ISSAIs

ISSAIs इसा�ईसा (about 80)

Level I (1) ISSAI 1

Level II (6) ISSAIs- 10,11,20,21,30,40

Level III (4)Fundamental Principles of Auditing ISSAI100,

of Financial Auditing (200), of Performance Auditing (300), of Compliance Auditing (400)

Level IV (38) Financial Auditing Standards (ISSAI 1000 series)

(2) Performance Auditing Standards (3000 series)

(3) Compliance Auditing Standards (4000 series)Level IV B

(27) Auditing Guidelines (5000 series) on IT Audit, Environmental Audit, Privatization, Public Debt etc

ISSAIs इसा�ईसा (about 80)

Level I (1) ISSAI 1

Level II (6) ISSAIs- 10,11,20,21,30,40

Level III (4)Fundamental Principles of Auditing ISSAI100,

of Financial Auditing (200), of Performance Auditing (300), of Compliance Auditing (400)

Level IV (38) Financial Auditing Standards (ISSAI 1000 series)

(2) Performance Auditing Standards (3000 series)

(3) Compliance Auditing Standards (4000 series)Level IV B

(27) Auditing Guidelines (5000 series) on IT Audit, Environmental Audit, Privatization, Public Debt etc

Subject matter & scope of the audit, understanding the entity, understanding risk, planning the audit Audit objectives

Audit criteria

Selection of sample

Audit procedures -review of controls, analytical procedures substantive testing Significant deviations - Materiality

Sufficient appropriate Audit evidence

Audit findings, Conclusions

Documentation of entire audit process and evidence

Reporting - reasonable assurance-short form report exception reporting-long form report

• Identified 10 principles of an ‘audit’

• Do all three ‘types’ of audits involve application of these 10 principles?

• do we apply in our FA, CA and PA?

• If we are applying all 10 in all the three – what is the difference between financial audit, compliance and performance audit?

• Each reference to one of the 3 responsibilities (purpose) of a (Government) public sector entity

A public sector entity is created to deliver a service. Primary function is to fulfil its service delivery mandate efficiently. Their operational performance (delivery of service) is expected to efficient- first responsibilityTo carry out its operations entity is provided with resources - financial resources, budget - through which acquires all other resources (men, material, assets, land, building etc). There are Rules on how to safeguard these resource from theft, loss, misuse, abuse, mismanage, idling and waste Safeguard of all the resources at all the times by following the related rules is the second responsibility.Entities to keep an ‘account’ of all financial transactions and related administrative records ( sanctions)Keeping an account of financial ‘transactions’ in the books of accounts –prepare a reliable financial report –third responsibility

To give an assurance on To what extent its operational performance

(service delivery) was efficient -PATo what extent it could reasonable safeguard all

its resources at all times from the risk of … by following the applicable rules - CA

To what extent its financial reporting is reasonable…-FA

We need 5or 6 audit objectives for each one.

Each objective needs 3 or 4 criteria. (6x3x4)

Difficult to capture all that in an audit of an office (unit) in 10 working days

Select one ‘aspect’ of each function.One audit objective relating to operational

performance (service delivery)One audit objective relating to safeguard of

resources One audit objective relating to ‘accounting’ and

financial reportingHave 3 criteria for each objective

•One Audit Objective relating to an aspect of service delivery (operational performance)•One aspect of entity’s output•What inputs are used and what is the process involved to get this output? In what time, in what quantities, in what quality, for whom?•Can the time taken, quality, quantity be better with same given resources(inputs & infrastructure)?

show how it can be? (criteria )•Can the same quantity, quality, in same time be produced with lesser resources ?

show how it can be (criteria )

There are only two issues here acquiring resources (inputs, infrastructure) process (using the resources in a way to get that out put ) ‘ECONOMY’ is essentially achieved in the first by

safeguarding them while acquiring…….‘EFFICIENCY’ is about the process- how efficient is the

process? If the process is more efficient, it would naturally use less resources (‘economy’)

If desired out put is not coming - it is problem with the resources or process (its design, execution)

If out-put is not EFFECTIVE – it is the problem with service delivery planning - not the above two

Audit objective relating to an aspect

Sub-Objectives

Criteria

To what extent complied

• DPs have their own important place – we are not against them

• When Government Audit started 2 centuries ago it was concurrent audit of every transaction – certify receipt/expend

• When volume increased – only transactions beyond a threshold

• Volumes multiplied- became a post audit of selected number of transactions – audit teams visiting from its audit office

• Out put of such audit is a number of audit observations• Communicated in Local Audit Reports to audited offices

• The best were / and are selected as Paragraphs for Audit Report – Legislature

• Till they are printed – are called Draft Paras (DP)• That kind of output is a natural product of that

kind of process • At that time sophisticated financial auditing was

not required• Concept of VFM studies, performance auditing

came later• Idea of ‘overall assurance’ came later

The other set of ideas took a concrete shape with a different kind of process

This process threatens the output of traditional compliance audit that comes out from a process which was different

What should one do? Do away with DPs?When an existing well established thing is

threatened by fully developed equally strong opposite of it (ISSAIs) –

You try to move to next level where both the opposites are reconciled (Hegel & Marx)

An activity is the sum (whole) of all the transactions (parts) related to it

deficiencies in the parts lead to assurance of the whole (sum)

The less transactions gone wrong – more assurance of that activity

More parts gone wrong – less and less assurance of the whole

TA/DA Budget -Audit Parties -AG Shimla -as a whole well spent

96 % of transactions were correct

2% gone wrong- (1) acts of omission in bills section 1% (2) acts of commission – fraud claims in 1%

•Positive assurance is given for the whole. Deficiencies of the parts should be reported. Both (1) & (2) need to be corrected. But (2) needs further stringent action.

•Local Audit Report (for example) can provide assurance for the activity as whole and list out all the deficiencies. You can elaborate significant deviations in the form of existing Draft Paragraphs

•This provides opportunity to bring out decisions of a officials which are questionable on the grounds of propriety, probity, misuse of discretion, squandering of public money, wastage, misuse or idling of public assets