The meeting of the Steering Committee
of INTOSAI Professional Standards Committee (PSC)
in Washington 4-5 May 2006

 

Minutes

 

1. Opening of the meeting

The host of the meeting, David Walker, Comptroller General of the United States welcomed the delegates to the important meeting.

The Chair of PSC thanked the host and welcomed delegates from 15 SAIs and organizations. A special welcome was made to the new members of the Steering Committee from the SAIs of Brazil (Chair of the Subcommittee on Performance Audit) and China (representative from ASOSAI), and also to the new observers from the World Bank and the specially invited guests from Institute of Internal Auditors.

A list of delegates and their contact-information is attached to these minutes.

2. Approval of the Agenda

The Chair of PSC introduced a new item 8a on the agenda: presentation of the IDI strategic plan 2007-2012 by Magnus Borge.

The agenda was approved.

3. Information from the Chair

The Chair informed the Steering Committee that Mr. Kjell Larsson would be renominated to the International Auditing and Assurance Standards Board for a full three-year term.

4. Recognition of INTOSAI auditing standards and guidelines

Sheila Fraser introduced this item on the agenda, emphasizing the limited resources of INTOSAI and explaining the background. There had been some doubt in the UN Board of Auditors over the appropriateness of making reference to INTOSAI standards. She was not certain that INTOSAI should continue to consider it-self standard-setting. Frank Vandenhoven presented a discussion paper and outlined two possible approaches: PSC could either develop INTOSAI specific standards or apply other internationally recognized standards and modify them to suit the SAI environment. The two approaches could be combined.

The following discussion reflected a variety of different views and visions. Among these, David Walker suggested that PSC’s tasks could be fulfilled by either endorsing a single set of standards or combining a number of different standards into INTOSAI guidance. One option was USA’s national standards in “the yellow book” which is also used in some other countries. The resources of INTOSAI were best used by filling in gabs in areas not already covered by other standard setting bodies and emphasising the areas were SAI’s has special needs. He stressed that according to the strategic plan PSC’s current role was to issue guidelines rather than developing further on INTOSAI’s Auditing Standards. Per Engeseth generally preferred the solution of drawing on a number of relevant standards rather than endorsing one specific standard setting body. Josephine Mukomba found that the decisions on how to develop guidelines were best taken in the subcommittees. Sheila Fraser emphasised the importance of establishing a mechanism that can verify to what extent those SAI’s which has chosen to follow INTOSAI standards apply these consistently. Greg Schollum emphasised the need to avoid duplication in standards and guidelines within the INTOSAI framework and encouraged the committee to draw conclusions from the discussion. The delegates expressed general satisfaction with the use of resources under the approach taken by the Financial Audit Subcommittee in which experts nominated from 65 SAIs participate in IFAC/IAASB’s standard setting work and in writing complementary Practice Notes.

The Committee concluded that the following lines expressed the view of the Committee and should be included in the minutes:

The PSC Steering Committee agreed that the PSC should strive for a dual approach in fulfilling the goal of developing implementation guidelines to the INTOSAI Auditing Standards approved by INCOSAI in 2001:

INTOSAI’s guidelines should preferably be based on standards that are widely recognized among SAIs. By recognizing, utilizing and building on standards issued by other standard setting bodies to the maximum extent possible and appropriate, PSC will work to harmonize public sector audit internationally. INTOSAI will develop complementary guidance where there is a special need and/or a pressing concern in the SAI environment and will seek to influence international standards to address issues of particular interest to SAIs. In doing so, PSC will look to eliminate any duplication within the framework of INTOSAI’s professional standards.

This dual approach should provide clarity by emphasizing in what aspects private and public sector auditing is alike and in what aspects auditing in the two sectors differs. The approach will allow PSC to concentrate its own efforts in developing guidance in fields where SAIs have special needs due to their status as national authorities within the constitutional systems and the special considerations of public sector auditing.

The Subcommittee on Financial Audit Guidelines will continue its work under the memorandum of understanding with IFAC. Due to the cooperation with IAASB on providing INTOSAI experts in the task forces to develop ISA’s, these can be expected to be applicable to a high degree to public sector auditing as well as private auditing. If there are specific public sector perspectives not covered by ISAs, these will be stated in the Practice Notes, explaining how the public sector auditor may deal with these areas. In areas where there are no ISA’s, the FAS will develop additional guidance in accordance with the scope of the Financial Audit Guidelines.

In the field of compliance audit and performance audit, the Steering Committee encourages the subcommittees to consider existing standards in the further development of guidelines. As a working method the committees should consider if any national, regional or international standards are widely recognized among the SAI’s of the world and could form the basis of the committee’s work. The steering committee invite all SAI’s to forward any standards they might consider relevant, to the subcommittee chairs. Examples of standards could be USA’s yellow book (national), the European Implementation Guidelines to INTOSAI’s Auditing Standards (regional) or IFAC or IIA standards (global). After consideration of these and other standards, the subcommittees should advise the PSC of any standards it believes acceptable to INTOSAI or could be consolidated into suitable guidelines. Should there be no such standards the subcommittee should explain the issues and concerns.

In accordance with the Lima declaration and the INTOSAI Auditing Standards approved by INCOSAI, INTOSAI’s standards and guidelines are not compulsory. As SAIs are national authorities exercising their duties on basis of their legal mandate there is no enforcement mechanism directed at SAIs. The PSC Steering Committee encourages the Capacity Building Committee to consider if peer reviews could provide a voluntary mechanism of establishing compliance with INTOSAI standards and guidelines.

The steering committee will continue to ensure that the mandates, terms of reference and work plans of PSC and the subcommittees are followed. At a coming meeting the steering committee will discuss what mandate to ask for at INCOSAI 2007 in order to further elaborate on INTOSAI’s documents.

5. Draft framework for professional standards

Yvan Pedersen presented a paper on a draft framework for INTOSAI’s professional standards and introduced the suggested names “International Standards of Supreme Audit Institutions (ISSAI)” and “INTOSAI Guidelines on Good Governance (INTOSAI GOV)” together with the suggested principles for classifying documents in a number system with four levels. Mr. David Walker suggested that the framework should be modified in the light of the discussions under item 4 when a conclusion on this item had been drafted. Greg Schollum agreed and asked if PSC is creating a framework of what is currently in existence or what we want to elaborate in the future. Josephine Mukomba asked if the PSC is expecting implementation guidelines from the Accounting and Reporting Subcommittee. Kristoffer Blegvad answered that at this stage only existing INTOSAI documents have been included in the framework

In the following debate on the content and number of levels in the framework some delegates were of the opinion that one or more levels could be deleted as INTOSAI would probably not develop standards in the future. Other delegates emphasized the value of the existing INTOSAI Auditing Standards and wanted to include them in the framework. Dominique Vincenti and Jim Sylph shared their experiences from the work of IIA and IFAC and suggested that plenty of flexibility was maintained in the framework in order to take future developments into account. Monica Gonzales suggested that more INTOSAI documents – e.g. the handbook should be included in the framework and asked who would administrate and run the framework. Jeanette Franzel mentioned the problem with conflicting standards and referred to the Yellow Book for inspiration.

The Chair emphasized that the PSC Secretariat has developed a basic, empty version of the framework and that each subcommittee will be responsible for applying the classification principles on the existing and planned documents within their field of work.

Having concluded on item 4 the Steering Committee agreed on the content of the paper presented by the PSC Secretariat with the modification following from the graphic illustration of the framework which was circulated at the meeting and is attached to these minutes. At INCOSAI 2007 PSC will suggest a framework with four levels while the general heading of level 3 will be Fundamental Auditing Principles instead of the suggested ‘Auditing Standards’. This reflects that the content of level 3 is likely to evolve over time and that efforts to improve on the framework as well as the individual documents will continue with a renewed mandate after 2007.

6. Draft Communication and Implementation Plan

The Chair introduced the draft plan and asked in particular for comments on the need to coordinate surveys in PSC. Magnus Borge emphasized that the three steps: acknowledgement, application and awareness are linked and suggested that the professional development of standards within SAIs should also be targeted. IDI is prepared to cooperate with the PSC on the Communication and Implementation Plan.

Monika Gonzalez emphasized that the PSC should be in very close contact with India as they will develop a global communication policy for INTOSAI. Sheila Fraser pointed out that some use of language in document might need to be reviewed when conclusions on item 4 had been drawn.

The Steering Committee agreed with this and decided that the PSC Secretariat should make contact to Mr. Kaul, Comptroller and Auditor General of India and ask about their advice on the PSC plan in the light of the INTOSAI Global Communication Policy. The PSC should then take it to the Governing Board of INTOSAI if the contact with India leads to changes in the terms of reference.

In the meantime the Subcommittees should inform the PSC Secretariat about up-coming surveys. Finally the wording of the document should be in line with the conclusions under item 4 on the agenda.

7. Project on Principles for Transparency and Accountability

Ignace Desomer presented the paper and emphasized that one of the main challenges of this issue was to come to a common understanding of what transparency and accountability means. He then went through the process so far.

The aim of the paper is to explore accountability and transparency, in this sense it is a working document. The question is, if the work should result in a code of transparency and accountability – the drafting of such a code becomes a relatively easy task once the PSC has agreed on the content.

The Steering Committee agreed that the paper drafted by the SAI of Belgium was excellent.

Jean Ste-Marie presented the comments from Canada and drew attention to the links between independence and transparency and accountability. He suggested that the focus needed to be narrowed down and maybe the issue of good governance could be left out. Per Engeseth mentioned that Norway will be prepared to continue the work in the project. The Chair found it important also to have a Court included in the work. Greg Schollum emphasized that the document should be kept at a high enough level – the principles level – and linked to the Framework and the work of the Independence Subcommittee.

The Steering Committee agreed that a new draft of the paper should be circulated to all Steering Committee members for comments. Belgium will receive the comments and prepare a package for the SAI of France which will then take over and Chair the project.

8. Status on the Strategic Goals of PSC

The Chair went very briefly through the status of the strategic goals of PSC:

- The framework: we are close to a decision while at the same time acknowledging that this is a living document.

- The survey: does our discussion this morning affect the survey?

- Performance Audit Subcommittee: ongoing

- Memorandum of Understanding: a new draft will be discussed tomorrow

The Chair suggested that this item on the agenda should be repeated at all Steering Committee meetings to make sure that we are on track.

Monika Gonzalez pointed to the task of “Facilitating the provision to INTOSAI members of practical guidance material” and suggested that the PSC should work very closely with Goal 2 – Capacity Building on this issue.

Jim Sylph asked if the PSC would consider nominating an INTOSAI representative as a public member of the IFAC International Ethics Standards Board for Accountants (IESBA). The role would be similar to that of Mr. Kjell Larsson’s on the IAASB although much less time-consuming.

The Steering Committee agreed that this kind of cooperation would be very fruitful and that the Chair should consult Mr. Moser on the issue. It was also suggested that the Chair should ask for a more permanent mandate for the PSC to put forward candidates for different assignments.

8a. Presentation of the IDI strategic plan 2007-2012

Magnus Borge presented the IDI strategic plan, which can also be found at: www.idi.no

9. Presentation of the Institute of Internal Auditors (IIA)

Dominique Vincenti and Steve Morgan from the IIA made a presentation on the role of Internal Auditing in the Public Sector.

10. Report from FAS

Gert Jönsson presented the report from FAS and emphasized that it is a working committee consisting of very active members who are spending a lot of time on this work. The presentation is attached to these minutes. He pointed to the delay of Practice Note which is primarily due to the clarity project of IFAC. The Steering Committee congratulated Sweden on the impressive amount of work done so far and asked how many practice notes we are aiming at, at the INCOSAI. Jonas Hällström answered that FAS will not be able to have all 20 Practice Notes approved at the INCOSAI – the estimated target is 8 – 10 for approval and the remaining 10 – 12 drafted.

11. Report from PAS

Jose Omir explained to the Steering Committee how the Chair has worked so far on the establishment of the Subcommittee. A first draft of the Terms of Reference for the Subcommittee has been distributed to the members of the Subcommittee for comments. Jose Omir presented some of the comments. The draft reflected that new implementation guidelines on performance audit had already been issued by INCOSAI in 2004. CAROSAI had suggested that assisting guidelines should be developed for the introduction of performance audit in less developed countries. Norway had suggested a new mandate on how to assess the impact of performance audit. Australia had some questions in relation to training and pointed out that performance accountability is not a very clear term. The European Court of Auditors suggested that it is included in the text that membership of PAS could change in the future.

José Omir told the Steering Committee member that the Chair is planning a meeting in the Subcommittee before the next meeting of the PSC Steering Committee. Alfred Enoh emphasized that performance audit is a very important issue in Africa and asked about members from AFROSAI in the PAS. José Omir would make contact to Libya and the Ivory Coast.

The Steering Committee congratulated the PAS on the work done so far. Jeff Steinhoff referred to the Yellow Book for inspiration concerning quality insurance and monitoring. Gert Jönsson suggested that high priority was given to the development of performance audit standards and guidelines as there is a lot of confusion about performance audit among individual SAIs and stakeholders. Greg Schollum agreed and suggested that mandate 1 and 2 should be the prime objects whereas 3 and 4 are more open-ended.

The PSC Chair suggested that mandate 3 and 4 are seen as a second step, once any appropriate supplements to the performance audit guidelines approved at INCOSAI 2004 have been elaborated. This was agreed by the Steering Committee. It was also agreed to leave the work on peer reviews to Goal 2, the Capacity Building Committee.

12. Report from the Subcommittee on Compliance Audit

Per Engeseth forwarded greetings from Jens Gunvaldsen. The preliminary draft on compliance audit has been delayed due to important input to the document at the last meeting in April. Per Engeseth would like to take into account input from the discussion in the Steering Committee as well. He suggested that the work plan of the Subcommittee was revised and forwarded to the Steering Committee before the end of June.

The Steering Committee asked for a written report on some of the topics at the September meeting – preferably a full preliminary draft. Per Engeseth said that a written presentation and hopefully a preliminary draft will be forwarded to the September meeting.

13. Report from the Subcommittee on SAI Independence

Sheila Fraser introduced the Charter of Independence and the Charter guidelines. The report on case studies and on a new awareness and communications program will be presented to the Steering Committee in September. The work of the Subcommittee will be completed with the INCOSAI 2007 and by then the Subcommittee will cease to exist. Jean Ste-Marie presented the documents. The challenge has been the guidelines with and illustration of how you can achieve independence. The guidelines should be seen as a living document and the Subcommittee would ask for examples/case studies in relation to the guidelines from all members of INTOSAI. Sheila Fraser emphasized that the Subcommittee has worked very well together. It has been an 8 years project but the continuity in the group has been extremely important – she suggested that this maybe is a issue that should be considered by other Subcommittees.

The Steering Committee congratulated the Subcommittee on the work done so far and the “mission accomplished”. Monika Gonzalez agreed that continuity in the Subcommittees is very important and asked if it could be included in any of the PSC documents. Sheila Fraser suggested that the Subcommittee could make a “lessons learned” in order to share experiences. Ahmed Abdulqader suggested that the need for continuity could be emphasized in the letters of invitation. Gert Jönsson mentioned that the Charter Principle 6 could be quite controversial– he would come back in writing on this issue.

Greg Schollum asked if the four outputs from the Subcommittee could be linked to the framework. Sheila Fraser answered that the Charter would be included in level 2 and the Guidelines in level 4, and suggested that given the nature of the documents, it should be considered to translate the draft charter and the guidelines into the five official INTOSAI languages before distribution.

14. Report from the Subcommittee on Internal Control standards

Ignace Desomer presented the report from the Subcommittee and asked for comments. He emphasized that the guidelines should be seen as a living document. This means that the Subcommittee needs to monitor the development of internal control standards - the Subcommittee however, lacks funding. It also means that an updated version of the guidelines will be presented to approval at the INCOSAI. The SAI of Brazil becomes a new member of the Subcommittee.

15. Report from the Subcommittee on Accounting and Reporting

David Walker informed the Steering Committee about the status of the work of the Subcommittee.

16. Updating the Memorandum of Understanding (MOU) with IFAC

Jonas Hällström presented the new draft and the achievements so far. The main changes compared to the former MOU is that the changes in the INTOSAI structure has been mirrored in the new MOU and that the MOU has been split into two documents one describing the regulations and one describing the project structure/internal processes. The former additional document describing IAASB and FAS and §13 have been left out, while §4 and §7 have been updated. Per Engeseth asked about §9 the INTOSAI project director – who is that and what is the IFAC Translation Policy? Jonas Hällström answered that the project director refers to the project director of FAS and that a translation policy for ISA needs to be considered. Jim Sylph informed the Steering Committee that IFAC do not translate ISAs – the policy is merely suggesting something about the competency of the translator – as you need a professional understanding of the subject matter.

On a practical matter, Kristoffer Blegvad asked if the memorandum would grant INTOSAI the right to distribute the combined documents envisaged in the draft framework of INTOSAI’s professional standards through the internet free of charge. The documents would consist of ISA’s with Practice Notes and could contain a statement on IFAC’s/IASSB’s copyright to the ISA-part of the document. Jim Sylph said that IFAC would have no problem in ensuring INTOSAI such a right either by the memorandum or by a separate agreement on distribution.

The Steering Committee agreed on the new Memorandum of Understanding – the PSC Chair will sign the MOU when it has been approved by the IAASB. The new Memorandum of Understanding is enclosed to these minutes.

17. Translation of INTOSAI documents

Gert Jönson introduced the item and pointed to a more general problem: in the future INTOSAI documents should not only be directed at top-management but to the individual auditor – how do we make documents available and understandable to individual auditors without language skills in the official languages?

Jonas Hällström presented the paper from FAS. While it will demand large resources to translate the Practice Notes to all ISA’s, the most important problem was that there are no official translations of ISAs. It was not the intention that the Practice Note should be read independently from the ISA. If INTOSAI translate the ISAs there may still be a possible time-gap between the latest developed ISA and the official INTOSAI translated ISA. The constant translation of ISA will be difficult to finance. Translations of some of the ISAs to some of the languages will be available from other source, especially the European Union. These would not be ready for use before 2008 at the earliest.

Jonas Hälström presented the suggested solution contained in the paper implying that for the purpose of endorsement by INCOSAI, practice notes are presented as exposure draft in the 5 official INTOSAI languages together with the official ISA in English. Other language versions of the ISAs are presented subsequently when translation is available. FAS would at a later stage present a policy on translations to other languages than the 5 INTOSAI languages. He then asked the Steering Committee for comments.

Jim Sylph explained that it was IFAC’s policy not to make official translations of the ISAs but leave it to the users to transform the ISA’s into local standards or other language versions as appropriate. It was the experience from the field of accounting standards that translation resulted in inconsistencies between the language versions. Setting aside the question of costs of translating ISA’s, given the amount of text it would also be difficult to find capable professional translators with sufficient understanding of the subject matter. Davis Walker agreed with the proposal from FAS. He found though that it would not be necessary to present ISA’s in other languages than English, as it was the Practice Note containing a reference to the ISA, rather than the ISA itself, which would need endorsement by INCOSAI. Monika Gonzalez clarified procedures explaining that only official INTOSAI documents needed to be translated into the official INTOSAI languages. Alfred Enoh emphasised that translation was important in practice if the documents were to have relevance outside the Anglophone hemisphere.

The Steering Committee agreed that INTOSAI should and could not be responsible for the translation of ISAs, however – reliable translations of ISAs can be used by INTOSAI. The delegates also agreed that the PSC Secretariat, in consultation with the INTOSAI Secretariat in Vienna, will draft a document on this issue for discussion at the next PSC Steering Committee meeting.

18. Evaluation of the templates for reporting

The Chair introduced this minor point just to refer colleagues to the Terms of Reference and the use of the templates for reporting. As reporting is a very big issue for FAS, Jonas Hällstrom asked if reporting could be simplified so the FAS could use their own standard-format for reporting. This was approved by the Steering Committee.

19. Format for the PSC documents

Sheila Fraser introduced this item on the agenda. She referred to the drafted Charter of Independence where Canada has been using the model of the Lima Declaration. The question is – as all Committees will be developing documents – if they should all have a common format. Monika Gonzalez informed the Steering Committee that some guidance was offered in the Committee Handbook. Jeff Steinhoff found it important that PSC and INTOSAI use the same terminology for the same kind of things. The members of the Steering Committee agreed that the documents needed a common structure as well and debated if this was a task for PSC, the INTOSAI Secretariat or Goal 3 as part of the INTOSAI Communication Policy.

The Chair of the PSC suggested that Mr. Moser and Mr. Kaul were approached concerning a long-term solution and that Canada and Denmark could consider a temporary solution for discussion at the next meeting. This should not delay the present work of the subcommittees. The Steering Committee agreed to this suggestion.

20. Updating the work plan

The Chair informed the delegates that a draft updated work plan for the PSC’ work would be circulated with the draft minutes for comments.

21. Next meeting

The dates for the next meeting have been postponed to September 5 – 6 due to the flight connections to Yaounde in Cameroon, where the meeting will take place at hotel Hilton. Alfred Enoh said that the SAI of Cameroon was pleased to host the meeting. The PSC Chair thanked for the invitation.

22. Any other business

23. Closing remarks

The PSC Chair thanked the host and the delegates for their fruitful contributions to the meeting.