Intosai Auditing Standards Essay Example

complexity of, information technology systems.
- The need for more effective use and retention of corporate knowledge and the importance of effective record keeping, particularly electronic records.
- Challenges in recruiting and retaining the required skills for today's resource person.
- An increased focus on the physical environment, for example, clean water, poverty alleviation, and security matters.

2. Developments in the accounting and auditing profession:
- Increased attention to sound corporate governance.
- Emphasis on risk management and the importance of robust control environments.
- Adoption of international accounting and auditing standards.The ongoing development of government accounting standards includes the development of audit methodologies, with a focus on legislative compliance. A high-quality external audit for Soaps would encompass the scope and coverage of the audit, adherence to auditing standards, independence of the external audit institution, reporting on significant and systemic financial management issues, and performing a comprehensive financial audit. This includes ensuring the reliability of financial statements, regularity of transactions, and functioning of internal control and procurement systems. The inclusion of some aspects of performance audit, such as value for money in major infrastructure contracts, is expected. The role of the Auditor-General has expanded with the adoption of International Auditing Standards. Audits now need to be conducted during busy periods to meet reporting deadlines imposed by the PEA, necessitating increased staffing. Additionally, devolution has changed the way government money is spent in Pakistan, with responsibility for significant amounts now resting with devolved administrations. These changes have also led to changes in audit arrangements for accountability of public money.The objectives of the AFAR Audit Component, an initiative by SOAP, include implementing best audit practices, developing SOAP infrastructure, technology and human resources, implementing an

Audit Management and Information System (MA'S), and adopting auditing standards and guidelines.

The purpose of this concept paper is to develop a strategy for the post-AFAR scenario, which is expected to be completed in 2010. It is important to create a strategy for the succession of the reforms implemented by the project.

To develop an effective strategy, it is necessary to assess the activities conducted by AFAR consultants and the impact it will have on SOAP staff after the completion of the project.

Assuming certain objectives will be achieved by the end of the project, including rolling out FOAM to all three tiers of government, implementing AMISS, and upgrading Oafs.

SOAP faces challenges in adopting best international practices and expanding its client base and variety of work.

FOAM was developed based on MAINTAINS guidelines.MAINTAINS has made the adoption of International Standards of Supreme Audit Institutions (ASSAI) mandatory for all the SASS. FOAM and practices performed under FOAM also need revisions in accordance with new technical requirements prescribed by Sisal. The Auditor-General of Pakistan is a signatory of the Lima Declaration (ASSAI guidelines) and the World Bank has recommended their formal adoption to align with international best practices. Currently, a gap analysis is being conducted to compare ASSAI with current departmental practices. Following the adoption of ASSAI, the new technical requirements prescribed by ASSAI must be implemented across all the Oafs. This implementation requires technical and professional expertise as well as human resources well-versed in International Standards on Auditing (Isis). IS Auditing I SAP is being implemented at all levels of government, from federal to district level. Additionally, a pilot project is underway to apply it to devolved levels of government.

The workload of audits will increase significantly as more government and devolved spending levels are added. SAP generates a variety of accounts &Reports and reliance on reports can only be made after a detailed Information System (IS) functionality audit has been established by trained IS staff on a regular basis. The World Bank has emphasized the adoption of ISAAC standards for IS audits, which are highly technical and require the expertise of professional and experienced staff in the field. These experts will not only train the Oafs staff but also monitor their progress to ensure they meet the minimum requirements stated in ISAAC standards.

The Audit Management and Information System (MA'S) is software that encompasses the entire audit cycle, including planning, execution, and reporting. It reduces human discretion and bias in audit processes and provides real-time information to strategic management. Implementing AMISS in SOAP is currently a concept, and having professional staff with relevant experience becomes crucial for technical support and training for Oaf's staff after AFAR.

SOAP currently performs two types of audit: compliance with authority work and certification audit. These audits are interconnected, and an integrated audit approach is considered one of the best international practices.Integration of regularity and certification audits will significantly improve efficiency and prevent duplicate work, benefitting the department and all 25 Oafs. It is important to have professionally qualified human resources with knowledge and experience in integrated audit approaches to educate Oafs staff. SOAP takes pride in being innovative and proactive in the field of public sector auditing and accounting, and FOAM is an example of such initiative. However, FOAM is not a static document and requires continuous updates based on

lessons learned and innovative thinking. SOAP has also issued 16 sector guidelines, offering opportunities for improvement in current and proposed audit practices. PIPES, the comprehensive set of public sector accounting standards, ensures that the financial reporting of public bodies provides a true and fair view of their financial situation.There are two options for preparing financial statements, the cash basis of accounting and the accrual basis of accounting. In Pakistan, public sector accounts are currently prepared using the cash basis. However, the Auditor General has proposed adopting accrual accounting in the future. The strategy for this adoption is a phased approach, starting with asset accounting and commitment accounting. Accrual accounting differs significantly from the cash basis and will require sophisticated knowledge and experience to understand both systems' requirements.

Improvement in Public Expenditure and Financial Accountability (PEA) indicators is essential. PEA is an integrated performance measurement framework for Public Financial Management (FM) developed by several donors, including the World Bank, MIFF, European Commission, United Kingdom's Department for International Development, French Ministry of Foreign Affairs, Royal Norwegian Ministry of Foreign Affairs, Swiss State Secretariat for Economic Affairs, and SPA Strategic Partnership with Africa. These PEA indicators play a crucial role in determining donor funds availability and interest rates for a country.The audit reports are essential documents for maintaining accountability and transparency in a country's financial system. They serve as a check on budgeted expenditures and the utilization of donor funds, as well as overall Public Financial Management (FM). One of the criteria for achieving an 'A' category in PEA indicators is ensuring that the audit office receives and covers the necessary financial statements within a specific timeframe. Currently, the

government prepares, audits, and presents its accounts to the legislature within one year of the relevant financial year. To meet this required timeliness and improve PEA ratings for Pakistan, a team of professional and experienced staff is needed. This would also result in increased flow of funds such as grants and debts at more favorable terms.
The authority to spend rests with the government, which is given by the legislature through the passing of the annual budget law. If the legislature does not thoroughly examine and debate this law, it undermines the government's accountability to the electorate. Assessing the legislative scrutiny and debate of the annual budget law considers factors such as the scope of scrutiny, internal procedures for scrutiny and debate, and the time allotted for this process. The legislative scrutiny of the annual budget is an important indicator within the PEA framework (PI-27).

SOAP, the legislature representative for assessing transparency and scrutiny of public funds, is seeking to expand its scope. Specifically, they aim to evaluate and audit the procedures and assumptions related to budget scrutiny and preparation. This is a new area of focus that requires building capacity to meet the challenge. By doing so, SOAP aims to improve Pakistan's PEA ratings and potentially increase the flow of funds, including grants and debts with more relaxed terms. Additionally, the Audit Component of AFAR plays a significant role in implementing the Financial Audit Manual (FOAM). FOAM, based on international best practices, employs a risk-based auditing approach in both public and private sectors. To ensure proper implementation, experienced audit consultants were hired and stationed at respective G offices to provide on-job and classroom-based training. Auditor

Competency Centers were also established at GAP Head Office and four provincial levels to support FOAM implementation at respective G offices.The AC Islamabad, which consists of Audit Experts and Supervisors, works with all Field Audit offices to achieve the benchmarks set in FOAM. Some functions performed at AC include monitoring progress towards targets set by the GAP and World Bank, devising strategies for target achievement, communicating strategies to field offices, liaising with field audit offices for communication of policy decisions, arranging trainings for G offices, providing technical input on queries, hiring and orienting Audit Experts/Supervisors, extracting data from SAP and distributing it for CAL checks, procuring Audit Component-related items, coordinating with AMISS consultants for nationwide MA'S implementation, arranging workshops on auditing and accounting practices, and assisting PAR;SD wing on quality control and assessment.

Technical support will be provided for finalizing financial statements on a cash basis in the PIPES format. Additionally, practical inputs and advice will be given for IT audits and control assessment of the IT environment. Field Audit Offices have professionals, including Audit Experts and Audit Supervisors, who are placed at 24 Oafs. These professionals provide on-the-job training to Field Audit Staff on implementing the Financial Audit Manual. The functions performed by the Audit Experts/Supervisors include classroom training of FAA staff and assisting in the preparation of various files such as the Annual Audit Plan, Permanent files, Planning file of Individual Audits, Execution Files, Reporting File, Management letter, and assisting G office in conducting Special Audits if required. The proposed strategy includes improving the audit process and ensuring sustainability. To achieve this, professionals will continue to provide technical assistance under the department's FOAM

Technical Assistance program. Lessons learned from AFAR-II will be applied, and the existing number of Audit Experts and Audit Supervisors will remain at 24 Oafs to provide on-the-job training to Field Audit Staff on implementing the Financial Audit Manual.

The Audit Competency Centers will be established as a permanent technical resource center, where Master Trainers and qualified professionals will be appointed to provide technical input to Oafs. The Master Trainers will be qualified accountants from PA;AS or departmental staff with experience in FOAM implementation. FOAM Modules certified Master Trainers will work closely with Audit Experts at Oafs and participate in a minimum of three to five more Audit Cycles under the supervision of Audit Experts. Ideally, there should be three Master Trainers for each Audit Expert.

These Master Trainers will receive compensation in the form of an allowance for motivation and sustainability of reforms. They will be encouraged to obtain certifications in the field of Audit and accountancy, such as Certificate in International Auditing, Certified Government Auditor or COCA etc.

To manage all the Audit Offices, one Director General will be appointed in Audit Competency Center (AC), Islamabad. Additionally, one Director will be appointed in AC Lahore and Karachi each, while AC Equate and APeacer will be run by Deputy Directors to continue with the existing setup.

FOAM will be a key criteria and case for promotion of Oaf's staff. Incentives, such as additional allowances and recognition of work performed, will be introduced to motivate master trainers. AMISS Technical Support will be responsible for maintaining the system once it is fully functional.There will be a continuous need for IT professionals to maintain and upgrade the system and ensure smooth

operations. Staff with IT background will be identified and attached to the AMISS implementation team to gain experience for maintaining the IT system after the project is implemented. PA&AS officers will be involved in the implementation stage of MA'S and posted at Sacs to provide technical support post AMISS implementation. AMISS Experts will be placed at each AC to handle technical difficulties and change management related to AMISS operations. They will also provide continuous training at each FAA and offer on-job training in coordination with Audit Experts in the respective Oafs. CAL Master Trainers will be placed at Sacs for data extraction and CAL checks for Oafs. It is encouraged for CAL Master Trainers to obtain CAL certification and continue training selected staff of Oafs instead of the entire staff. The Strategy Office will oversee these efforts.Staff at AP;AS wing Professionals will be placed at Strategy office to continue supporting SOAP office for overall technical assistance and ensuring SOAP stays updated with International Best Practices.

Additionally, they will assist AP;AS wing in the following functions:
- Continuous upgrading of FOAM, Working Paper Kit, Sector guidelines, Desk audit guidelines, and compliance with International Standards of Supreme Audit Instructions (ASSAI) through active field research.
- Issuing instructions and organizing workshops for new auditing techniques that will be implemented in the future.
- Modifying/amending auditing techniques if PIPES accrual basis is adopted.

Quality Assurance Unit: As FOAM requires quality assurance procedures at every step to achieve quality and timeliness in our reports, it is important to ensure that these procedures are in place in all our work.

Quality Control Unit: With the conversion of our Financial Statements into PIPES compliant accounts and the

increased awareness among stakeholders about our improved output, the opinion on financial statements (certification audit) will gain more importance. To address quality issues, a strong Quality Control Unit will be required.The presence of a Senior Quality Control Specialist and a support team will ensure the accuracy of Audit Opinions expressed by SOAP and address the risk of reputation. The SOAP gathers various types of information at different levels, which needs to be managed appropriately. To achieve this, a knowledge management cell will be established. This cell will be responsible for ensuring the timely availability of current and up-to-date information. It will also convert the department's accumulated information into knowledge. SAP is being implemented across all tiers of governments, from Federal to District levels. SAP generates various accounts, reports, and reliance on these reports can only be made after a detailed Information System (IS) functionality audit by trained IS staff on a regular basis has been established. The World Bank has also emphasized the adoption of ISAAC standards for such IS Audits. These ISAAC standards are highly technical and require the services of professional and experienced staff in the field of IS audit, specifically in CICS. These experts will not only train the Oafs staff but also monitor their progress and ensure they meet the minimum IS audit requirements stated in the ISAAC standards.Performance Auditing SOAP has significantly reduced the timeliness for certification and regulatory audit through the efficient use of state-of-the-art tools gained in AFAR-II and coordination amongst its various wings. It is now expected that SOAP presents reports to the Parliament on the value for money (FM) with which Government departments and other public

bodies have spent their resources.

To develop this product for all stakeholders, both internal and external, we will allocate a reasonable amount of time. Our value for money work will cover a wide range of issues and all aspects of government. Our reports will include the examination of the entire operation of the criminal justice system, major procurement projects of the Ministry of Defense, and initiatives to improve literacy and numeracy levels. As a first step towards developing performance auditing capability, SOAP plans to create a performance auditing manual. To ensure its quality and success, SOAP will engage a firm of international repute that has the capability to understand the local environment to develop this manual for SOAP.