Draft framework

INTOSAI’s Framework of Professional Standards

 Draft proposal for comments by the PSC Subcommittees.

 

 

Introduction – why a common framework of professional standards?

 

1. In its Strategic Plan 2005-2010 INTOSAI made it an ambition under Goal 1 to ensure that INTOSAI can provide an up-to-date framework of professional standards that is relevant to the needs of its members. In the light of this ambition the Steering Committee of the Professional Standards Committee (PSC) has decided to merge the existing and new INTOSAI standards and guidelines into a framework. The overall purpose of the framework is to give the members of INTOSAI and other interested parties an overview and common understanding of the auditing standards and guidelines of INTOSAI. 

 

2.It is the intention that the framework should provide greater focus and attention on professional standards and raise the profile and status of INTOSAI’s standard-setting process – also within the broader accountability community.Moreover a framework will improve the general knowledge of standards and guidelines and facilitate the practical use of them in the INTOSAI community and in the public administration in general.

 

 

Proposal of a common framework of INTOSAI’s standards and guidelines

 

3. The INTOSAIdocuments can be divided into four levels:  

• Level 1: The Lima Declaration
• Level 2: The INTOSAI Codes which contain statements of values and principles guiding the daily work of the auditors.
• Level 3: The INTOSAI Auditing Standards that contain the basic assumptions and principles for carrying out the audit work.
• Level 4: INTOSAI Implementation Guidelines which contain more specific guidance material on different subjects

4. There is a hierarchical relationship between these levels in the sense that all documents at a lower level refer to documents at a higher level. The higher level documents thus forms the basis of the lower level documents.

5. With this hierarchy of documents as a point of departure the PSC Secretariat suggests that the framework of INTOSAI professional standards is developed along the following lines:

 

The framework comprises all documents endorsed by INCOSAI with the purpose of guiding the professional standards used by SAI’s. It is suggested that the name International Standards of Supreme Audit Institutions (ISSAI) is used as the common name to the body of such documents.

 For practical and identification reasons standards and guidelines are listed in a systematic number system.  Each document will thus get an ISSAI-number.

The framework should emphasize the hierarchical relationship between the documents at the four levels. It is suggested that the number of digits in the ISSAI-number indicates the level in the hierarchy.  The framework thus maintains the distinction between Auditing Standards (ISSAI-numbers of 3 digits) stipulating general principles and Implementation Guidelines (ISSAI-numbers of 4 digits) giving more detailed guidance.

 

6. An overview of the proposed framework is shown in figure 1.

 

Figure 1. Draft framework of INTOSAI’s standards and guidelines

 

 

 The suggested principles for classification of INTOSAI documents and a draft list of numbers for existing and planned documents are annexed as appendix 1.

 

Level 1: The Lima Declaration

7. The Lima declaration is the foundation with its comprehensive precepts on auditing in the public sector.

 

Level 2: Codes

 

8. Three codes or sets of principles are foreseen in the framework. These concern Independence, Transparency and Accountability and Ethics. The code of Ethics has already been developed and the PSC is at present working to develop a Charter on SAI Independence and principles of transparency and accountability. The suggested framework leaves room for further initiatives at a later stage, e.g. on Audit Quality. Together with the Lima declaration the codes will contain the essential prerequisites of the operations of SAIs. The codes have a form of general statements/objectives and principles on a high level and should not be changed very often.

 

Level 3: Auditing Standards

 

9.  The INTOSAI Auditing Standards consist of

1. Basic principles in government auditing contain the audit assumptions/general principles.

2. General Standardsin government auditing contain qualification requirements, independence, conflicts of interest, competence and due care etc.

3. Field Standards in government auditing contain more detailed guidance on for instance planning, evidence, analysis of financial statements, internal control.

4. Reporting Standards in government auditing contain financial audit reporting (the audit opinion), regularity and performance audit remarks and reporting.

The present document on Auditing Standards thus contains a chapter for each of these four types of standards. To underline the importance of these standards and make it easier to refer to specific items within the documents it is suggested that each of the 4 chapters is given its own ISSAI-number. 

 

Level 4: Guidelines

 

10. Guidelines have a more specific, detailed and operational form than standards in order to foster the practical use and implementation of auditing standards (and codes). The guidelines include guidelines for financial audit, performance audit and compliance audit. At present the guidelines do not follow the same outline and have very different structures depending on the subject matter.

 

11. The guidelines for financial audit are presently being elaboratedby the Subcommittee on Financial Audit Guidelines. These guidelines are based on the IFAC International Standards of Auditing (ISA’s) and will be prepared in close cooperation between INTOSAI’s Financial Audit Guidelines Subcommittee and IFAC’s International Auditing and Assurance Standards Board (IAASB). An INTOSAI guideline on financial auditing will consist of an ISA together with an INTOSAI Practice Note, outlining the special issues that must be taken into consideration in public auditing.  It is therefore suggested that the ISSAI-number contains a reference to the ISA-number.

 

12.Implementation guidelines for performance audit have been endorsed by the INTOSAI Congress 2004 in Hungary. The guidelines on Compliance Audit will be developed by the PSC Compliance Audit Subcommittee and presented to the INCOSAI 2007.  Documents that solely concerns compliance/regularity aspects within financial audit (or performance audit) may be adopted as guidelines on financial audit (or performance audit respectively). To provide for the necessary flexibility it is however suggested that a series of numbers are reserved for future general guidelines on compliance audit that can not be referred exclusively to either financial or performance audit.  

 

13. A number of other documents from Subcommittees and working groups contain more specific guidance material on different subjects e.g. audit of privatisation, public debt, environmental matters and international institutions. The majority of these guidelines have already been developed and endorsed by the INCOSAI.

 

14. Level 4 also includes documents giving guidance to SAIs on internal control standards and accounting standards. It is suggested that the hierarchical relationship between the documents within the same field is reflected by reserving numbers dividable by 1000 (or 100) to the more general document while the subsequent numbers x001-x999 (or xx01-x99) are used for documents on more specific subjects within the field.  Following this principle e.g. the Accounting Standards Framework published in 1996 could become ISSAI 7000 while the Accounting Standards Framework Implementation Guides for SAIs would be numbered 7100, 7200...etc.

 

What’s next?

15.  A draft framework will be presented to the Steering Committee of the PSC at the meeting in Washington, May 2006. The PSC-Secretariat will then – in cooperation with the Subcommittees – fill in the framework with the existing standards and guidelines as well as new documents to be endorsed by INCOSAI 2007. An exposure draft of the framework will be presented to the Steering Committee at the meeting in autumn 2006 and subsequently to the INTOSAI Governing Board meeting in Mexico, November 2006.

16. In accordance with the strategic goals of the PSC, the Committee will present the common framework for all INTOSAI professional standards to the INCOSAI 2007 in Mexico.

17. At the Congress the PSC will ask for a mandate to further elaborate on the INTOSAI standards and guidelines on the basis of the framework presented and the results of the survey planned in PSC’s Terms of Reference in order to make the INTOSAI documents more useable.

 

Appendix 1 - International Standards of Supreme Audit Institutions (ISSAI)

 

Suggested classification principles:

1       Each document is given a 1-4 digit ISSAI-number. The number of digits indicates at which hierarchical level the document belongs.

2       Document-numbers dividable by 1000 (or 100) are reserved for documents of a more general scope while the subsequent numbers x001-x999 (or xx01-x99) are used for documents on more specific subjects within the same general theme.

3       Each of the 4 chapters in the existing Auditing Standards is treated as a separate document and given its own number. Other existing documents are given only one ISSAI-number.

4       The numbers from 1000-9999 reserved for level 4 (implementation guidelines) are segmented into clusters reserved for different subject areas. The subcommittees are responsible for maintaining the classification within their subject area.

5       For documents that have their origin in an ISA (or ISQC) from IFAC/IAASB the last 3 digits of the ISSAI-number are identical with ISA-number (or ISQC-number).

6       When convenient a reference to specific items (or sections and subsections) within an ISSAI-document can be made by adding the number of the item to the ISSAI-number with a dash ‘-‘. (Eg. ISSAI 3000-5.4 refers to item 5.4 in ISSAI 3000).  

7       To provide a general overview the classification system comprises all documents endorsed by INCOSAI with the purpose of guiding the professional standards used by SAI’s. This includes recommendations on the legal, organisational and professional prerequisites as well as on the conduct of audits and on public accounting and internal controls. Where appropriate it may also include examples or description of good practices. Other documents (such as reports, glossaries, lists of organisations or collections of examples for inspirational purposes) are not given a ISSAI-number. If relevant such documents may be annexed to an ISSAI-document.

 

Draft list of documents– illustrating the suggested classification principles

 

 

International Standards of Supreme Audit Institutions (ISSAI)
ISSAI-numbers and existing INTOSAI documents	Examples of references to item or sections/subsections within the document:
Level 1 – Founding principles ISSAI 1 The Lima Declaration	(ISSAI 1-1 to 1-25.3)
Level 2 – Codes for Supreme Audit Institutions ISSAI 10 New code/principles of Independence      ISSAI 20 New code/principles of Transparency and Accountability ISSAI 30  Code of Ethics (ISSAI 40-90 reserved for other “codes”, e.g. on Audit Quality)	(ISSAI 30-1 to 30-33)
Level 3 – Auditing Standards for Supreme Audit Institutions ISSAI 100 Basic Principles in Government Auditing                      ISSAI 200 General Standards in Government Auditing ISSAI 300 Field Standards in Government Auditing ISSAI 400 Reporting Standards in Government Auditing	(ISSAI 100-1 to 100-47) (ISSAI 200-1.1 to 200-2.46) (ISSAI 300-0.1 to 300-3.4) (ISSAI 400-1 to 400-29)
Level 4 – Guidelines for Supreme Audit Institutions ISSAI 1000-2999 concern financial audit:   ISSAI 1000 Implementation guidelines on Financial Audit ISSAI 1XXX - guidelines consisting of IFAC/IAASB standards with practice notes, XXX is the ISA number (100-999) or ISQC number (1-99)   (ISSAI 2000-2999 reserved for supplementary financial audit guidelines e.g. on reporting or compliance aspects)	E.g. ISSAI 1240-28 will refer to provision 28 in ISA 240 with practice notes
ISSAI 3000-3999 concern performance audit:   ISSAI 3000 Implementation guidelines on Performance Audit   (ISSAI 3100-3999 reserved for supplementary performance audit guidelines on e.g compliance aspects, economy, efficiency, effectiveness, sound financial management or programme evaluation).   ISSAI 4000-4999 are reserved for compliance audit.	SSAI 3000-1.1 to 3000-5.6
ISSAI 5000-5900 concern audit work within special fields:   ISSAI 5000-5099 concern International institutions   ISSAI 5010 Principles for best audit arrangements for international institutions (ISSAI 5010-Appendix: Best practice example of financial rules and regulations concerning audit arrangements in international institutions) ISSAI 5020 Audit of International Institutions - Guidance for Supreme Audit Institutions (SAIs)   ISSAI 5100-5199 concern environmental audit ISSAI 5110  Guidance on Conducting Audits of Activities with an Environmental Perspective ISSAI 5120 Environmental Audit and Regularity Auditing ISSAI 5130 Sustainable Development: The Role of Supreme Audit Institutions ISSAI 5200-5299 concern privatisation   ISSAI 5210 Guidelines on Best Practice for the Audit of Privatisations   ISSAI 5220 Guidelines on Best Practice for the Audit of Public/Private Finance and Concessions   ISSAI 5230 Guidelines on Best Practice for the Audit of Economic Regulation   ISSAI 5240 Guidelines on Best Practice for the Audit of Risk in Public/Private Partnerships (PPP)   ISSAI 5300-5399 concern IT-audit   ISSAI 5310 Information System Security Review Methodology - A Guide for Reviewing Information System Security in Government Organisations   ISSAI 5400-5499 concern audit of public debt   ISSAI 5410 Guidance for Planning and Conducting an Audit of Internal Controls of Public Debt    ISSAI 5420 Public Debt: Management and Fiscal Vulnerability: Potential Roles for SAIs   ISSAI 5430 Fiscal Exposures: Implications for Debt Management and the Role for SAIs   ISSAI 6000-6999 concern internal control:   ISSAI 6000 Guidelines for Internal Control Standards for the Public Sector   ISSAI 6100 Guidance for Reporting on the Effectiveness of Internal Controls: SAI Experiences In Implementing and Evaluating Internal Controls   ISSAI 6200 Internal Control: Providing a Foundation for Accountability in Government   ISSAI 7000-7999 concern accounting standards:   ISSAI 7000 Accounting Standards Framework   ISSAI 7100 Accounting Standards Framework Implementation Guide: Departmental and Government-wide Reporting   ISSAI 7200 Accounting Standards Framework Implementation Guide for SAIs: Management Discussion and Analysis Of Financial, Performance and Other Information   ISSAI 7300 Guidance on Definition and Disclosure of Public Debt	ISSAI 5010-1 to 5010-7 refers to the 7 principles ISSAI 5010-1.1 to 5010-7.9 refers to the comments