| Supreme Audit Office (SAO) Afghanistan

1. |Supreme Audit Office (SAO) Afghanistan

2. |Value of Audit – Measuring and Challenges SAO Afghanistan – Assurance on donor assisted projects and meeting benchmarks for incentive based financing

3. Overall Framework • INTOSAI ISSAI 12 – The Value and Benefits of Supreme Audit Institutions

4. Overall Framework

5. Measuring Value of Audit – Perceptive/Qualitative/Formal and Quantifiable • Perceptive /Qualitative /Formal –

6. Measuring Value of Audit – Perceptive/Qualitative/Formal and Quantifiable • Quantifiable / countable measures –

7. Measuring Value of Audit – Perceived and Quantifiable • Quantifiable or Countable –

8. Measuring Value of Audit – Public Audit in Afghanistan • The Supreme Audit Office of Afghanistan is striving to demonstrate the value of public audit in terms of –

9. Measuring value of Audit – Afghanistan’s context • Measuring value of public audit in Afghanistan has additional dimensions, e.g. –

10. Measuring Value of Audit – Afghanistan’s context • In addition to the mandated responsibilities as per the Audit Law, the SAO is responsible for financial audit of all the World Bank grants projects’ (about 40-46) financial statements, which entails –

11. Measuring Value of Audit – Afghanistan’s context • Assurance on donor assisted projects, also entailing examination and assurance on –

12. Measuring Value of Audit – Afghanistan’s context • Meeting benchmarks for incentive-based financing. • In addition to normal route grants and supports, the donors assisting Afghanistan, have incentive-based financing. • The incentive-based benchmarks for financing include fixed tranche eligibility criteria (general conditions) as well as variable tranche eligibility criteria (performance based) criteria for financing. • These apply to Government agencies and certain cases, to the SAO Afghanistan also. • Criteria and benchmarks are as agreed to and set under various bilateral and multilateral arrangements.

13. Measuring Value of Audit – Afghanistan’s context • Agreed Frameworks for criteria and benchmarks -

14. Measuring Value of Audit – SAO’s Benchmarks

15. Measuring of Value of Audit – SAO’s Benchmarks

16. Measuring Value of Audit – SAO’s Benchmarks

17. Measuring the value of audit in special conditions • The Government agency’s related benchmarks and indicators, amongst other, relate to – • Public Policy, Macro-economic stability, Public Financial Management, Budget Transparency and reforms, Improving tax administration, Maximizing domestic revenue for self-reliance, Civil Service reforms • Reforms in extractive industry, Improving business environment, Power utility reforms, Land governance • Reduction of corruption and better governance, Better service to rural and urban population, Efficient and improving expenditure control • Irrigation and agriculture policy reforms for livelihood • Improved planning and appraisal of projects

18. Measuring the value of audit in special conditions

19. Challenges in measuring the value of audit • While quantifiable measures may be subject to a lesser degree of disagreement amongst stakeholders, perception-based measures may always be subject to debate. • Even the quantifiable measures are subject to the capacity of the management to implement the related audit observations and recommendations, e.g., recoveries, revenue maximization, or service delivery, etc.

20. Challenges in measuring the value of audit • Unless agreed to by the management for implementation and effectively guided by the legislative oversight, many of the recommendations of the audit would remain unimplemented due to management's disagreement. • Hence, there would remain a gap between the perception of value and the actual value added by the audit.

21. Challenges in measuring the value of audit • Meeting the benchmarks are subject to third party review and hence their effectiveness is subject to external factors. • Value of the audit is dependent upon the effective scrutiny of the legislative oversight.

22. Thank you