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Experiences in Implementing Audit Quality in Performance Auditing

Experiences in Implementing Audit Quality in Performance Auditing. Jarmo Soukainen State Audit Office of Finland Vilnius 15-17 March 2006. Contents. 1. SAO Performance Auditing in nutshell 2. Experiences in Implementing Audit Quality, lessons learned: insitutional level

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Experiences in Implementing Audit Quality in Performance Auditing

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  1. Experiences in Implementing Audit Quality in Performance Auditing Jarmo Soukainen State Audit Office of FinlandVilnius 15-17 March 2006

  2. Contents • 1. SAO Performance Auditing in nutshell • 2. Experiences in Implementing Audit Quality, lessons learned: • insitutional level • individual audit level • 3. Summary – what next?

  3. The Mission of the Performance Audit The Working Order of the SAO, 2 §: The mission of the Performance Audit Unit is to • produce audit information which is useful for control and steering of the state budget and financial management • produce information on legality and appropriateness of state operational systems and activities • in production of information, to place special emphasis on achievement of goals and objectives

  4. Performance audit objects Performance audits focus on • state finances: budget appropriations, state’s assets and property, state subsidies, transfers and guarantees, state enterprises and funds • management of state finances: how the state finances are planned, decided upon and executed • the results and consequences of the management of state finances: achievement of objectives and the results and outcomes of activities • often on activities that cross administrational sectors

  5. Organisation of the Unit Director General Management Group Audit Director (reporting & deputy DG) Audit Manager (reporting) Audit Manager (complaints,abuses & legal advice) Support function (7 pers.) Audit Group 1 Audit Manager 17 auditors Audit Group 2 Audit Manager 18 auditors Audit Group 3 Audit Manager 16 auditors

  6. Performance Audit Reporting • Approximately 25 performance audit reports a year • Usually at least one report from each administrational sector annually • Abstracts of reports 2001- : www.vtv.fi • Approximately 25 follow-up reports annually • Additionally few other reports & pre-study reports that have not led to full-study • In the office’s annual report to the parliament • Abbreviations of the performance audit reports and the follow-up reports • 2–3 thematic studies based on the previous years’ audits

  7. Examples of Performance Audit topics • The acquisition of external financing by the Housing Fund of Finland • Employment effects of labour market training • Use of expert services by the Defence Administration • Senate Property Ltd‘s procurement of property management services • Waste taxation

  8. Quality improvement work – history in brief • Audit quality working group 1994-2000: • general quality requirements 1997 • audit process developing 1998-, eg report standardizing, follow-up procedures • quality criteria for audit reporting  external ”cold reviews” 1999-2001 • external assessment of audit impacts 2000 • Quality establishing stage 2000- : • Performance audit process guidelines 2002, incl. preliminary study and reporting guidelines • establishing 3 permanent working groups 2003 for monitoring and taking initiatives for 1) audit planning, 2) work process, 3) reporting • self-assessment of audit focusing 2005

  9. Basics of audit quality work – institutional level • definition of quality requirements • ”what is it like?” –finding adjectives • product- and process-oriented approach • process-integrated and comprehensive quality; • audit quality does not build up by auditing or reviewing of (draft)reports • quality assurance and control procedures: eg involving top management • recruitment of staff; eg exploiting skills and expertise • step by step- policy: building up quality in existing processes

  10. General quality requirements – finnish application • Objective: neutral, integrated, strict integrity, no interference and deals with auditees • Reliable: focused, planned (eg time and costs), proper audit evidence • Transparent: transparent argumentation, co-operation with auditees, no surprises, processing confidential information • Feasible: appropriate, timely, clear, concrete, simplified, specification of audit findings / arisen problems Detailed specification in each of these 4 elements: What does it mean? Balance between elements  high quality

  11. Performance audit process • Monitoring of the administration • Audit proposals • Audit plan (by the Auditor General) • Preliminary study * • Full study (audit work) • Draft report & feedback from the auditee* • Audit report * • Press release • Follow-up study *Note: Checklist (of questions based on general quality requirements) included in guidelines

  12. Audit process Decision on further measures Decision on starting the audit Decision on further measures Audit Preliminary study Final meeting Initial meeting Prel.study meeting DG, AD AM I / II A DG, AD AM I / II A DG, AD AM I / II A A AM II, AD A AM I

  13. Quality assurance – individual audit level 1/2 • pay attention to the first beginning: identify all potential approaches and audit questions, explain carefully the selected alternatives and restrictions • pay attention to audit risks: what may go wrong? • collecting audit evidence: take full advantage of SAO:s extensive mandate, try to exploit several appropriate methods (”cross-checking”) • prepare yourself for conflicts and take the contradictions into account, be neutral and persistent • keep in touch a) the audit team members, b) audit management and c) especially the auditees • quality assurance: no full ”audit auditing”, the auditees’ contribution

  14. Quality assurance – individual audit level ( 2/2) • concentrate to answering the main audit questions: is the situation satisfactory or not, in respect of audit questions • pay attention to transparency: audit findings-> conclusions-> recommendations • pay attention to positive findings as well – keep the balance • write shortly and correctly, don’t blame anyone personally • when formulating recommendations, avoid a) political slogans, b) detailed proposals for actions, only show the direction

  15. Summary – what next? • Ongoing quality work – improving measures step by step • Strategy of the Performance Auditing 2006-2012: • general streamlining the audit process, especially use of IT • main expertise areas in audit methodology, persons in charge • spreading the know-how in the office (incl. finacial audits), improving the exploitation of previous audit results • external experts (if available) • peer review, benchmarking other SAI:s

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