International Journal of Government Auditing – April 2011
Editor's note: The author, a lawyer with the Audit Office of Saxony, Germany, worked for German Technical Cooperation (GTZ) in the Republic of Georgia from May 2007 to December 2008 as the leader of a project to support the Chamber of Control of Georgia in developing an audit methodology that complies with INTOSAI standards.
INTOSAI’s standards, now codified in the International Standards of Supreme Audit Institutions (ISSAI), play a major role in the development of supreme audit institutions (SAI). International development organizations support SAIs in their efforts to develop capacity and comply with INTOSAI’s standards.
The reform process recently undertaken by the Chamber of Control of Georgia illustrates the importance of INTOSAI standards in capacity-building efforts. The international development organizations involved in those efforts—the European Union, the United Nations Development Program, the World Bank, and German Technical Cooperation (GTZ) —supported the chamber and collaborated with it to achieve the same objective: transforming the chamber into an SAI that functions in accordance with INTOSAI’s principles and standards. This objective corresponds with goal 2 of INTOSAI’s Strategic Plan: “Institutional Capacity Building—Build the capabilities and professional capacities of SAIs through training, technical assistance, information sharing, and other capacity-building activities.”
This article discusses efforts to develop the chamber’s legal framework, audit methodology, and training initiatives and how INTOSAI standards have contributed to and informed those efforts.
Since Georgia gained its independence in 1991, it has been undergoing a political and economic process that has moved it toward democracy, the rule of law, and a market-oriented economy. Georgia suffered from economic crises and civil unrest during the 1990s. However, following the bloodless November 2003 “Rose Revolution,” the new Georgian government initiated an extensive reform program to promote political stability and economic growth. Since then, the country has experienced the fastest economic growth in its history. Even the August 2008 armed conflict between Russia and separatist groups from South Ossetia and Abkhazia on the one hand and Georgia on the other did not stop the reform process.
The Chamber of Control has supported the reform process and plays a key role in holding the government accountable for the proper and effective use of public funds, increasing the efficiency of administrative activities, improving budget classification and accounting systems, and promoting anticorruption efforts and other public management priorities. Government auditing depends on the performance of its SAI, and the chamber is currently working to develop the capabilities needed to fulfill its mandate.
The constitution of Georgia defines the independence of the Chamber of Control and specifies its authority and functions:
A new law on the Chamber of Control passed the Georgian Parliament in December 2008. Before the law was passed, different international donor organizations gave advice, and discussions were held between the chamber and the Parliament. The goal was well defined: the law should comply with INTOSAI standards. Simply translating the existing law of another country’s SAI would not be sufficient. One country’s law can be an example to another, but it cannot be a draft. The specific environment of the country must be taken into consideration.
The process of legal advice followed in Georgia illustrates INTOSAI principles found in the Lima Declaration (sections 8 and 18): an SAI’s audit powers and relationship to Parliament will depend on the conditions and requirements of each country. There is no single blueprint for an SAI’s legal framework that can or should always be followed. Therefore, the discussions between the chamber and the Parliament were very important throughout the process. Only Georgian institutions and government bodies could identify potential legal consequences and effects. As a result of this process, the new law of the Chamber of Control corresponds to INTOSAI standards.
To date, the Chamber of Control has taken promising steps to develop its first reporting guidelines and several audit standards. Currently, the chamber is addressing the challenge posed by the need for an extensive and integrated audit methodology that will comply with INTOSAI’s standards. Several donor agencies have supported the Chamber of Control in achieving this objective. Measures to develop and apply auditing methods include the elaboration, teaching, and implementation of procedures.
INTOSAI’s Capacity Building Committee (CBC) has identified an SAI’s need for appropriate audit working methods, guidance, and manuals. An SAI must have audit methods that correspond to its role and mandate, available resources, its staff’s skills, and the context in which it operates.
An audit methodology provides guidance on how an SAI should carry out its mandate, and an audit manual sets out that methodology. The manual supports the standardization of auditing procedures within an SAI and is also used as a reference book. It covers important areas such as an SAI’s internal procedures, audit mandate and objectives, audit planning, audit tools and techniques, audit findings, and reports. An audit manual can be supplemented by specific audit guides on topics such as performance audit standards.
While developing audit manuals is a long-term process, audit manuals are essential to maintaining auditing quality. The Lima Declaration recommends that SAIs prepare audit manuals as an aid for their auditors (see section 13, paragraph 4) as does ISSAI 200: General standards in Government Auditing and standards with ethical significance (paragraph 1.2c).
The Chamber of Control has introduced procedures to prepare audit manuals, and developing a modern audit methodology is one of its main goals in the coming years. The chamber plans to adopt a modern audit approach that will change its function from regularity reviews to performance audits that examine the government’s complete operations and transactions.
Having a legal basis and an audit methodology that comply with INTOSAI standards will not guarantee that an SAI carries out its audits in accordance with those standards. The standards must be implemented in practice by the auditors and all individuals working for an SAI, who are its most important resource.
INTOSAI’s Capacity Building Committee affirms that training and educating an SAI’s professional staff is one of the most effective ways to build capacity. Training can also help an SAI to make capacity building sustainable. During the past few years, donor organizations organized several different trainings within the Chamber of Control, including internships with associated joint audits, which are described in the following section.
Internships with Associated Joint Audits
In 2003, the Chamber of Control of Georgia and the Hessian Court of Audit began a long-term technical cooperation initiative under the auspices of the German Technical Cooperation (GTZ) to improve the chamber’s oversight of the use of public funds. While the initiative focused on developing capacity within the chamber, it also benefited the Hessian Court of Audit. Despite its long tradition, the Hessian court also identified areas for potential improvement, as the working relationship encouraged the reevaluation of established structures. Learning about and understanding different SAI practices offered learning opportunities for both SAIs.
To support cooperation and knowledge transfer between both organizations, the two audit institutions organized several internships in Germany followed by associated joint audits in Georgia. These activities are comparable to the format of INTOSAI’s training workshops, case studies, and pilot audits.
As a first step, all project participants identified professional action areas. For example, the Chamber of Control named tax audits and audits of public works as key areas, and the Georgian auditors had the opportunity to work on audits in these areas and gain experience in related methods and procedures that complied with international standards.
Focusing on these practical themes, the exchange of experiences started with internships at the Hessian Court of Audit that offered the opportunity to apply international standards in practice. The Georgian auditors took part in different (1) audit phases, from planning an audit to the final reporting, (2) types of audit, such as regularity (financial) and performance audits, and (3) audit approaches (e.g., selective and cross-sectional audits). In addition, the auditors received extensive training on audit methods and techniques, such as interviews and analyses of files and databases, and took part in the fieldwork. With the audited entity’s consent, they were able to observe the introductory discussion, the collection of relevant audit evidence, and reviews of the files.
The internships focused mainly on audit procedures. Following the internships, Georgian and German auditors carried out joint audits in Georgia on issues related to the internships. Like the trainings, the audits included the different phases of an audit, from drawing up the audit plan to preparing the audit report.
The Georgian and German auditors chose among the different possible audit approaches and conducted the fieldwork as a team. A joint audit of public works provided a good example of effective cooperation. The auditors criticized the quality of construction work and concluded that a building contractor had charged for services not performed. The Chamber of Control determined that claims should be pursued against the contractor and notified the relevant authorities.
Keys to Success for Internships and Associated Joint Audits
The first and foremost condition for the success of internships and associated joint audits is the commitment of leadership in the partner institutions to support cooperation with another audit institution.
Second, internships and associated joint audits require a high level of organization. The Chamber of Control of Georgia and the Hessian Court of Audit had to take cooperative arrangements into consideration during their daily work. The dates for internships and joint audits had to be synchronized with the audit programs of both institutions. Auditors were released from their normal work for some weeks but continued to receive their salary. Simultaneous interpreters were vital to eliminating the language barrier.
Finally, internships and joint audits need to be evaluated. The Chamber of Control of Georgia and Hessian Court of Audit effort was subject to an independent evaluation, which proved to be very positive. The Georgian auditors widened their knowledge and applied the experience to future audits. Both audit institutions’ staff members enjoyed active and committed collaboration. The participants exchanged information and ideas, and the activities offered challenging and satisfying work experiences.
There is no universal prescription for developing an SAI. Many different types of measures build the capacities of an institution. Learning from one another and receiving support from partner institutions are particularly important. Close cooperation between a well-established organization and a developing SAI can support sustainable capacity building.
Internships at a recognized audit institution followed by joint audits at the developing SAI are one example of this type of cooperation. They offer learning opportunities for both institutions, promoting the effective exchange of experiences embodied in INTOSAI’s motto, “Mutual Experience Benefits All.” The development of an SAI is never completed. Even well-established audit institutions have to adapt to ongoing changes in their external environment. A close transnational cooperation ensures the exchange of experiences gained by putting INTOSAI’s standards into practice.
For additional information, contact the author at: mailto:firstname.lastname@example.org
 In January 2011, the GTZ merged with several other development organizations and is now known as GIZ. The GIZ is a federally owned enterprise that supports the German government in achieving its objectives in the field of international cooperation for sustainable development.
 Building Capacity in SAIs: A Guide, p. 33.
 Building Capacity in SAIs: A Guide, p. 38.