40 Years of Lima Declaration of INTOSAI 1 · 140 Years of Lima Declaration of INTOSAI Foreword FOREWORD The Declaration of Lima, which was adopted by the IX International Congress

140YearsofLimaDeclarationofINTOSAI

Foreword

FOREWORD

TheDeclarationofLima,whichwasadoptedbytheIXInternationalCongressofINTOSAIinLimain1977,isconsideredtobetheMagnaChartaofgovernmentauditanddefinestheprerequisitesforitsindependentandeffectivefunctioning.

It was already during the preparation of the Lima Declaration that INTOSAI aimed atlayingdowntheprincipleof independenceandthepreceptsofmethodologicalandstaff-relatedprofessionalism.Inthispublicationontheoccasionofthe40thanniversaryoftheadoption of the Lima Declaration, Mr Hubert Weber, former Director General of theAustrian Court of Audit and long-standing President of the EuropeanCourt of Auditors,outlines in a clear and comprehensible manner the intention and purpose of thisfundamentalworkofgovernmentaudit.

ItiswiththeutmostappreciationthatIextendmythankstoMrHubertWeber,who,alongwithMrRamónMuñozof theSpanishCourtofAuditorsandMrGiorgioClementeof theItalianCourtofAudit, isregardedasoneofthefoundingfathersoftheLimaDeclaration.Heillustrates,basedonintensiveresearch,thehistoricalstepstowardsthepreparationofthe Lima Declaration, the ideas and decisions behind it, the decisive elements for itspermanent validity and its current significance in the framework of INTOSAI and theUnitedNations.

ThecurrentversionoftheLimaDeclarationisattachedtothispublication.

Inmycapacity asSecretaryGeneralof INTOSAI Iwould like to thankDrWeber for thisvaluablework,whichunderlinestheimportanceoftheprinciplesofindependenceoftheLima Declaration and the precepts contained therein. As an independent internationalplatform dedicated to the exchange of knowledge and experience and as the voice ofSupremeAuditInstitutions(SAIs)withintheinternationalcommunity,INTOSAIstartedasuccess story, which will also sustainably shape the future path of SAIs as models oftransparencyandaccountabilityinthespiritofthe2030Agenda.

DrMargitKraker

PresidentoftheAustrianCourtofAuditandSecretaryGeneralofINTOSAI


Foreword


Foreword

FOREWORD

40years ago, 95delegations –representing their SupremeAuditOrganizations–met inLima,thecapitalofPeru,ontheoccasionoftheIXCongressofINTOSAItodiscussrelevantthemes of government audit, among them also technical theme1: “Declaration ofGuidelines on Auditing Precepts”, which is known today as the “Lima Declaration ofGuidelinesonAuditingPrecepts”.

This Declaration is considered to be theMagna Charta of government audit around theglobe as it established the principles of government audit, upholding their validity andsignificance for many years to come. This was also underlined by the United Nations,which recognized the importance of the Lima Declaration in two General AssemblyResolutions.

TheLimaDeclarationhighlights, amongother aspects, the independenceof governmentauditasafundamentalprerequisiteofexternalpublicauditandtheefficientfulfilmentoftasksbySupremeAudit Institutions(SAIs).Today, independencecontinues tobeamainchallengeforSAIsandhaspromptedimportantinitiativessupportedbyINTOSAIandtheDonor Community based on the conviction that only independent SAIs can achieveeffectiveresultswithregard to the fightagainst functionalmisbehaviourandcorruptionandtheimprovementofpublicpolicies.

40yearslater,theOfficeoftheComptrollerGeneral(ContraloríaGeneraldelaRepública)of the Republic of Peru pays tribute to the Lima Declaration, the cornerstone of theINTOSAIstandardsandprinciplesthatgovernthefundamentalworkofSAIs.Wethereforefeel very honoured to welcome once again INTOSAI’s member SAIs in our capital tocommemoratethe40thanniversaryofsigningthisimportantdeclaration.

Welcome!NelsonShack

ContralorGeneraloftheRepublicofPeru


Foreword


Content

CONTENT

ForewordbytheSecretaryGeneral..................................................................1

ForewordbytheContralorGeneraloftheRepublicofPeru............................3

Content.............................................................................................................5

1. PreliminaryRemarks..................................................................................7

2. StepstowardsthepreparationoftheLimaDeclaration...........................8

2.1 TheContactCommitteeofPalermoin1974...............................................8

2.2 TheCongressofMadridinMay1974.........................................................9

2.3 TheWorkingGroup...................................................................................10

2.4 TheCongressofLimainOctober1977.....................................................11

3. DecisiveelementsforthepermanentvalidityoftheLimaDeclaration..............................................................................................12

4. ThesignificanceoftheLimaDeclarationintheframeworkof

INTOSAIanditsacknowledgementattheUNlevel................................15

5. TheLimaDeclarationofGuidelinesonAuditingPrecepts......................17


Content


DrHubertWeber

1. PRELIMINARYREMARKS

Whenever a reform of government audit, which merits this designation, is introduced,thus, whenever fundamental issues of government audit are addressed, reference isusuallymade to the LimaDeclaration ofGuidelines onAuditingPrecepts. The followingcontribution1explores the reasons for this. In other words, it examines the question ofwhytheLimaDeclaration,anachievementoftheIX.CongressoftheglobalassociationofSupreme Audit Institutions (International Organization of Supreme Audit Institutions–INTOSAI), which took place in Lima, Peru, in 1977, has provided orientation regardingelementaryquestionsofauditforfourdecadesandwill,inalllikelihood,continuetodoso.Ontheoccasionofthe40thanniversaryofthislandmarkdocumentofgovernmentaudititseems tobebeneficial tooffer at least a sketchof thepolitical andeconomic conditionsthatprevailedwhentheLimaDeclarationwaselaborated.Thisaimstobeanattempt toillustrate the influence of the 1973 oil crisis and the therefrom resulting inflation onSupremeAuditInstitutions(SAIs).

ThedeclaredintentionoftheoverwhelmingmajorityofSAIswastomakeacontributionto tackling the critical developments by enhanced efforts geared towardsmore efficientauditing.TheSAIs,whichhadingeneralfewresourcesathand,focusedonthisaimalbeitfacing considerable constraints regarding financial and human resources. This becameevidentwhen it turnedout tobenecessary todivide thepreparatorywork for theLimaDeclarationamongseveralSAIs.

AllthemoredoSAIsdeserveacknowledgementfortheircommitmenttoimprovingaudit.Thisdevelopmentwas shapedbya shiftof focus frommainly identifyingdeficiencies toconstructively providing impetus towards an improved administration and economicmanagement, which was furthermore supported by a gradually stronger emphasis onperformanceaudits.

From the very beginning on INTOSAI has aimed to attain mutual benefits through theexchange of experiences, in other words to strengthen its participating SAIs. TherealizationofthisaimwascloselytiedtoatighterinternationalcooperationofSAIs.

1 The author of this contribution had essentially the followingdocuments at hand: the minutes of the Congresses of Madrid1974 and of Lima 1977 (in which he had taken part), theCirculars and other documents of INTOSAI, recordings of talkswiththeAustriankeymemberoftheworkinggrouptaskedwithdrafting the declaration, Dr Peter Beran, as well as thepublications generously provided by his then colleague at theEuropean Court of Auditors and later Director General of theItalianCourtofAudit,MrGiorgioClemente.


DrHubertWeber

Theresultingdevelopmentscanroughlybedivided intothreestages: the firststagewaslargelyshapedby thedefinitionand illustrationofSAIs’ownauditsystems.At thesametime,however,SAIsputINTOSAI’smotto„mutualexperiencebenefitsall“intopracticebyharnessingtheexchangeofexperiencesforareassuchasauditmethodology,educationand training. During the second stage, SAIs engaged in a more intensive exchange ofexperiences and in attempts to implement elements of audit systems of other SAIs thatweredeemedtobeuseful.Notallofthoseeffortswerecrownedbysuccess.

Inthethirdphase,SAIsdidnotonlydelveintomatterssuchasindependence,therelationofpre-auditandpost-audit,financialauditandperformanceaudit,butwerealsospurredby thedesire tomerge theprinciplesof government audit intoonedocument.Thiswasbased on the idea that after 20 years of congressional activities with wide-rangingdecisions and recommendations the time had come to prepare a document that wouldallow SAIs to go beyond the usual practice of having resolutions and recommendationsscatteredthroughoutvariouscongressminutes.

As it turned out later, this document, which offers a systematic illustration of theprinciples of government audit, has beenmarkedly more compelling in particular withregard to political institutions, and has therefore been a significantly more effectiveinstrumentforSAIswhenitcomestopursuingtheirinterests.

ApartfromlookingbackatthedraftingprocessoftheLimaDeclaration,thiscontributionaims to acknowledge the work of INTOSAI and its General Secretariat, but also thecontributionsofallthosewhohaverenderedoutstandingservicestowardstherealizationoftheLimaDeclaration.

2. STEPSTOWARDSTHEPREPARATIONOFTHELIMADECLARATION

2.1 TheContactCommitteeofPalermoin1974

The idea of compiling the principles of government audit was first addressed at themeeting of the Contact Committee of the SAIs of the Member States of the EuropeanCommunity (today theContactCommitteeof theHeadsofSupremeAudit InstitutionsoftheEuropeanUnionandtheEuropeanCourtofAuditors)inPalermoinMarch1974intheframeworkoftheagendaitem“ExchangeofopinionsontheVIIICongressof INTOSAI inMadridin1974”.

Theme IV of this congress was “Basic problems in government audit with specialconsideration to the relevant recommendations adopted by INTOSAI Congresses”. Theselectionof this themewasbasedon the fact that thecongresses,whichhavebeenheldfrom 1953 onwards and take place every three years, had dealt with numerousfundamental questions of government audit in the framework of the manifold themediscussions.Thetimewasthereforeripetotrytothoroughlyanalysethedecisionsofthepastcongresses,notleastinordertoassesstheirvalidity.


DrHubertWeber

Twomotionsshallbepointedoutinthisregard.

• The Italian delegation proposed to establish a working group at the GeneralSecretariatofINTOSAItobetaskedwithdraftinga“charter”ora“declaration”oftheprinciples of government audit, taking in particular into account therecommendationsanddecisionsofthepastcongressesofINTOSAI.

• TheGermandelegationsuggestedtopresenttotheVIIICongresstheideaofcreatingaworking groupwhose taskwouldbe to elaborate anorganizational summaryofthose decisions by taking an in-depth look at the themes addressed so far and topresentthissummarytoallINTOSAImemberSAIsattheIXinternationalcongressinLimain1977.

2.2 TheCongressofMadridinMay1974

Dr Peter Beran of the Austrian Court of Audit, who was tasked with reporting on theprinciplesofgovernmentaudit,explainedinhisintroductorywords,whichwerebasedon22 country contributions, that, apart from very few exceptions, the approach of thegovernment audit community to this matter was driven by unanimity and unity ofsentiment.Followingthis,heoutlinedindetailissuessuchasindependence,thescopeofgovernment audit, pre-audit and post-audit, financial audit and performance audit, therelationofaSAIwithparliamentandgovernmentandthequalityofstaff.

Itturnedoutthatthehopeexpressedbytherapporteurtohaveprovidedsufficientfoodfordiscussionwasfulfilledconvincingly.

Inthecourseofthedebate,MrAntoninodeStefano,DirectorGeneraloftheItalianCourtof Audit, announced amotion to assign to theGeneral Secretariat in Vienna the task toelaborateadeclarationonthefoundingprinciplesofgovernmentaudittobepresentedtotheforthcomingcongress.

ThemotionwasexpresslyendorsedbytheGermanandLuxembourgiandelegation.

Eventually,thisresultedinthefollowingdecision:

TheCongressrequeststhattheGeneralSecretariatinVienna–dependingontheavailabilityofpersonnelandfundsandwiththeactiveassistanceofotherSAIs–classifyandanalysetherecommendationsadoptedbytheCongressesheldthusso farandcompile theprinciplesofexternalaudit forpresentationat thenextINTOSAICongress.


DrHubertWeber

2.3 TheWorkingGroup

Inorder torealize theabove-citeddecision,aworkinggroupwassetup,whichcountedamongitsmembers,apartfromthealreadymentionedMrdeStefanoandMrBeran,alsoMrFranzMittagoftheSupremeAuditInstitutionofGermany.

In the course of 1975 this working group had three meetings, which were held in thepremisesoftheItalianCourtofAuditinRome.AfinalmeetingwashostedbytheSecretaryGeneralofINTOSAI,DrJörgKandutsch,inViennainSeptember1975,andwasattendedbythe President of the Spanish Court of Auditors,Mr Servando Fernandez-Victorio (in hiscapacity as chair of the INTOSAIGoverningBoard), the President of the SupremeAuditInstitution of Germany, Dr Hans Schäfer, the President of the Italian Court of Audit,ProfGuiseppeCataldi,aswellasbystaffmembersoftherespectiveinstitutions.

The draft of the fundamental declaration adopted at this meeting was forwarded toINTOSAI’smembersforcomments.

Somenotesontheworkingmethod:

InapplicationofthedecisiontakenbytheCongressofMadrid,theworkinggroupdividedthe work in two conceptually completely separate phases, namely an analytical and asyntheticphase.

Theneedforasystematicanalysisofthecomprehensivecongress-relatedmaterialwasinitself a formidable obstacle to a quick preparation of the Declaration. This could bealleviatedbythefactthatMrBeranhaddraftedaclassificationdocument2alreadybeforetheworkinggroupassumeditsactivities.

Based on this, the working group prepared two documents for the congress, a fullclassification of the extant recommendations of the INTOSAI congresses, as well as asynthetic compilation of the government audit principles resulting from theserecommendations.

2 Theclassificationdocumentcomprisedthefollowingmaincategories:

1. Internationalcooperation2. Auditingingeneral3. SAIsandtheirrelationstootherstateinstitutions4. TherightsofSAIs5. Auditmethodsandprocedures6. Reporting7. AreasofactivitiesofSAIs

Thesemaincategoriesweredividedinto66individualitems.


DrHubertWeber

Although the working group recognized primarily only the decisions andrecommendationsofthepreviouseightcongressesas“obligatoryreferencepoints”,italsotried to cautiously fill gaps in cases going beyond those reference points and,correspondingly,totakeintoaccountallthoseprinciplesthatimplicitlyhavebeenpartofthe principles laid down by the congresses. However, the working group refused toincludenewprinciplesintothecompilation.

2.4 TheCongressofLimainOctober1977

TherapporteuronTheme1“TheLimaDeclarationofGuidelines on Auditing Precepts” was Mr FrancescoSernia from the Italian delegation. After providing acomprehensive overview of the background andmethodologyof theworking group, hepresented thedraft declaration,which consisted of a preamble andseven chapters containing overall 25 sections. Therapporteurcitedthesourcesofboththepreambleandthe25sectionsandoutlinedinadetailedmannertheremarks made in the numerous country contributions. After an intensive debate theCongress decided to set up a Committee, which would consist of the chair for thementioned theme (chair: Venezuela, vice-chair: Fiji), the rapporteur from Italy and theSecretary from Indonesia andwhichwould be attended by a delegate from the FederalRepublicofGermany,PeruandtheGeneralSecretariateach.

This Committee was tasked with examining the submitted contributions and withpresentingsuggestionsatthesecondmeetingonthistopic.Thedecisionoftheextendedboardwaspresentedatthesecondmeeting.

The intentionwas to recognize thevalueandpracticalityof thedraftdeclarationand toavoid a decisionwith regard towhat is understood by audit principles. Furthermore, itwas planned to refrain from taking decisions that would be in contradiction with theconstitutional and other legal provisions of an INTOSAI member state. Discussions oneditorial and terminological questionswere also to be avoided.Basedon all this, itwasproposed to name the document “Guidelines on Auditing Precepts” rather than“DeclarationonthePrinciplesofAuditing”.

Theensuingdebatewaslargelyfocusedonthepreamble.Accordingtotheinterventions,itwas perceived to be too long and too ideological. The latter argument referred inparticular to thewords “... riskof the statebecomingomnipotent”. ThePresident of theFrenchCourtofAudit,MrDésiréArnaud,whohadalreadypreviouslyechoedthecriticalremarksregarding the lengthof thepreamble,declaredhiswillingness topresenta textthatcouldserveasabasisforthecommitteemeeting.Thissignificantlyshortenedversion,which set the focus on technical aspects, was only slightly amended compared to theversionadoptedbytheCongress.


DrHubertWeber

Also as regards the “Guidelines on Auditing Precepts” it can be noted that the versiondraftedbytheworkinggroupfollowingtheCongressofMadriddidnotdiffersignificantlyfrom the one that had served as a basis for the Congress decision concerning thepublicationanddisseminationofthedocument.

Owing to amotion of amember of the Chilean delegation to acknowledge the place ofdecisionmaking,thedocumentwasentitled„LimaDeclaration“.

3. DECISIVEELEMENTSFORTHEPERMANENTVALIDITYOFTHELIMADECLARATION

Acommonsayingamongauditorsgoes thatanaudit reportmustbeput to theacid testbefore it can be published. The acid test refers, among others, to numerous in-housedepartments that critically examine the content and form of the reports from variousperspectives. Given the fact that the draft elaborated by the working group had towithstandnumerouscountrycontributionsandprovetobeplausibleintheframeworkofthe Congress of Lima, namely the plenary sessions, the meetings of the responsiblecommission and specifically established committees, the illustration above is definitelyalsotruefortheLimaDeclaration.

Whatiscertainisthattheworkinggroup,basedontherecommendationsofthepreviouseight congresses, did an excellent work and fulfilled the demand to not only present areviewbutalsosomethingofpermanentvalidity.

If the outcomewas sufficiently informative to provide answers to technical concerns, itwas even more difficult to dispel doubts stemming from the apprehension that thegovernment authorities could perceive the precepts laid down in the Declaration asexaggerated.

By choosing the term “guidelines”, the authors ensured that they do not have a legallybindingcharacter.

Elements that contribute to the permanent validity of the Declaration are outlined innumeroussections.Thefollowingillustrationdoesnotpurporttobecomplete,nordoesitestablisharankingasitexclusivelyfollowsthestructureoftheDeclaration.

Section2 of the Declaration comprises the attempt to address the issue of the relationbetween pre-audit and post-audit, which has then and again provoked discussions incongresses.The authorsof the textwere cognizant of thebenefits of pre-audit, but alsotookintoconsiderationthefactthatbyengaginginapre-audittheauditingentityassumessomesortofresponsibility.

ByoptingforthewordingthatthelegalsituationandtheconditionsandrequirementsofeachcountrydeterminewhetheraSAIcarriesoutpre-auditsandthatpost-auditsareanindispensabletaskofeverySAIregardlessofwhetherornotitalsocarriesoutpre-audits,theauthorsattainedabalancedviewinthisregard.


DrHubertWeber

In section4, the audit of the legality and regularity of financial management andaccounting isdesignatedas the traditional taskofSAIs. Inaddition to this typeof audit,this section also describes audits geared toward examining the economy, efficiency andeffectiveness of public administration as equally important, thereby acknowledging thealreadythenperceivabletrendtowardsamoreintensiveuseofperformanceaudits.

Section5 rejects the notion of state institutions as being absolutely independent. It,however, calls for the functional and organizational independence of SAIs, which theyneedtoaccomplishtheirtasks.ThissectionsubstantiatestheimpressionthattheauthorsoftheDeclarationrefrainedfromtakingextremepositions.

Section10(2) leaves it to SAIs to decidewhether it ismore expedient to carry out theauditattheinstitutiontobeauditedorattheSAIitself.

Thisformulationwasbasedontheconsiderationthat,takingintoaccountbigvolumesoffilesprovidedbythedifferentadministrativeentities,afinancialauditwillprobablyhaveto be conducted inevitably at the headquarters of the SAI, while performance auditsassessingtheeconomy,efficiencyandeffectivenessoffinancialmanagementareingeneralperformedonsite.

Inthisway,theDeclarationtookintoaccountperformanceaudits,whichweresteppedupatthattime.

Section13(2)laysoutthefollowing:

Since anaudit can rarely be all-inclusive, SAIs as a rulewill find it necessary to useasamplingapproach.

Thenumeroussamplingmodels,however,havedeliberatelynotbeenenumerated.

Thisunderscoresthefactthattheauthorsrefrainedfromgoingintodetail.

Section15(2)The inclusionof seminars jointly organizedwith theUnitedNations (UN)andotherinstitutionsintheactivitiespromotedbytheexchangeofexperiencesillustrateshighlyimportantconcernsofSAIs.

Section15(3)Thedevelopmentof auniform terminologyof government audit– a long-standingconcernof INTOSAI–wasalso thesubjectofdebatesheld in the frameworkoftheCongressofLima.


DrHubertWeber

Theworkinggrouptaskedwiththedraftingofthefundamentaldeclarationalsoattachedutmost importancetotheunificationof theterminologyandnotedwithsatisfactionthattheGeneralSecretariathadtakenonthetaskofelaboratingglossariesincooperationwithacorrespondinginstitution3.

Section19Auditingpublicauthoritiesandotherinstitutionsestablishedabroad:

This is based on the idea that auditing is undoubtedly an official act involving coercivemeasures,whicharenotpermittedunderinternationallaw.

Basedonthefactthatinternationallawissubjecttoconstantchanges,thedocumentwasnottobeburdenedbymomentarypositions.

Section22 draws from the experience that technological possibilities are oftenoveremphasizedandresultsobtainedwithgreateffortsfrequentlyfailtobeanalysed,orifso,notsufficiently.Thissectionimpliesawarningthathasremainedvalidalsointheeraofbigdata.

Section25(2) recommends to establish audit bodies of international and supranationalorganizationsfollowingtheprinciplessimilartothosegoverningtheauditscarriedoutbySAIs.

InthiscontextitisworthtohavealookatheEuropeanCourtofAuditorsheadquarteredinLuxembourg.ItsestablishmentwasbasedonademocratizationoftheEuropeanUnion,namelythefactthattheexclusivepowertograntthebudgetdischargetotheCommissionwastransferredtotheEuropeanParliament,whichrendereditnecessarytoestablish,inadditiontothepoliticalcontrolexercisedbytheParliament,atechnicalcontrol.

The guarantee of independence and the scope of a SAI’s mandate were decisivelyinfluenced by the Presidents of the SAIs of the then EU member states, whoseconsiderationswereguidedbytheprinciplesoftheLimaDeclaration.

In order to become permanently valid, a document has, apart from dealing with thespecifictechnicalsubjectsinathoroughlymanner,tobestructuredinawaythatenablesastep-by-step approach to the subjectmatter. Furthermore, the language has to be clearandunderstandable.TheLimaDeclarationmeetsboth these requirementswith its tightstructure and its easily accessible wording. We can rightfully claim that the LimaDeclaration,with its characteristic fluent style, doesnotpresent aheavyburden for thereader. It rather guides them through the world of government audit in a didacticalmanner,therebyconveyinganoverallviewofthematter.

3 Namely the International Institute for Legal and Administrative Terminology/Berlin. The work waspublishedasthe“EuropeanGlossaryofLegalandAdministrativeTerminology”.


DrHubertWeber

Oneaspect,whichhadalreadybeenbroughtup indebates inLima, concerneda certainweaknessoftheEnglishversionofthedocument.WhenthisbecameevidentagainintheframeworkofanAFROSAIseminar,alinguisticrevisionwasenvisaged.Inadditiontotherevision of the English version, the SAI of Canada also revised the French version. TheSpanish versionhad alreadybeenpreparedbyMrRamonMuñoz4.TheGermanoriginalversionwascriticallyexaminedattheGeneralSecretariat,which,however,ledmerelytosomeminorstylisticamendments.

Based on these versions, the General Secretariat had a brochure prepared in fourlanguagesinordertorenderiteasierforINTOSAI’smemberstorefertothedocument.

Finally,thischaptershallbeconcludedwithaquotebyGiorgioClemente5,acontemporarywitness of the preparation of the Lima Declaration, who, as early as in 1978, the yearfollowingtheCongressofLima,demonstratedforesight:

Thesignificanceofthedocumentclearlyliesinthecompletenessofthethemesaddressed.Thecomprehensiveissueofauditisinfactapproachedinall itsdimensions,bothfroma“modern” point of view and also with respect to traditional values. In doing so, theDeclarationoffersseveraldirectionsinwhichSAIs,regardlessinwhichlegalsystemstheybecomeactive,shallmove.

4. THESIGNIFICANCEOFTHELIMADECLARATIONINTHEFRAMEWORKOFINTOSAI

ANDITSACKNOWLEDGEMENTATTHEUNLEVEL

AsconveyedintheframeworkoftheCongressesofMadridandLima,numerousSAIshadbeen prompted to implement reforms of government audit in their countries based ondecisionstakenatpreviouscongresses.Thisprocesswasevenfurtherstrengthenedwiththe Lima Declaration and supported by the special edition described in the previouschapter.

The fact that the Lima Declaration was classified as a level-1-document– foundingprinciples–intheframeworkoftheInternationalStandardsofSupremeAuditInstitutions(ISSAI)isampletestimonytothesignificanceaccordedtoitbythecommunityofSAIs.Itisthereforevery likely thatmanySAIsaround theworldwill succeed in initiatingreformsandfendingoffinterferencesintheirrightsbyreferringtotheLimaDeclaration.

4 MemberoftheSpanishCourtofAuditorsandlaterfoundingpresidentoftheAuditOfficeoftheCommunityofMadrid

5 GiorgioClemente,formermemberoftheEuropeanCourtofAuditors,DirectorGeneraloftheSAIofItalyinILFOROAMMINISTRATIVO1978


DrHubertWeber

The efforts of INTOSAI to establish close relationswith theUN canbe tracedbackoverdecades. Its successes in this regard are not only limited to the fact that UN Secretary-Generals have honoured INTOSAI’s congresses by sending greeting messages and thathigh-rankingUNrepresentativeshaveparticipatedinsuchcongresses.

Whatdeserves specialmentionare theUN/INTOSAI symposia,whichhavebeenheld inVienna,usuallyeverytwoyears,since1971.

AspecialsuccessforINTOSAIanditsGeneralSecretariatwasthefactthattheUNGeneralAssemblyadoptedtworesolutionsontheindependenceofSAIs(A/66/209of22December2011 and A/69/228 of 19December2014), welcoming the Lima Declaration, which isbased on the work of SAIs with regard to promoting the efficiency, accountability,effectivenessandtransparencyofpublicadministrationbystrengtheningSAIs.

Theadoptionofthe2030AgendaandoftheSustainableDevelopmentGoals(SDGs)bytheUNGeneralAssemblyon25September2015cannotbeoverrated.Inthe2030Agenda,theUNrecognizestheimportantroleofSAIsinimplementingtheSDGs.Atthesametime,theAgendacanberegardedasacommitmentoftheUNtostrengtheningSAIs.

Furthermore, this acknowledgment at theUN level also increases the certainty that theLimaDeclarationwillcelebratemanymoreanniversaries.

Weshallthereforecongratulate

INTOSAIanditsGeneralSecretariat

onthisremarkablesuccess.


LimaDeclaration

5. THELIMADECLARATIONOFGUIDELINESONAUDITINGPRECEPTS

Preamble

The IX Congress of the International Organisation of Supreme AuditInstitutions(INTOSAI),meetinginLima:

– Whereastheorderlyandefficientuseofpublicfundsconstitutesoneoftheessentialprerequisites for theproperhandlingofpublic finances and theeffectivenessofthedecisionsoftheresponsibleauthorities;

– Whereas, to achieve this objective, it is indispensable that each countryhave a Supreme Audit Institution whose independence is guaranteed bylaw;

– Whereassuchinstitutionsbecomeevenmorenecessarybecausethestatehas expanded its activities into the social and economic sectors and thusoperatesbeyondthelimitsofthetraditionalfinancialframework;

– Whereas the specific objectives of auditing, namely, the proper andeffective use of public funds; the development of sound financialmanagement; the proper execution of administrative activities; and thecommunicationofinformationtopublicauthoritiesandthegeneralpublicthroughthepublicationofobjectivereports,arenecessaryforthestabilityand the development of states in keeping with the goals of the UnitedNations;

– Whereas at previous INTOSAI congresses, plenary assemblies adoptedresolutionswhosedistributionwasapprovedbyallmembercountries;

RESOLVES:

– Topublishanddistributethedocumententitled“TheLimaDeclarationofGuidelinesonAuditingPrecepts”.

I. General

Section1. Purposeofaudit

The concept and establishment of audit is inherent in public financialadministrationasthemanagementofpublicfundsrepresentsatrust.Auditisnot an end in itself but an indispensable part of a regulatory systemwhoseaim is to reveal deviations from accepted standards and violations of theprinciples of legality, efficiency, effectiveness and economy of financialmanagement early enough to make it possible to take corrective action inindividual cases, to make those accountable accept responsibility, to obtaincompensation,ortotakestepstoprevent–oratleastrendermoredifficult–suchbreaches.


LimaDeclaration

Section2. Pre-auditandpost-audit

1. Pre-audit representsabefore the fact typeof reviewofadministrativeorfinancialactivities;post-auditisauditafterthefact.

2. Effective pre-audit is indispensable for the soundmanagement of publicfunds entrusted to the state. It may be carried out by a Supreme AuditInstitutionorbyotherauditinstitutions.

3. Pre-auditbyaSupremeAuditInstitutionhastheadvantageofbeingabletopreventdamagebefore it occurs, buthas thedisadvantageof creating anexcessiveamountofworkandofblurringresponsibilitiesunderpubliclaw.Post-audit by a SupremeAudit Institution highlights the responsibility ofthoseaccountable;itmayleadtocompensationforthedamagecausedandmaypreventbreachesfromrecurring.

4. The legal situation and the conditions and requirements of each countrydeterminewhetheraSupremeAuditInstitutioncarriesoutpre-audit.Post-audit is an indispensable task of every Supreme Audit Institutionregardlessofwhetherornotitalsocarriesoutpre-audits.

Section3. Internalauditandexternalaudit

1. Internal audit services are established within government departmentsand institutions, whereas external audit services are not part of theorganisational structure of the institutions to be audited. Supreme AuditInstitutionsareexternalauditservices.

2. Internal audit services necessarily are subordinate to the head of thedepartmentwithinwhich they have been established. Nevertheless, theyshall be functionally and organisationally independent as far as possiblewithintheirrespectiveconstitutionalframework.

3. As the external auditor, the Supreme Audit Institution has the task ofexaminingtheeffectivenessof internalaudit. If internalaudit is judgedtobe effective, efforts shall be made, without prejudice to the right of theSupremeAuditInstitutiontocarryoutanoverallaudit,toachievethemostappropriatedivisionorassignmentof tasksandcooperationbetween theSupremeAuditInstitutionandinternalaudit.

Section4. Legalityaudit,regularityauditandperformanceaudit

1. The traditional task of SupremeAudit Institutions is to audit the legalityandregularityoffinancialmanagementandofaccounting.

2. In addition to this type of audit, which retains its significance, there isanother equally important type of audit –performance audit– which isoriented towards examining the performance, economy, efficiency andeffectiveness of public administration. Performance audit coversnot only


LimaDeclaration

specific financial operations, but the full range of government activityincludingbothorganisationalandadministrativesystems.

3. The Supreme Audit Institution‘s audit objectives –legality, regularity,economy, efficiencyandeffectivenessof financialmanagement–basicallyareofequalimportance.However,itisforeachSupremeAuditInstitutiontodetermineitsprioritiesonacase-by-casebasis.

II. Independence

Section5. IndependenceofSupremeAuditInstitutions

1. Supreme Audit Institutions can accomplish their tasks objectively andeffectively only if they are independent of the audited entity and areprotectedagainstoutsideinfluence.

2. Althoughstateinstitutionscannotbeabsolutelyindependentbecausetheyarepartofthestateasawhole,SupremeAuditInstitutionsshallhavethefunctional and organisational independence required to accomplish theirtasks.

3. TheestablishmentofSupremeAuditInstitutionsandthenecessarydegreeoftheirindependenceshallbelaiddownintheConstitution;detailsmaybesetoutinlegislation.Inparticular,adequatelegalprotectionbyasupremecourt against any interference with a Supreme Audit Institution‘sindependenceandauditmandateshallbeguaranteed.

Section6. IndependenceofthemembersandofficialsofSupremeAuditInstitutions

1. The independence of Supreme Audit Institutions is inseparably linked tothe independenceof itsmembers.Members aredefinedas thosepersonswhohavetomakethedecisionsfortheSupremeAuditInstitutionandareanswerable for thesedecisions to thirdparties, that is, themembers of adecision-makingcollegiatebodyortheheadofamonocraticallyorganisedSupremeAuditInstitution.

2. TheindependenceofthemembersshallbeguaranteedbytheConstitution.In particular, the procedures for removal from office also shall beembodiedintheConstitutionandmaynotimpairtheindependenceofthemembers.Themethodof appointment and removalofmembersdependsontheconstitutionalstructureofeachcountry.

3. Intheirprofessionalcareers,auditstaffofSupremeAuditInstitutionsmustnotbeinfluencedbytheauditedorganisationsandmustnotbedependentonsuchorganisations.


LimaDeclaration

Section7. FinancialindependenceofSupremeAuditInstitutions

1. SupremeAudit Institutions shall be providedwith the financialmeans toenablethemtoaccomplishtheirtasks.

2. If required, SupremeAudit Institutions shall be entitled to apply directlyfor the necessary financial means to the public body deciding on thenationalbudget.

3. Supreme Audit Institutions shall be entitled to use the funds allotted tothemunderaseparatebudgetheadingastheyseefit.

III. RelationshiptoParliament,governmentandtheadministration

Section8. RelationshiptoParliament

The independence of Supreme Audit Institutions provided under theConstitution and law also guarantees a very high degree of initiative andautonomy,evenwhentheyactasanagentofParliamentandperformauditson its instructions. The relationship between the Supreme Audit Institutionand Parliament shall be laid down in the Constitution according to theconditionsandrequirementsofeachcountry.

Section9. Relationshiptogovernmentandtheadministration

Supreme Audit Institutions audit the activities of the government, itsadministrative authorities and other subordinate institutions. This does notmean, however, that the government is subordinate to the Supreme AuditInstitution.Inparticular,thegovernmentisfullyandsolelyresponsibleforitsacts and omissions and cannot absolve itself by referring to the auditfindings–unlesssuchfindingsweredeliveredaslegallyvalidandenforceablejudgments–andonexpertopinionsoftheSupremeAuditInstitution.

IV. PowersofSupremeAuditInstitutions

Section10. PowersofInvestigation

1. SupremeAuditInstitutionsshallhaveaccesstoallrecordsanddocumentsrelating to financial management and shall be empowered to request,orallyorinwriting,anyinformationdeemednecessarybytheSAI.

2. For each audit, the Supreme Audit Institution shall decide whether it ismoreexpedienttocarryouttheauditattheinstitutiontobeaudited,orattheSupremeAuditInstitutionitself.

3. EitherthelawortheSupremeAuditInstitution(forindividualcases)shallset time limits for furnishing information or submitting documents andother records including the financial statements to the Supreme AuditInstitution.


LimaDeclaration

Section11. EnforcementofSupremeAuditInstitutionfindings

1. The audited organisations shall comment on the findings of the SupremeAudit Institutionwithin a period of time established generally by law, orspecifically by the Supreme Audit Institution, and shall indicate themeasurestakenasaresultoftheauditfindings.

2. To the extent the findings of the Supreme Audit Institution are notdelivered as legally valid and enforceable judgments, the Supreme AuditInstitution shall be empowered to approach the authority which isresponsiblefortakingthenecessarymeasuresandrequiretheaccountablepartytoacceptresponsibility.

Section12. Expertopinionsandrightsofconsultation

1. Whennecessary,SupremeAudit InstitutionsmayprovideParliamentandtheadministrationwiththeirprofessionalknowledgeintheformofexpertopinions,includingcommentsondraftlawsandotherfinancialregulations.The administrative authorities shall bear the sole responsibility foracceptingorrejectingsuchexpertopinions;moreover,thisadditionaltaskmust not anticipate the future audit findings of the Supreme AuditInstitutionandmustnotinterferewiththeeffectivenessofitsaudit.

2. Regulations for appropriate and as uniform as possible accountingproceduresshallbeadoptedonlyafteragreementwiththeSupremeAuditInstitution.

V. Auditmethods,auditstaff,internationalexchangeofexperiences

Section13. Auditmethodsandprocedures

1. Supreme Audit Institutions shall audit in accordance with a self-determined programme. The rights of certain public bodies to request aspecificauditshallremainunaffected.

2. Sinceanaudit can rarelybeall-inclusive, SupremeAudit Institutionsasarule will find it necessary to use a sampling approach. The samples,however, shall be selected on the basis of a given model and shall besufficiently numerous to make it possible to judge the quality andregularityoffinancialmanagement.

3. Auditmethodsshallalwaysbeadaptedtotheprogressofthesciencesandtechniquesrelatingtofinancialmanagement.

4. It is appropriate for the Supreme Audit Institution to prepare auditmanualsasanaidforitsauditors.


LimaDeclaration

Section14. Auditstaff

1. ThemembersandtheauditstaffofSupremeAudit Institutionsshallhavethe qualifications and moral integrity required to completely carry outtheirtasks.

2. Inrecruitingstaff forSupremeAudit Institutions,appropriaterecognitionshall be given to above-average knowledge and skills and adequateprofessionalexperience.

3. Specialattentionshallbegiven to improving the theoreticalandpracticalprofessionaldevelopmentof allmembers andaudit staff of SAIs, throughinternal,universityandinternationalprogrammes.Suchdevelopmentshallbe encouraged by all possible financial and organisational means.Professional development shall go beyond the traditional framework oflegal, economic and accounting knowledge, and include other businessmanagementtechniques,suchaselectronicdataprocessing.

4. To ensure auditing staff of excellent quality, salaries shall becommensuratewiththespecialrequirementsofsuchemployment.

5. Ifspecialskillsarenotavailableamongtheauditstaff, theSupremeAuditInstitutionmaycallonexternalexpertsasnecessary.

Section15. Internationalexchangeofexperiences

1. The international exchange of ideas and experiences within theInternational Organisation of Supreme Audit Institutions is an effectivemeansofhelpingSupremeAuditInstitutionsaccomplishtheirtasks.

2. This purpose has so far been served by congresses, training seminarsjointly organised with the United Nations and other institutions, byregionalworkinggroupsandbythepublicationofaprofessionaljournal.

3. It is desirable to expand and intensify these efforts and activities. Thedevelopment of a uniform terminology of government audit based oncomparativelawisofprimeimportance.

VI. Reporting

Section16. ReportingtoParliamentandtothegeneralpublic

1. The Supreme Audit Institution shall be empowered and required by theConstitution to report its findings annually and independently toParliament or any other responsible public body; this report shall bepublished. This will ensure extensive distribution and discussion, andenhance opportunities for enforcing the findings of the Supreme AuditInstitution.


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2. The Supreme Audit Institution shall also be empowered to report onparticularlyimportantandsignificantfindingsduringtheyear.

3. Generally,theannualreportshallcoverallactivitiesoftheSupremeAuditInstitution;onlywhen interestsworthyofprotectionorprotectedby laware involved shall the Supreme Audit Institution carefully weigh suchinterestsagainstthebenefitsofdisclosure.

Section17. Methodofreporting

1. The reports shall present the facts and their assessment in an objective,clearmannerandbelimitedtoessentials.Thewordingofthereportsshallbepreciseandeasytounderstand.

2. TheSupremeAuditInstitutionshallgivedueconsiderationtothepointsofviewoftheauditedorganisationsonitsfindings.

VII. AuditpowersofSupremeAuditInstitutions

Section18. Constitutionalbasisofauditpowers;auditofpublicfinancialmanagement

1. ThebasicauditpowersofSupremeAuditInstitutionsshallbeembodiedintheConstitution;detailsmaybelaiddowninlegislation.

2. The actual terms of the Supreme Audit Institution‘s audit powers willdependontheconditionsandrequirementsofeachcountry.

3. All public financial operations, regardless of whether and how they arereflectedinthenationalbudget,shallbesubjecttoauditbySupremeAuditInstitutions. Excluding parts of financial management from the nationalbudget shall not result in these parts being exempted from audit by theSupremeAuditInstitution.

4. SupremeAudit Institutions shouldpromote through theirauditsa clearlydefinedbudgetclassificationandaccountingsystemswhichareas simpleandclearaspossible.

Section19. Auditofpublicauthoritiesandotherinstitutionsabroad

As a general principle, public authorities and other institutions establishedabroadshallalsobeauditedbytheSupremeAuditInstitution.Whenauditingthese institutions, due consideration shall be given to the constraints laiddown by international law; where justified, these limitations shall beovercomeasinternationallawdevelops.


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Section20. Taxaudits

1. SupremeAudit Institutions shall be empowered to audit the collectionoftaxesasextensivelyaspossibleand,indoingso,toexamineindividualtaxfiles.

2. Tax audits are primarily legality and regularity audits; however, whenauditing theapplicationof tax laws,SupremeAudit Institutions shall alsoexamine the system and efficiency of tax collection, the achievement ofrevenue targets and, if appropriate, shall propose improvements to thelegislativebody.

Section21. Publiccontractsandpublicworks

1. The considerable funds expended by public authorities on contracts andpublicworksjustifyaparticularlyexhaustiveauditofthefundsused.

2. Public tendering is the most suitable procedure for obtaining the mostfavourableofferintermsofpriceandquality.Wheneverpublictendersarenotinvited,theSupremeAuditInstitutionshalldeterminethereasons.

3. Whenauditingpublicworks, theSupremeAudit Institutionshallpromotethedevelopmentofsuitablestandardsforregulatingtheadministrationofsuchworks.

4. Auditsofpublicworksshallcovernotonlytheregularityofpayments,butalso the efficiency of construction management and the quality ofconstructionwork.

Section22. Auditofelectronicdataprocessingfacilities

Theconsiderablefundsspentonelectronicdataprocessingfacilitiesalsocallsforappropriateauditing.Suchauditsshallbesystems-basedandcoveraspectssuch as planning for requirements; economical use of data processingequipment;useofstaffwithappropriateexpertise,preferablyfromwithintheadministration of the audited organisation; prevention of misuse; and theusefulnessoftheinformationproduced.

Section23. Commercialenterpriseswithpublicparticipation

1. Theexpansionoftheeconomicactivitiesofgovernmentfrequentlyresultsin the establishment of enterprises under private law. These enterprisesshall also be subject to audit by the Supreme Audit Institution if thegovernment has a substantial participation in them – particularly wherethisismajorityparticipation–orexercisesadominatinginfluence.

2. Itisappropriateforsuchauditstobecarriedoutaspost-audits;theyshalladdressissuesofeconomy,efficiencyandeffectiveness.


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3. Reports to Parliament and the general public on such enterprises shallobservetherestrictionsrequiredfortheprotectionofindustrialandtradesecrets.

Section24. Auditofsubsidisedinstitutions

1. Supreme Audit Institutions shall be empowered to audit the use ofsubsidiesgrantedfrompublicfunds.

2. Whenthesubsidy isparticularlyhigh,eitherby itselfor inrelationtotherevenues and capital of the subsidised organisation, the audit can, ifrequired, be extended to include the entire financial management of thesubsidisedinstitution.

3. Misuseofsubsidiesshallleadtoarequirementforrepayment.

Section25. Auditofinternationalandsupranationalorganisations

1. International and supranational organisations whose expenditures arecovered by contributions from member countries shall be subject toexternal,independentauditlikeindividualcountries.

2. Althoughsuchauditsshalltakeaccountofthelevelofresourcesusedandthe tasks of these organisations, they shall follow principles similar tothose governing the audits carried out by Supreme Audit Institutions inmembercountries.

3. To ensure the independence of such audits, themembers of the externalauditbodyshallbeappointedmainlyfromSupremeAuditInstitutions.

Documents

40 Years of Lima Declaration of INTOSAI 1 · 140 Years of Lima Declaration of INTOSAI Foreword FOREWORD The Declaration of Lima, which was adopted by the IX International Congress