Ennio Colasanti, Italy
  • Final version expected in September 2006 and Practice Note expected in May 2007

ISA 620 – Using the Work of an Expert

  • Expert: Ms. Cláudio Branco, Brazil
  • Back-office experts: The project secretariat is in the process of nominating back-office experts
  • Final version expected in December 2006 and Practice Note expected in September 2007

The working group is also charged with developing practice notes for each ISA to provide additional guidance that auditors in the public sector may need to apply to the ISA. The practice notes will be based on the contributions of the audit experts from the reference panel.

Work in Progress on Practice Notes

Practice notes will also be developed for ISAs already approved at the time of the creation of the reference panel and where no expert has participated in the IAASB task force. The project secretariat is now forming task forces with experts and back-office experts from the reference panel to develop practice notes for these ISAs.

ISA 240 – The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements: Mr. Leif Egil Berland, Norway

Exposure Draft of Practice Note 240 to the INTOSAI community for comments, expected in February 200

ISA 500 – Audit Evidence: Mr. Henrik Söderhielm, Sweden

For more detailed and regularly updated information regarding this work or the standards, please visit the INTOSAI Auditing Standards Committee’s Web site: or the IFAC website:

For further information, please contact the Project Secretarial or the Chair of the Working Group:

Task Force to Fight against International Money Laundering Meets in Peru

The task force was established in 2002 and is chaired by the SAI of Peru. Its purpose is to promote international cooperation among SAIs and with other international organizations in the fight against money laundering, (2) identify and share policies and strategies within SAIs’ competencies and authorities for combating money laundering, and (3) design and promote policies, strategies, and actions for SAIs within the national and international anti-money-laundering legal framework.

The SAI of Peru hosted the task force’s fourth meeting in March 2005 in Lima. Task force members from Fiji, Lesotho, the Russian Federation, the United Kingdom, and the United States attended. At the meeting, the SAI of Peru demonstrated the Web site it created to track task force activities and post information about anti-money-laundering activities that task force members submit. The task force reaffirmed its three objectives and assigned responsibilities to task force members for carrying out tasks under each objective. The task force plans to submit a report to the Governing Board in advance of its meeting in the fall of 2005.

For additional information, contact the task force chair: Contraloría General de la República,
fax: ++51 (1) 330 32 80; e-mail:; Web site:

INTOSAI Task Force on the Audit of International Institutions Begins Its Work

The Task Force on the Audit of International Institutions, established at the 18th INCOSAI in Budapest, began its work by holding its first meeting in Copenhagen, Denmark, in April 2005. The task force’s mandate is to

  • coordinate and assist in identifying international institutions that should have SAIs as their external auditors and that need to develop auditing arrangements in line with best audit arrangements,
  • cooperate with concerned SAIs in promoting to relevant international institutions and authorities the principles approved at the 18th INCOSAI with the aim of changing the audit arrangements, and
  • promote SAIs as external auditors and assist interested SAIs in preparing for such assignments.

The work of the task force is to be carried out in cooperation with the INTOSAI regions and other stakeholders and may involve such activities as seminars for SAIs and direct contact with relevant international institutions. Because the mandate is based on persuasion rather than delegated power, the work of the task force is dependent on the goodwill of the institutions involved.

At its initial meeting in Copenhagen, task force members discussed draft terms of reference, including a set of strategic goals to be presented to the Governing Board at its regular meeting in Vienna in November 2005. The members agreed on approaching a number of international institutions to gather information on their audit arrangements. Each member of the task force will deal with one or two of the institutions and report on the needs and possibilities for change at that institution. After this fact-finding mission is completed, the task force will meet again in the autumn of 2005 to choose, based on the reports, a smaller number of pilot institutions that can be approached to initiate a debate on their audit arrangements. The task force expects to complete its work before the 19th INCOSAI in Mexico City in 2007 and report on its work at that time.
The National Audit Office of Denmark chairs the task force. Its members are the SAIs of Austria, Denmark, Hungary, India, Japan, South Korea, Nepal, Norway, Saudi Arabia, South Africa, Sweden, Tuvalu, the United Kingdom, and Venezuela.

The task force was established based on the work of an ad hoc working group created at the 17th INCOSAI in Seoul, where one of the themes was the audit of international institutions.

The working group, which was dissolved at the 18th INCOSAI, elaborated a set of principles for the audit of international institutions, which were adopted at the Congress. These principles are the following:

To be effective, the audit arrangements for international institutions should ensure that:

1. all international institutions financed with or supported by public money are subject to audit by supreme audit institutions to promote better governance, transparency, and accountability;

and that the external auditor:

2. is fully independent in the conduct of the audit;

3. has sufficient authority to carry out the audit in a manner that meets best practice in the audit of public money;

4. has adequate resources to carry out the audit;

5. has the right and obligation to report on the results of the audit to the member states concerned through the governing body(ies);

6. meets relevant professional and ethical standards; and

7. is appointed in an open, fair, and transparent manner.

Other SAIs who would like to join the task force are most welcome.

For additional information on the task force, contact the chairman: fax: ++45 33 14 38 28; e-mail:

Working Group on Environmental Auditing (WGEA)

From Head and Heart: Insights into Environmental Auditing at 18th INCOSAI

The scene was set. More than 150 people from 80 supreme audit institutions (SAI)—most of them auditors general—gathered in the conference hall at the 18th INCOSAI in Budapest in October 2004. The standing-room-only crowd was buzzing with friendly chatter and laughter. But as the proceedings began in earnest, the room fell silent and all eyes were fixed on the speakers.

“We have an obligation to cultivate and care for our planet—it must be our common duty. Our environmental failures and successes are not only ours—they affect people in other countries.” (Mr. Miroslaw Sekula, President of the Supreme Chamber of Control of Poland)

“Our audits help to improve government’s management of environmental issues and in the long run improve social prosperity and economic development in each and every one of our countries.” (Dr. Genaro Matute Mejía, Comptroller General of the Republic of Peru)

Hold on a minute . . . were these hard-nosed auditors or radical environmentalists? Speaker after speaker emphasized the need to protect the quality of our natural environment and resources while pursuing the goal of sustainable development. The travel-weary, jet-lagged crowd might have thought that they were in the wrong room, perhaps having accidentally stumbled into a Greenpeace revival. But no—this was the right place: The Heads of SAIs Forum: Experiences in Environmental Auditing, hosted by Canada’s Auditor General, Sheila Fraser, and Commissioner of the Environment and Sustainable Development, Johanne Gélinas. Following months of preparation by the Working Group on Environmental Auditing (WGEA) Secretariat, participants were listening to five of their auditor general colleagues (Mr. Miroslaw Sekula, Dr. Genaro Matute Mejía, Mr. Liu Jiayi, Mr. Shauket A. Fakie, and Mr. Sarath Chandrasiri Mayadunne) share their insights on environmental auditing. One by one they described, in their own words, why environmental auditing is important to their institutions.

Auditors general address the INCOSAI forum on environmental auditing. Auditors general address the INCOSAI forum on environmental auditing.

“Our country attaches great importance to the environment and sustainable development in its budget and its activities. Environmental auditing is one of the most important parts of my office’s 5-year strategic plan.” (Mr. Liu Jiayi, Deputy Auditor General of the National Audit Office of the People’s Republic of China)

The purpose of the event, as John Reed from Canada explained, was to build awareness and confidence among the leaders of SAIs. “For many SAIs, environmental auditing is a mature and mainstream area of practice. Other SAIs are in the early stages of building their practice and others still want to get started but aren’t sure how. We know from our experience with the WGEA that SAIs still have many questions and all have perspectives to share and something to learn.”

As the event progressed, the conviction of each auditor general became evident. They were not reading scripted speeches; rather, they were speaking from the heart. One common theme that emerged was that while their institutions place a high priority on environmental matters, the reasoning is all about business. Environmental auditing is an integral part of their legislative, fiduciary, and moral auditing mandate and duty.

“It is all good and well for a country to have high ideals and policy directives, but without implementation this means nothing. The question now is whether political role players and local authorities have been called to account with regard to the deterioration of the environment. My role, as the Auditor General, includes informing the public not only about the government’s financial stewardship but also its environmental performance.” (Mr. Shauket A. Fakie, Auditor General of the Republic of South Africa)

In her opening remarks, Johanne Gélinas explained that the WGEA exists to help SAIs build capacity to do environmental audits. “All of the things we do—including our guidance documents, the Web site, the WGEA-IDI training program, and our major meetings—are meant to help SAIs.”

Picking up on this theme, all of the speakers stressed the importance of sharing information and experiences among SAIs and the key role that the WGEA has played in supporting their efforts.

“We are still new to the area of environmental auditing. The WGEA gave us a big hand to stand up and get started. Sharing experiences is a very meaningful step and one way to do this is through on-the-job training with more experienced SAIs. We have learned that our audits are beneficial to the betterment of future generations.” (Mr. Sarath Chandrasiri Mayadunne, Auditor General of Sri Lanka)

Judging by the crowd’s reaction during the proceedings, the auditors general’s messages were well received. For example, Pieter Zevenbergen from the Netherlands said afterwards, “It was a great pleasure to hear the worldwide unconditional support for environmental issues . . . . Environmental audit is [here] to stay.” After the formal portion of the event, participants shared their reactions and thoughts informally over light refreshments. The speakers had indeed stimulated some energetic exchanges—some as interesting as the talks themselves!

Sheila Fraser declared the event a great success. “Paying attention to the environment is one of my key priorities. Leading the WGEA gives us the chance to learn from, and also help, other SAIs. And we always need to keep the momentum going forward.”

Fourth WGEA Steering Committee Meeting Held in Prague

The WGEA’s Fourth Steering Committee meeting was held in Prague, April 4-7, 2005. It was hosted by Mr. Dušan Tešnar and the staff of the Supreme Audit Office of the Czech Republic. The Steering Committee, which includes 20 SAIs, is the working body of the WGEA.

The main purpose of this meeting was to implement the 2005-2007 work plan. The Steering Committee agreed on lead roles, timetables, information collection methods, and scope for each of the following projects:

  • Moving towards auditing biodiversity (Lead SAIs—Brazil and Canada) This paper will provide auditors with a general orientation on how to plan and carry out audits on biodiversity.
  • Implementation of the WGEA communications plan (Lead SAI—United States) The implementation of this plan will improve communications among WGEA members and between the WGEA and other key target audiences.
  • Evolution and trends of environmental auditing (Lead SAI—Canada) This paper will describe the difference SAIs have made in managing natural resources and protecting the environment. It will provide insights on the current and future practice of environmental audits.
  • Cooperation between SAIs: tips and examples (Lead SAIs—the Netherlands and Poland) This paper will share experiences on cooperation (primarily with environmental audits) between SAIs within the INTOSAI community—particularly in preparing, performing, and reporting audits.
  • Fifth survey on environmental auditing (Lead SAI— Canada) This survey will analyze environmental auditing trends of INTOSAI members. It is an important tool for gathering data on SAIs’ environmental auditing needs and will help to shape the next WGEA work plan (2008–2010).
  • Reviewing the implementation of World Summit on Sustainable Development (WSSD) commitments (Lead SAI—United Kingdom) This paper will compare SAIs’ reviews of their countries’ progress to the WSSD commitments and share their experiences with other SAIs.
  • Waste and Water Alive (Lead SAIs—Norway and the Netherlands) This project will identify appropriate ways to promote the ongoing exchange of experiences between SAIs on water and waste audits and actively encourage and support audits in the areas of water management and waste management. Upcoming 10th Meeting of the WGEA in Moscow Recently, Sheila Fraser, Auditor General of Canada and Chair of the WGEA, invited all SAIs to attend the 10th meeting of the WGEA, which will be held in Moscow, the Russian Federation, from October 27 to November 1, 2005. “This is the preeminent event for environmental audit practitioners in our community, and I would strongly encourage SAIs to attend and benefit— there won’t be another one like it again until 2007.”

The Steering Committee set the agenda for the meeting, which will include guest speakers from the United Nations Environment Programme (UNEP) and the United Nations Framework Convention on Climate Change Secretariat. The meeting will feature small working group discussions on topics of interest and seminar workshops with presentations by SAIs on the following topics:

  • Auditing biological diversity: presentations on the protection of national parks, rivers and lakes, ecosystems, forestry, and endangered species.
  • Auditing climate change: presentations on the Kyoto Protocol implementation, measures for adaptation, energy efficiency, international commitments, transportation, and greenhouse gases.
  • Increasing the impact of environmental audits: presentations on techniques used in auditing, including the following:
    • making effective recommendations,
    • using experts,
    • formulating audit questions,
    • deciding the scope of issues, and
    • communicating results.
  • Environmental auditing: facing the challenges: presentations on challenges encountered when undertaking a first environmental audit, creating a long-term strategy for the SAI, recruiting and training staff, and conducting environmental audits.

For more information, contact: WGEA Secretariat, fax: ++ (613) 941-8286; e-mail:; Web site: