ISSAI 1000 E Endorsement Version

8/2/2019 ISSAI 1000 E Endorsement Version

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Financial Audit Guideline

General Introduction to

the INTOSAI Financial AuditGuidelines

The Internationa Standards of Supreme Audit Institutions, ISSAI, are issued

by the Internationa Organization of Supreme Audit Institutions, INTOSAI.

For more information visit www.issai.org.

ISSAI 1000


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INTOSAI Genera Secretariat - RECHNUNGSHOF(Austrian Court of Audit)

DAMPFSCHIFFSTRASSE 2

A-1033 VIENNA

AUSTRIA

Te: ++43 (1) 711 71

Fax: ++43 (1) 718 09 69

[email protected]

http://www.intosai.org

INTOSAI PrOfeSSIONAl STANdArdS COmmITTee

fINANCIAl AudIT SubCOmmITTee-SeCreTArIAT

Riksrevisionen 114 90 Stockholm Sweden

Tel.:+46 5171 4000 Fax:+46 5171 4111 E-mail: [email protected]

10 GENERAl INTRODUCTION TO THE INTOSAI FINANCIAl AUDIT GUIDElINES


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GENERAl INTRODUCTION TO THE INTOSAI FINANCIAl AUDIT GUIDElINES 11

Paagaph

Intoction 19

backgon 1013

Th Ppos o th INTOSAI financia Ait Giins 1417

Scop o th INTOSAI financia Ait Giins 1823

Stct an Contnt o th INTOSAI financia Ait Giins 2427

Appying th INTOSAI financia Ait Giins as Stanas 2829

Appying the INTOSAI Financia Audit Guideines to Support

INTOSAI Fundamenta Principes 30

Appying the INTOSAI Financia Audit Guideines to Support other Standards 31

Athoity

Authority INTOSAI Fundamenta Principes and Financia Audit Guideines 3236

Authority Internationa Standards on Auditing 3743

Gna Isss in Aits o Pic Scto entitis 44 45

Different Auditing Systems within the Pubic Sector 4648

Terminoogy Used in the Guideines 4951

Professiona Judgment and Skepticism 52

Engagement Acceptance and Continuance 5354

Objective of an Audit of Financial Statements 5558

Agreeing the Terms of Audit Engagements 5963

Quaity Assurance Processes 6466

Working Papers and Audit Documentation 67

Communication 6870

Identifying Fraud and Error 7174

The Auditors Consideration of laws and Reguations 7576Risk Assessment and Audit Procedures 7780

Materiaity in Audits of Pubic Sector Entities 8184

Auditors Reports in the Pubic Sector 8586

Tabe of Contents ISSAI 1000


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Tansation o th INTOSAI financia Ait Giins 8791

Appnix 1 link twn th INTOSAI fnanta Aiting Pincips (ISSAI 100400)an th INTOSAI financia Ait Giins (ISSAI 10002999)

Appendix 2 ISSAIs, effective for audits of nancial statements for periods beginning on or after

dc 15, 2009

Appnix 3 Th Athoity Attach to th ISAs

Appnix 4 Tansation rconations

Appnix 5 list o Aviations


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Genera Introduction to the INTOSAI

Financia Audit Guideines

Intoction

1. The INTOSAI Financial Audit Guidelines provide guidance for conducting nancial audits of

pubic sector entities.

2. The INTOSAI Financia Audit Guideines represent the fourth eve (Auditing Guideines) of the

Internationa Standards of Supreme Audit Institutions (ISSAI) Framework, where the FoundingPrinciples constitute the rst level, the Principles and Guidelines for SAIs constitute the second

eve and the Fundamenta Auditing Principes (the INTOSAI Auditing Standards) constitute the

third eve.1

3. The INTOSAI Financia Audit Guideines incude the Internationa Standards on Auditing (ISAs)

issued by the Internationa Auditing and Assurance Standards Board (IAASB). INTOSAI contrib-

utes to the deveopment of those standards by participating in the IAASB Task Forces responsibe

for deveoping new standards or revising existing standards.

4. Practice Notes (PN), which are incuded in the INTOSAI Financia Audit Guideines, provide

relevant guidance on applying each ISA in nancial audits of public sector entities in addition tothat provided in the corresponding ISA.

5. In applying the INTOSAI Financial Audit Guidelines in nancial audits of public sector entities,

Supreme Audit Institutions recognize that the ISAs and the PNs together form the guidance. If

referring in the auditors report to the fact that the audit was conducted in accordance with the

ISSAIs, pubic sector auditors compy with a the ISSAIs reevant to the audit, as expained in

the section on authority (paragraphs 28-43).

6. By comparison with the objectives of an audit of nancial statements in accordance with the

ISAs (i.e. to express an opinion whether the nancial statements are prepared, in all material

respects, in accordance with the applicable nancial reporting framework), the objectives of a

nancial audit of public sector entities may include additional audit and reporting responsibilities.

For exampe, pubic sector auditors may be required to report on: a pubic sector entitys compi-

ance or non-compiance with authorities, incuding budget and accountabiity; the effectiveness

of internal control over nancial reporting; or on the economy, efciency and effectiveness of

programs, projects and activities.

7. The audit mandate for a Supreme Audit Institution, or the obigations for pubic sector entities

arising from egisation, reguation, ministeria directives, government poicy requirements, or

1 An iustration of the ink between the INTOSAI Fundamenta Auditing Principes (ISSAI 100400) and the INTOSAI Financia Audit Guideines (ISSAI 10002999) is

avaiabe in appendix 1.


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resoutions of the egisature, may aso resut in additiona audit and reporting responsibiities for

pubic sector auditors.

8. The INTOSAI Financia Audit Guideines do not contain detaied guidance on audit and report-

ing responsibiities reating to compiance with authorities. Such guidance is contained in the

Compiance Audit Guideines. ISSAI 4200 provides guidance for compiance audits performed

together with an audit of nancial statements. They build upon INTOSAIs Fundamental

Auditing Principes and have been designed to assist pubic sector auditors having responsi-

biities reated to compiance with authorities.2 ISSAI 4200 suppements, and shoud be read

together with the Financia Audit Guideines (ISSAI 1000-2999), when having such broader

responsibiities.

9. The Financia Audit Guideines, when appied together with the Compiance Audit Guideines,

are intended to provide pubic sector auditors with a comprehensive set of guidance for auditsof nancial statements in the public sector, when compliance with authorities is included in the

objective.

backgon

10. The origina INTOSAI Auditing Standards3 were issued by the INTOSAI Auditing Standards

Committee in June 1992 and the INTOSAI Code of Ethics was approved at the XVIth INTOSAI

Congress (INCOSAI)4 hed in Montevideo in 1998. The INTOSAI Auditing Standards were

subsequenty restructured, and the current INTOSAI Code of Ethics and Auditing Standards were

approved by the XVIIth INCOSAI in Seou in 2001. Both are based on the lima Decaration ofGuideines on Auditing Precepts. The INCOSAI in Montevideo initiay gave the INTOSAI

Auditing Standards Committee the task to deveop impementation guideines for auditing

standards. This mandate for the Committee was reiterated during subsequent Congresses in Seou

(2001) and Budapest (2004). The Committee presented the INTOSAI Guideines for Performance

Audit for the approva of the Congress in 2001 and then moved on to address guideines for

nancial audit.

11. In response to the expressed need by INTOSAI members, the INTOSAI Auditing Standards

Committee agreed to develop nancial audit guidelines based on the ISAs developed by the

IAASB. The Committee aso agreed to deveop guidance on the additiona audit and reporting re-

sponsibiities of pubic sector auditors. Deveopment of the INTOSAI Financia Audit Guideines

was given to the INTOSAI Financia Audit Guideines Working Group.

12. In September 2005, INTOSAI was reorganized in accordance with the new INTOSAI Stra-

tegic Pan and the INTOSAI Auditing Standards Committee was repaced by the INTOSAI

Professiona Standards Committee (PSC). The responsibiities of the INTOSAI Financia

Audit Guideines Working Group were taken over by the INTOSAI Financia Audit Guideines

2 ISSAI 4000, Genera Introduction to Guideines on Compiance Audit and ISSAI 4200, Compiance Audit Guideines Reated to Audit of Financia Statements.

3 ISSAI 100-400 presented as INTOSAI Fundamenta Principes

4 INCOSAI is the INTOSAI Congress which is hed every three years.


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Subcommittee (FAS) created in the new committee structure. The Financia Audit Guideines

Subcommittee reports to the PSC.

13. Provision has been made in the ISSAI framework for the incusion of a Code on Quaity Contro

(ISSAI 40) in the second eve of the ISSAI structure to be appied by Supreme Audit Institutions

for a types of audit activities.

Th Ppos o th INTOSAI financia Ait Giins

14. The main purpose of the INTOSAI Financia Audit Guideines is to provide INTOSAI members

with a comprehensive set of guidelines for the audit of nancial statements of public sector enti-

ties. The INTOSAI Financia Audit Guideines incude PNs deveoped by INTOSAI in addition

to the ISAs deveoped by the IAASB. They together form a guideine in the INTOSAI standardsframework.

15. The INTOSAI Fundamenta Principes provide the overriding principes for the performance

of and reporting on audits carried out by Supreme Audit Institutions. However, by utiizing the

detail of the ISAs insofar as it is relevant to nancial audits conducted by Supreme Audit Institu-

tions, and by developing PNs that deal with special considerations for nancial audits of public

sector entities, INTOSAI provides a comprehensive set of Financia Audit Guideines that can be

drawn upon by a Supreme Audit Institutions in a institutiona settings and audit environments.

16. The PNs provide a cear statement on appicabiity of the ISA to audits of pubic sector entities

as we as suppementary guidance to pubic sector auditors on the ISAs. The PNs are addressedto public sector auditors which include, when relevant, other auditors doing nancial audits of

pubic sector entities. Where appicabe, they aso dea with genera guidance on additiona audit

and reporting responsibiities of pubic sector auditors. There is a separate PN for each ISA. PNs

are issued on an ongoing basis as and when the IAASB issues new or revises existing ISAs. The

INTOSAI Financial Audit Guidelines apply to audits of nancial statements as dened by ISSAI

12005 and address additiona pubic sector audit considerations. The audit and reporting responsi-

bilities of Supreme Audit Institutions related to nancial audits may include additional aspects of

regularity audits (as claried in paragraph 19). In the public sector, audits of nancial statements

wi often be combined with audits of compiance with authorities. ISSAI 42006 addresses such

additiona auditing and reporting responsibiities. Audits of compiance with authorities incude

the assessment of whether the activities, nancial transactions and information that are reected

or contained in the accounts or nancial statements are in accordance with applicable resolutions

of the egisature, incuding budgetary aws or decisions for such, provisions for funds, contracts,

grant agreements etc.

17. The INTOSAI Financia Audit Guideines appy to audits at a eves of government. Depending

on the audit mandate or aw governing the Supreme Audit Institution, the INTOSAI Financia

5 ISSAI 1200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards of Auditing.

6 ISSAI 4200 Compiance Audit Guideines reated to the Audit of Financia Statements.


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Audit Guideines may appy to audits of private sector entities when they are invoved in the

management of pubic services or pubic monies, for exampe through partnership arrangements

or as recipients of pubic grants or subsidies.

Scop o th INTOSAI financia Ait Giins

18. The objective of the INTOSAI Financial Audit Guidelines is to provide guidance for audits of

nancial statements in the public sector, including general guidance on additional auditing and

reporting objectives related to the public sector audit of nancial statements.

19. The INTOSAI Fundamental Principles do not dene an audit of nancial statements. According

to ISSAI 1007 the fu scope of government auditing incudes reguarity and performance audit.

Reguarity audit embraces:(a) Attestation of nancial accountability of accountable entities, involving examination and

evaluation of nancial records and expression of opinions on nancial statements;

(b) Attestation of nancial accountability of the government administration as a whole;

(c) Audit of nancial systems and transactions including an evaluation of compliance with

appicabe statutes and reguations;

(d) Audit of interna contro and interna audit functions;

(e) Audit of the probity and propriety of administrative decisions taken within the audited entity;

and

(f) Reporting of any other matters arising from or reating to the audit that the Supreme Audit

Institutions considers shoud be discosed.

20. The scope of a reguarity audit performed in accordance with the ISSAI 100 is thus wider than

the scope of an audit of nancial statements conducted in accordance with the ISAs.

21. Furthermore, the denition of nancial audit within each Supreme Audit Institutions depends on

reguations, mandate and organizationa structure. The mandate of a Supreme Audit Institution

may specify auditing and reporting responsibiities different from, or in addition to the audit of

nancial statements. Such responsibilities may either be included in, or may be in addition to,

the audit of nancial statements. The audit of such information will require public sector auditors

to perform work that is in addition to what is required soey for auditing and reporting on the

nancial statements in accordance with the ISAs.

22. Due to INTOSAIs invovement in the deveopment of the ISAs, the ISAs incude appication

material relevant to nancial audits of public sector entities, often provided under a separate

heading. The PNs provide additiona guidance to be considered if reevant to the mandate of the

Supreme Audit Institutions.

23. Athough the Financia Audit Guideines may provide guidance on audit and reporting responsi-

biities in addition to those in the ISAs, it is not their intent to provide guidance on the fu scope

7 ISSAI 100- INTOSAI Auditing Standards- Basic Principes, paragraphs 38 and 39.


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of a reguarity audit performed in accordance with the INTOSAI Fundamenta Principes, or a

the different or additiona audit or reporting responsibiities of the mandates of Supreme Audit

Institutions. For responsibilities other than audit of nancial statements public sector auditors

may need to appy other reevant INTOSAI guideines. ISSAI 42008 provide guidance on audit

responsibilities related to compliance audit as part of the audit of nancial statements.

Stct an Contnt o th INTOSAI financia Ait Giins

24. The INTOSAI Financia Audit Guideines contain initiay 38 ISSAIs. 36 of those incude an

ISA and in addition a Practice Note to support the adoption and use of the ISA in the pubic

sector. The ISA and the PN together constitute one guideline on the subject matter at hand. The

remaining ISSAIs, not based on or incuding an ISA, are ISSAI 1000, Genera Introduction to the

INTOSAI Financia Audit Guideines and ISSAI 1003, the Gossary

9

, which incudes the IAASBGossary and provides additiona pubic sector terms and expanations.

25. The INTOSAI Financial Audit Guidelines are presented in the INTOSAI classication system as

ISSAIs, starting with ISSAI 1000 to ISSAI 2999. The three ast positions in the ISSAI number

indicate the corresponding number of the ISA (for exampe, ISSAI 1800 incudes ISA 800 and

the Practice Note for ISA 800). Appendix 2 outlines the ISSAIs related to nancial audit.

26. The ISAs have a structure, in which information is presented in separate sections:

(a) Intoction

Introductory material may include information regarding the purpose, the scope, and subject

matter of the ISA, in addition to the responsibiities of the auditors and others in the contextin which the ISA is set.

(b) Ojctiv

Each ISA contains a clear statement of the objective of the auditor in the audit area addressed

by that ISA.

(c) Denitions

For greater understanding of the ISAs, applicable terms have been dened in each ISA.

(d) rqints

The objective(s) is supported by clearly stated requirements. Requirements are always

expressed by the phrase the auditor sha. In appying the INTOSAI Financia Audit Guide-

ines as guidance the word sha means may. When reference to the ISAs is made in the

Auditors Report, the authority of the ISAs sha be foowed.

(e) Appication an Oth expanatoy matia

The appication and other expanatory materia expains more precisey what a requirement

means or is intended to cover, or incudes exampes of procedures that may be appropriate

under given circumstances. The appication and other expanatory materia may incude sub-

headings for specic considerations for public sector entities. Such paragraphs have been

included as agreed with the IAASB to support the application in nancial audits of public

8 ISSAI 4200, Compiance Audit Guideines Reated to Audit of Financia Statements.

9 ISSAI 1003, Gossary of Terms to the INTOSAI Financia Audit Guideines.


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sector entities. Some ISAs also contain considerations specic to audits of smaller entities.

In audits of pubic sector entities and entities that receive government awards, these consid-

erations are usuay not appicabe, even if the pubic sector entity has few empoyees, simpe

operations, or a reativey sma budget. In those situations, the pubic sector entity may sti

have compicated transactions, such as transfers from other government entities, as we as a

need to compy with aws, reguations, poicies and systems determined by a higher eve of

government and a need for accountabiity for use of taxpayer monies. Therefore pubic sec-

tor auditors carefuy consider the reevance of such considerations. The Practice Notes may

incude additiona guidance in this area when considered important to add guidance reevant

for audits of smaer pubic sector entities.

27. The Practice Notes to the ISAs are presented in separate sections:

(a) backgon

Background materia may incude information regarding the ISA such as an introduction tothe ISA, and the content of the Practice Note.

(b) Appicaiity o th ISA in th Pic Scto Aiting

Each Practice Note contains a cear statement of appicabiity of the ISA for audits of pubic

sector entities. Matters regarding the pubic sector auditors statutory responsibiities and the

pubic sector auditors extended mandate (egaity/reguarity, compiance, and performance

issues) may inuence the applicability. In some PNs, when considered essential for the scope

of the PN such references are incuded.

(c) Aitiona Gianc on Pic Scto Isss

To assist pubic sector auditors in appying the ISA in audits of pubic sector entities, this sec-

tion provides additional public sector specic guidance on a general level. It may be struc-

tured foowing the headings of the ISA. When reevant the paragraphs in this section havereferences to the reated paragraphs of the ISA. The guidance may aso contain exampes

more reevant to audits of pubic sector entities than provided for in the ISA. When reevant,

additional applicable terms may also be dened in this section. The section is structured with

subsections for each area. Exampes of matters that are considered in this section incude:

i. Matters related to specic legislation applicable in the public sector

ii. Matters reated to overarching pubic sector concerns, for exampe stewardship, ac-

countabiity and transparency

iii. Matters reated to different modes of Supreme Audit Institutions (Auditor Genera and

Court of Accounts modes), and Supreme Audit Institutions that contract out work to

external audit rms

iv. Matters reated to accounting principes and practices particuar to pubic sector enti-

ties

v. Matters reated to particuar government entities (ministries, agencies, quasi-govern-

mental), and sectors (nance, defense, justice, health, environment, etc), if any.

vi. Other matters related directly to the application of the ISA in nancial audits of public

sector entities


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Appying th INTOSAI financia Ait Giins

Appying the INTOSAI Financia Audit Guideines28. Reference to the use of standards can be made in one of four ways depending on the standards

appied and the SAIs mandate:

(a) In accordance with the ISSAIs (1000-2999); which means fu compiance with a reevant

ISAs and the additiona guidance set out in the INTOSAI Practice Notes to the ISAs.

(b) In accordance with the ISAs; which means fu compiance with a reevant ISAs.

(c) In accordance with the INTOSAI Fundamenta Auditing Principes, but not fu compiance

with the ISAs which are presenty incuded as part of the INTOSAI Financia Audit Guide-

ines (ISSAIs 1000-2999).

(d) In accordance with other nationa and reevant Auditing Standards.

29. Public sector auditors who state in their auditors report on a set of nancial statements that the

audit has been conducted in accordance with the ISAs are aso encouraged to appy the additiona

pubic sector guidance in ISSAIs 1000-2999. Where pubic sector auditors have additiona audit

and reporting responsibiities, references to appicabe standards wi aso be necessary.

Appying the INTOSAI Financia Audit Guideines toSupport INTOSAI Fundamenta Principes

30. The INTOSAI Financia Audit Guideines are deveoped to support the appication of the INTO-

SAI Fundamenta Principes as we as the ISAs (as standards or as guidance together with the

Practice Notes). INTOSAI Fundamenta Principes are written to provide genera standards fora audit activities carried out by a Supreme Audit Institutions. Appying the INTOSAI Financia

Audit Guideines as guidance wi not diminish the use of INTOSAI Fundamenta Principes

as the authoritative auditing standards. In this circumstance reference is made to the INTOSAI

Fundamenta Principes as the authoritative standards appied.

Appying the INTOSAI Financia Audit Guideines toSupport other Standards

31. The INTOSAI Financia Audit Guideines may aso, if reevant, be used by Supreme Audit Insti-

tutions to support the use of other national standards for nancial audits. This is appropriate only

when the nationa audit standards are consistent with the INTOSAI Financia Audit Guideines.

10 ISSAI 100 INTOSAI Auditing Standards- Basic Principes, ISSAI 200 INTOSAI Auditing Standards Genera Standards,

ISSAI 300 INTOSAI Auditing Standards- Fied Standards. ISSAI 400 INTOSAI Auditing Standards- reporting Standards.

11 Ibid.


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Athoity

Authority INTOSAI Fundamenta Principes and Financia Audit Guide-ines

32. INTOSAI Fundamenta Principes12 contain the fundamenta auditing principes for audit work

conducted by the Supreme Audit Institution. Whie it is the responsibiity of each Supreme Audit

Institution to judge the extent to which the standards are compatible with its mandate, viewed in

the particuar constitutiona, ega and other circumstances of the audit organization, one of the

principes outined in the INTOSAI Code of Ethics13 is the pubic sector auditors obigation to

appy generay accepted auditing standards.

33. The INTOSAI Fundamenta Principes wi remain the framework of audit standards for INTO-

SAI members, and the authority of those standards is in no way diminished by the pubicationof the INTOSAI Financia Audit Guideines incuding the ISAs and the PNs. INTOSAI recog-

nizes that this framework together with the guidance provided by the INTOSAI Financia Audit

Guideines wi provide INTOSAI members with reevant concepts and guidance for conducting

nancial audits.

34. The Preface of the INTOSAI Fundamenta Principes states that, athough the word standards is

used throughout the documents, it is understood that this word is to be used synonymousy with

the authority for compiance within the domain of each Supreme Audit Institution. The foreword

to the INTOSAI Fundamenta Principes states that, whie INTOSAI Auditing Standards do not

have mandatory application, they reect a best practice consensus among Supreme Audit Insti-

tutions and therefore each institution must judge the extent to which the standards are compatiblewith its mandate.

35. The INTOSAI Financia Audit Guideines are to be considered with reference to the INTOSAI

Fundamenta Principes. As a resut the INTOSAI Financia Audit Guideines PNs do not stipu-

ate requirements for appication, and do not use the terms sha or shoud. The ISAs incude

such terms, and differentiate between requirements and appication and other expanatory mate-

ria. However, these shoud simiary not be regarded as mandatory for Supreme Audit Institution.

36. Auditors of pubic sector entities may use the INTOSAI Financia Audit Guideines as compre-

hensive guidance for conducting nancial audits. When the guidelines are used as standards,

auditors of pubic sector entities respect the authority of the ISAs. Paragraphs 37-43 dea with the

authority of the ISAs.

12 ISSAI 100- INTOSAI Auditing Standards- Basic Principes, ISSAI 200- INTOSAI Auditing Standards- Genera Standards,

ISSAI 300- INTOSAI Auditing Standards- Genera Standards, and ISSAI 400- INTOSAI Auditing Standards- Reporting Standards.

13 ISSAI 30- INTOSAI Code of Ethics


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Authority Internationa Standards on Auditing

37. The objective of the IAASB is to serve the public interest by setting, independently and under its

own authority, high-quaity auditing, assurance, quaity contro and reated services standards,

and by faciitating the convergence of nationa and internationa standards, thereby enhancing the

quality and uniformity of practice throughout the world and strengthening public condence in

the goba auditing profession.

38. The IAASB deveops ISAs, Internationa Standards on Review Engagements (ISREs), Inter-

nationa Standards on Assurance Engagements (ISAEs) and Internationa Standards on Reated

Services (ISRSs). These Standards are coectivey referred to as the IAASBs Engagement

Standards. The IAASB aso deveops Internationa Standards on Quaity Contro (ISQCs). The

Engagement Standards and the ISQCs are coectivey referred to as the Internationa Standards.

The INTOSAI Financia Audit Guideines incude the ISAs. They do not override the oca awsor regulations that govern the audit of historical nancial statements or assurance engagements

of other information in a particuar country required to be foowed in accordance with that

countrys national standards. In the event that local laws or regulations differ from, or conict

with, IAASB Standards on a particular subject, an engagement conducted in accordance with

oca aws or reguations wi not automaticay compy with IAASB Standards. A professiona

accountant shoud not represent compiance with IAASB Standards uness he/she has compied

fuy with a of those standards reevant to the engagement.

39. According to the Preface to the Internationa Standards on Quaity Contro, Auditing, Review,

Other Assurance and Related Services, the ISAs are written in the context of an audit of nancial

statements by an independent auditor (unless otherwise stated in the ISAs, this means nancialstatements comprising historical nancial information). The objective of an audit of nancial

statements is to enable the auditor to express an opinion whether the nancial statements are pre-

pared, in all material respects, in accordance with the applicable nancial reporting framework.

The ISAs, taken together, provide the standards for the auditors work in fullling this objective.

40. As the ISAs issued by the IAASB are increasingy recognized by the internationa community as

the international standards for audits of nancial statements, they provide a strong basis for guid-

ance on how to impement the INTOSAI Fundamenta Principes.

41. Since 2003 INTOSAI has had a Memorandum of Understanding with the IAASB. Under the

terms of the Memorandum of Understanding INTOSAI nominates experts drawn from the wider

INTOSAI membership to participate in IAASB Task Forces responsibe for deveoping new or

revising existing ISAs. Experts on IAASB Task Forces promote the incusion of pubic sector

considerations in the ISAs, thereby enhancing the application of the ISAs in nancial audits of

pubic sector entities. The nature of the Internationa Standards requires the professiona accoun-

tant to exercise professional judgment in applying them.

42. The scope, effective date and any specic limitation of the applicability of a specic ISA is made

cear in the ISA. Uness otherwise stated in the ISA, the professiona accountant is permitted to

apply an ISA before the effective date specied therein.


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43. If public sector auditors state in their auditors report on the nancial statements that the audit has

been conducted in accordance with the ISAs, they have to respect the authority attached to ISAs

as set out in ISA 200 (Appendix 3).

Gna Isss in Aits o Pic Scto entitis

44. This section deas with some genera issues of pubic sector concern. It is not intended to cover

all public sector issues that may be relevant to consider when conducting nancial audits in a

specic public sector environment. However, these issues have been regarded as having general

importance for public sector auditors in applying the ISSAIs on nancial audit.

45. Concepts outined in paragraphs 46-88 reate to issues reevant to pubic sector auditors that are

further expained in the individua PNs. However, the body of guideines shoud be consideredwhen appying the guideines.

Different Auditing Systems within the Pubic Sector

46. Different externa audit modes exist around the word. The three most common systems are:

(a) Auditor Genera mode

(b) Court of Accounts (or Audit) mode

(c) Board or Coegiate mode.

47. However, every country may have a unique mode and there are a great number of nationa varia-

tions in the way a Supreme Audit Institution operates, which may inuence the way the ISSAIsmay be adopted and impemented. The ISSAIs are deveoped to provide guidance for pubic

sector auditors regardess of the system within which they operate. The Auditor Genera systems

normally have a strong focus on nancial audit and operate under such conditions that adopting

the ISSAIs may be more reevant. The Board or Coegiate mode is simiar to the Auditor Gen-

era mode, except for the interna structure of the audit institution. A key difference in a Court of

Accounts system is that in such a system government ofcials are normally held personally liable

if unauthorized or iega payments are made. However, simiar sanctions may aso appy for

some Auditor Genera modes. The Supreme Audit Institutions may in such environments impose

penalties or corrections on audited ofcials. The main focus of the audit work is often to verify

the legality of transactions rather than providing an opinion on the true and fair view of the nan-

cial statements. A Board or Collegiate model may also have such judicial functions. INTOSAI

Fundamenta Principes14 states that because of the approach and structure of some Supreme

Audit Institutions, not a INTOSAI auditing standards appy to a aspects of their work, for

example, the judicial nature of the reviews conducted by Courts of Account make aspects of their

work fundamentally different from the nancial and performance audits conducted by Supreme

Audit Institutions which are organized under a hierarchy system ed by an Auditor-Genera or a

Comptroller General. INTOSAI standards do not cover these jurisdictional powers in detail.

14 ISSAI 100 INTOSAI Auditing Standards Basic Principes, paragraph 13


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Engagement Acceptance and Continuance

53. The ISAs require that in certain situations the auditor discaims an opinion or withdraws (or

resigns) from the engagement, where withdrawa is possibe under appicabe aw or reguation.

Withdrawa may be required, for exampe, when:

the auditor and management cannot agree on the terms of the engagement;

ethical requirements cannot be met;

signicant difculties are encountered, such as the inability to access documents or perform

required procedures;

the auditor risks being associated with misleading information, and

scope limitations prohibit them from obtaining sufcient, appropriate audit evidence on which

to base their audit opinion

54. The responsibiities of a Supreme Audit Institutions, or appicabe aw or reguation, wi norma-y not aow for withdrawa, and the Practice Notes provide guidance on other possibe actions

for such situations.

Objective of an Audit of Financial Statements

55. The ISAs are written in the context of an auditor conducting an audit of nancial statements in

accordance with the ISAs whereas such audits may ony be a part of the pubic sector audit task.

ISA 20020 describes the framework within which ISAs are to be applied. The ISAs do not speci-

cay dea with separate engagements for reporting on performance audits, compiance with aws

and reguations, or matters such as inadequate systems of contro. ISA 200 expains the overa

objective of the auditor in conducting an audit of nancial statements as being:(a) To obtain reasonable assurance about whether the nancial statements as a whole are free

from materia misstatement, whether due to fraud or error, thereby enabing the auditor to

express an opinion on whether the nancial statements are prepared, in all material respects,

in accordance with an applicable nancial reporting framework; and

(b) To report on the nancial statements, and communicate as required by the ISAs, in accor-

dance with the auditors ndings.

56. The purpose of an audit is to enhance the degree of condence of intended users in the nancial

statements. This is achieved by the expression of an opinion by the auditor on whether the nan-

cial statements are prepared, in all material respects, in accordance with an applicable nancial

reporting framework. In the case of most genera purpose frameworks, that opinion is on whether

the nancial statements are presented fairly, in all material respects, or give a true and fair view

in accordance with the framework. laws or reguations for pubic sector audit organizations may

prescribe the use of other wordings for expressing the opinion. An audit conducted in accordance

with ISAs and reevant ethica requirements enabes the auditor to express an opinion whether

the nancial statements are prepared, in all material respects, in accordance with an identied

nancial reporting framework.

20 ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With International Standards on Auditing


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57. The lima Decaration21 states Audit is not an end in itsef but an indispensabe part of a regua-

tory system whose aim is to revea deviations from accepted standards and vioations of the prin-

ciples of legality, efciency, effectiveness and economy of nancial management early enough

to make it possibe to take corrective action in individua cases, to make those accountabe

accept responsibiity, to obtain compensation, or to take steps to prevent or at east render more

difcult such breaches. This is a much broader task than providing an opinion on nancial

statements. These broader overall audit objectives may be addressed in other parts of INTOSAIs

Framework for Professiona Standards. The INTOSAI Financia Audit Guideines are reevant to

nancial audits of public sector entities. The often broader responsibilities may result in a need to

appy other ISSAIs for additiona responsibiities.

58. The INTOSAI Fundamenta Principes stipuate22 (ISSAI 100) that for some eements of the

Supreme Audit Institutions mandate, particularly in regard to the audit of nancial statements,

the Supreme Audit Institutions audit objectives may be similar to the objectives of audits in theprivate sector. ISSAI 30023 states that the auditor shoud design audit steps and procedures to

provide reasonabe assurance of detecting errors, irreguarities, and iega acts that coud have

a direct and material effect on the nancial statement amounts or the results of regularity audits.

Reguarity requirements in the pubic sector are rarey ess important in pubic accountabiity

than expressing an opinion on the nancial statements within broad materiality allowances. The

objective of ISAs are to enable the auditor to express an opinion whether the nancial statements

are prepared, in all material respects, in accordance with an identied nancial reporting frame-

work. A Supreme Audit Institutions objective of auditing is thus wider than the objectives of an

audit according to the ISAs. Furthermore, the user of a nancial statement audit report in the pub-

ic sector ooks at more extensive accountabiities than those impied by ISA 200 (the economic

decisions of users). The INTOSAI Financia Audit Guideines together with other INTOSAIstandards and guidelines will together serve the wider objective of public sector auditing.

Agreeing the Terms of Audit Engagements

59. The ISAs generay dea with tasks that are undertaken through agreement with cients. Supreme

Audit Institutions normay undertake assignments intended to provide reports on accountabiities

to egisative or governing bodies. These assignments are usuay mandated by egisation and the

Supreme Audit Institution is required to carry out the assigned functions. In some pubic sec-

tor environments there may in addition to mandated responsibiities be contractua measures for

audit tasks.

60. ISA 21024 deas with the terms of an engagement and provides requirements on the auditors in

reation to acceptance of an assignment. These requirements iustrate the reiance of the ISAs on

a cient reationship rather than the egisated powers of the Supreme Audit Institutions. Never-

theess the need for a cooperative reationship with the audited entity is common to both.

21 ISSAI 1 The lima Decaration

22 ISSAI 100 INTOSAI Auditing Standards Basic Principes

23 ISSAI 300 INTOSAI Auditing Standards Genera Standards

24 ISA 210 Agreeing The Terms of Audit Engagements


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61. In addition to the requirements and guidance set out in the ISAs, there may be further consider-

ations for pubic sector auditors in undertaking audit engagements. For exampe, the capabiities

and competence required in an audit may be broader and incude the need to understand appi-

cabe reporting arrangements, such as requirements for reporting to the egisature, governing

body, or the pubic. Pubic sector auditors may sometimes need to adapt their approach in order

to promote compiance with the requirements of the ISAs. They may do this, for exampe, by per-

forming procedures such as those reated to cient acceptance and continuance to obtain vauabe

information for assessing risk and carrying out reporting responsibiities.

62. Supreme Audit Institutions are normay required to carry out an audit as stated in their mandate.

They do not normally have the option to reject an assignment. ISA 210 includes requirements

on the auditor not to accept an engagement if certain circumstances are not met, uness required

to do so by aw or reguation. In such cases, when the requirement is not appicabe, the Practice

Note wi provide additiona guidance on suitabe actions for pubic sector auditors.

63. ISA 210 requires the auditor to obtain the agreement of management and, where appropriate,

those charged with governance that they acknowedge and understand their responsibiity. If aw

or regulation prescribes in sufcient detail the terms of the engagement, it may not be necessary

to record them in an audit engagement etter or other suitabe form of written agreement. An

exception may be for the agreement by management and, where appropriate, those charged with

governance, that they acknowedge and understand the responsibiities set out in the ISA. Such

engagements often exist in the pubic sector and written agreements on the terms of engagements

are not often used. The INTOSAI Financia Audit Guideines support introducing such agree-

ments in pubic sector auditing for reasons set out in the Practice Note.

Quaity Assurance Processes

64. The INTOSAI Fundamenta Principes do not contain a separate standard on quaity contro for

audit work, but some guidance is contained in the genera standards. These do not ceary state

the individua auditors responsibiities for quaity contro, but instead focus on the Supreme

Audit Institutions responsibiity to estabish quaity assurance arrangements25. ISA 22026 requires

the auditor to impement quaity contro procedures on individua audits. The provisions of ISA

220 are appicabe to the work of Supreme Audit Institutions. This ISA is premised on the basis

that the rm (or the public sector equivalent) is subject to quality control procedures according to

ISQC 127 or nationa requirements that are at east as demanding.

65. In private sector audit rms, engagement partners generally have individual responsibility for

audit engagements and also have the authority to bind the audit rm. For Supreme Audit Institu-

tions, an Auditor Genera, a Board or a Court of Accounts has overa responsibiity, athough

the day-to-day operationa responsibiity may be deegated to others. For exampe, a those with

engagement partner responsibiity in a Supreme Audit Institution with an Auditor Genera System

woud, because of the hierarchica structure utimatey report to the Auditor Genera. In the pub-

25 ISSAI 200 ,INTOSAI Auditing Standards - Genera Standards, paragraph 1.27

26 ISA 220, Quaity Contro for an Audit of Financia Statements.

27 ISQC 1, Quaity Contro for Firms that Perform Audits and Reviews of Financia Statements, and other Assurance reated Service Engagements.


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ic sector, it is important to seect engagement quaity contro reviewers who are independent of

the audited entity and can provide an objective evaluation even though they are part of the same

strategic eadership as the person with engagement partner responsibiity.

66. Furthermore, ISQC 128 requires engagement partner rotation for listed entities after a predened

period. In the public sector, this requirement may be applied to signicant public interest entities.

However, legislation establishing the appointments and terms of ofce of the Auditor General

may make rotation impractica. Supreme Audit Institutions may estabish poicies and proce-

dures to promote compiance with the spirit of this requirement (e.g., by rotating key personne

with operationa responsibiity for the audit engagement, requiring engagement quaity contro

reviews, or carrying out reguar peer reviews).

Working Papers and Audit Documentation

67. The INTOSAI Fundamenta Principes29 state that the auditor shoud ensure that working papers

contain evidence adequatey supporting a concusions, recommendations and opinions. Fur-

thermore paragraph 5.5 requires that auditors shoud adequatey document the audit evidence in

working papers, including the basis and extent of the planning, work performed and the ndings

of the audit. ISA 23030 requires the auditor to assemble the audit documentation in an audit le

and complete the administrative process of assembling the nal audit le on a timely basis after

the date of the auditors report. It aso requires the auditor not to deete or discard audit documen-

tation of any nature before the end of its retention period. ISQC 131 (or nationa requirements that

are at east as demanding) requires audit organizations to estabish poicies and procedures for the

timely completion of the assembly of audit les. In the public sector such requirements for docu-

mentation and retention may be governed by legislative requirements related to condentiality onthe one hand, and access by third parties on the other hand. ISQC 1 estabishes requirements on

audit rms (and public sector equivalents) related to quality controls.. The Practice Note to ISA

230 provides additiona guidance reated to documentation.

Communication

68. ISA 26032 denes those charged with governance as the person(s) or organization(s) with

responsibiity for overseeing the strategic direction of the entity and obigations reated to the ac-

countabiity of the entity. In the pubic sector, identifying those charged with governance may be

a chaenge. The audited entity may be part of a arger or broader structure with governance bod-

ies at severa organizationa eves. In some cases, there may aso be separate reporting require-

ments related to aspects of nancial and compliance audits involving separate governance bodies.

The Practice Notes to the ISAs deaing with communication provide appropriate guidance to

meet the needs and expectations of the egisature or appropriate reguators.

28 ISQC 1 Internationa Standard on Quaity Contro 1- Quaity Contro for Firms that Perform Audits and Reviews of Financia Statements, and Other Assurance and

Related Service Engagements. This standard establishes requirements on audit rms related to quality controls, and is not included in the INTOSAI Financial Audit

Guideines.

29 ISSAI 300 INTOSAI Auditing Standards- Fied Standards, paragraph 2.3 (d)

30 ISA 230 Audit Documentation

31 ISQC 1 Internationa Standard on Quaity Contro 1- Quaity Contro for Firms that Perform Audits and Reviews of Financia Statements, and Other Assurance and

Reated Service Engagements.

32 ISA 260 Communication With Those Charged With Governance


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69. ISA 260 sets out requirements for annua communication of compiance with ethica require-

ments regarding auditors independence. In addition to the considerations described in the ISSAI,

matters set out in the INTOSAI Code of Ethics, such as poitica neutraity, may aso be important

for pubic sector auditors.

70. Pubic sector auditors may aso have broader communication responsibiities than those envi-

sioned by ISA 260. As stated in reevant Practice Notes, pubic sector auditors may have such

responsibiities to communicate with the egisature, appropriate reguators, or reevant funding

agencies.

Identifying Fraud and Error

71. The INTOSAI Fundamenta Principes33 states that the Supreme Audit Institution shoud ensure

that the techniques employed are sufcient to reasonably detect all quantitatively material errorsand irreguarities. ISA 24034 requires, as a basic principe, that the auditor sha, when panning

the audit, assess the risk that fraud or error may cause the nancial statements to contain mate-

ria misstatements. It aso requires the auditor to inquire of management as to any fraud which

has been discovered. Pubic sector auditors may have formay mandated responsibiity to detect

fraud, and in addition, the use of public monies tends to impose a higher prole on fraud issues.

As a resut auditors may need to be responsive to pubic expectations regarding detection of

fraud.

72. Another area that may include signicant differences compared to private sector audits is related

to pubic sector auditors responsibiities, in some pubic sector environments, for actions to

be taken when offences are discovered. The Practice Note to ISA 240 makes reference to thepossibe extended reporting responsibiities within the pubic sector, to address concerns about

pubic accountabiity.

73. Many Supreme Audit Institutions are responsibe for contributing to the prevention and detection

of fraud in ine with the INTOSAI Fundamenta Principes. ISA 240 expands on the audit risk

standards and deas with their appication in reation to the risk of materia misstatement due to

fraud. In the pubic sector, auditors responsibiities may resut from egisation, reguation, or

directives reated to the audited entity or may be covered separatey by the audit mandate. As a

result, those responsibilities may not be limited to the risk of material misstatement of the nan-

cia statements due to fraud. The auditors responsibiities reated to fraud may be broader than in

the private sector and may incude aspects of compiance, pubic accountabiity, and sound pubic

sector nancial management.

74. Areas where pubic sector auditors are aert to fraud risks are incuded in the reated Practice

Note and incude areas such as procurement, grants, privatizations, intentiona misrepresentation

of resuts or information, and misuse of authority or power.

33 ISSAI 300 INTOSAI Auditing Standards- Fied Standards paragraph 5.3.

34 ISA 240 The Auditors Responsibiities Reating to Fraud in an Audit of Financia Statements


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The Auditors Consideration of laws and Reguations

75. ISSAI 30035 states that the reguarity audit is an essentia aspect of government auditing. One

important objective of this type of audit is to make sure, by all means possible, that the State

budget and accounts are compete and vaid. This wi provide Pariament and other users of the

audit report with assurance about the size and development of the nancial obligations of the

State. To achieve this objective, public sector auditors may examine the accounts and nancial

statements of the administration with a view to assuring that a operations have been correcty

undertaken, competed, paid and accounted for. The INTOSAI Fundamenta Principes focus on

the importance of reviewing compiance with aws and reguations when auditing in the pubic

sector because decision makers need to know if the aws and reguations are being foowed,

whether they are having the desired resuts, and, if not, what revisions are necessary.36 In addi-

tion to the audit of nancial statements, many public sector engagements include additional audit

responsibiities with respect to the consideration of aws and reguations which have no materiaeffect on the nancial statements. ISSAI 420037 addresses auditor responsibiities reated to an

audit of compliance in relation to an audit of nancial statements.

76. ISA 25038 states that the auditor is not responsibe for preventing non-compiance with aw and

reguations. Pubic sector auditors may have, as stated above, additiona responsibiities reated

to compiance with aw and reguations. In addition, pubic expectations may be considered when

panning and performing audit procedures.

Risk Assessment and Audit Procedures

77. The audit risk standards39 are fundamenta in risk-based audit approach. These standards nor-mally refer to business risk, which ISA 315 denes as a risk resulting from signicant condi-

tions, events, circumstances, actions or inactions that coud adversey affect an entitys abiity to

achieve its objectives and execute its strategies, or from the setting of inappropriate objectives

and strategies.Business risk is broader than the risk of material misstatement on nancial state-

ments.

78. The business risk genera concept appies in the context of identifying and assessing risk in

pubic sector audit work. In the pubic sector, business risk reates to the risk that government

activities, including relevant programs, program strategies, and objectives, will not be completed

or achieved. In addition, risks reated to issues such as the poitica cimate, pubic interest, and

program sensitivity or potentia non-compiance with egisation or proper authority are reevant

in the pubic sector context.

35 ISSAI 300- INTOSAI Auditing Standards- Fied Standards paragraph 4.1

36 ISSAI 300 INTOSAI Auditing Standards- Fied Standards paragraph 4.2

37 ISSAI 4200 Compiance Audit Reated to the Audit of Financia Statements

38 ISA 250 Consideration of laws and Reguations in an Audit of Financia Statements

39 ISA 315 Identifying and Assessing the Risks of Materia Misstatement through Understanding the Entity and Its Environment, ISA 330- The Auditors Responses to

Assessed Risks and ISA 500- Audit Evidence


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79. In addition to the requirements and guidance set out in the risk ISAs, there may be further con-

siderations for pubic sector auditors in assessing risk and designing audit procedures. To gain an

understanding of the entity, pubic sector auditors consider their broader mandate as we as any

reevant egisation, reguations, directives, or other requirements that affect the entitys opera-

tions. Management objectives, including public accountability concerns, are also considered.

Risk assessment information may aso be obtained from performance auditors or other reevant

sources, such as testimonies from government ofcials or legislative reports or minutes.

80. Pubic sector auditors may have reporting responsibiities, such as those reated to effective-

ness of interna contro or compiance with aws and reguations, which private sector auditors

do not have. Consequenty, pubic sector auditors reviews of interna contros may be broader

and more detaied than in the private sector. Reporting requirements may aso be broader in that

public sector auditors may be required to communicate all identied internal control deciencies

or compiance deviations (not ony those that are materia) to the egisature or other governingbody. Guidance on risk assessment issues is provided for in the reevant Practice Notes.

Materiaity in Audits of Pubic Sector Entities

81. The risk of material misstatements is dened in ISA 20040 as: The risk that the nancial state-

ments are materially misstated prior to audit. In a nancial statement audit, a misstatement is

materia, individuay or when aggregated with other misstatements, when it coud reasonaby

be expected to inuence the economic decisions users take based on the nancial statements.

Materiaity has both quantitative and quaitative aspects. In the pubic sector, materiaity may not

be imited to economic decisions of users. legisators and reguators are often the primary users

of public sector nancial statements. They may use the nancial statements to make not onlyeconomic decisions but aso decisions about whether to continue certain government programs

or grant funding. The quaitative aspects of materiaity generay pay a greater roe in the pubic

sector than in the private sector.

82. The ISAs deaing with materiaity set out procedures for determining eves of materiaity. In the

pubic sector, materiaity eves may be determined at a ower eve than those prescribed by the

ISAs due to considerations such as the sensitive nature of certain transactions or programs, the

pubic interest, the need for effective egisative oversight and reguation, and the nature of the

misstatement or deviation (e.g., if it is reated to fraud or corruption).

83. The broader mandate in the pubic sector may require audits of certain aspects reated to compi-

ance and interna contro. Whie misstatements of sma monetary amounts may be deemed triv-

ia, even sma deviations reated to compiance or interna contro are, by their nature, generay

not seen as trivial. Even if a transaction regardless of size is correctly recorded in the nancial

statements, the transaction represents an instance of non-compiance or a contro deviation if it is

iega or frauduent or if the contro was not foowed.

40 ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With International Standards on Auditing


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84. Many public sector auditors have a responsibility to report all (not only non-trivial) identied

misstatements or compiance and contro deviations to management or those charged with gover-

nance. Such misstatements or deviations may aso have impications in a broader context. Based

on their mandates, some Supreme Audit Institutions may aso order that any instances of non-

compiance be corrected.

Auditors Reports in the Pubic Sector

85. Greater consistency in the form of audit reports promotes credibiity, as the report can be readiy

identied as being prepared based on professional standards. It also helps readers to more easily

identify any modications of the Auditors opinion and audit ndings such as internal control

deciencies and instances of non- compliance with authorities. ISA 700, 705, 706, 800, 805, and

810 discuss the form of the auditors report required for audits performed in accordance with the

ISAs. In the private sector, the audit report is generay a one-way communication addressed tothe appropriate parties, such as the shareholders or the board of directors. It identies the audit

work performed and the standards on which the work was based. The responsibiities of the audi-

tor and management are set out and the auditors opinion is ceary stated. In certain circum-

stances, the report may aso incude additiona paragraphs that further eaborate on important

matters.

86. The same structure is normay reevant to pubic sector audit reports even though they tend to

be onger and incude a wider range of matters. In the pubic sector aws, the audit mandate or

common practice may lead the public sector auditor to report ndings, conclusions, recommenda-

tions and management responses. Such reporting is suppementary to the auditors report on the

nancial statements in accordance with ISSAI 170041.

Tansation o th INTOSAI financia Ait Giins

87. FAS has estabished procedures for transation of the INTOSAI guidance incuded in the INTO-

SAI Financial Audit Guidelines into the ofcial INTOSAI languages42. The procedures foow

the directions given by the INTOSAI Professiona Standards Steering Committee as formuated

during the meeting in Washington, DC in June, 2006.

88. A guidance issued by INTOSAI as part of the INTOSAI Financia Audit Guideines is exposed

for comments in English. Comments are accepted in all ofcial languages of INTOSAI.

89. Translation into the ofcial INTOSAI languages is done before INCOSAI endorsement of the

ISSAI. Quaity assurance of transations is undertaken by members of FAS, experts engaged in

the deveopment of the INTOSAI Financia Audit Guideines or other INTOSAI bodies.

41 ISSAI 1700 Forming an Opinion and Reporting on Financia Statements

42 The ofcial INTOSAI languages are: Arabic, English, French, German and Spanish.


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90. However, the ISAs, issued by the IAASB and adopted as part of the INTOSAI Financia Audit

Guidelines, are issued in English and are not translated by INTOSAI. The ISAs are subject to

copyright by the Internationa Federation of Accountants (IFAC). IFAC has compied a database

of transations of IFAC pubications by third parties. It incudes the anguages, pubication tites,

names of transating organizations and, where avaiabe, ists of transated key terms. IFAC has

not reviewed the quaity of the transated pubications or key terms. To serve the pubic interest

and promote adherence to high-quaity professiona standards, as we as to further the interna-

tiona convergence of such standards, IFAC makes this database of transations pubicy avaiabe

on its website43.

91. Any additiona transation of the INTOSAI Financia Audit Guideines by SAIs shoud com-

ply with the translation recommendations set out in Appendix 4 and if ISAs are subject to that

transation process, with the December 2008Policy for Translating and Reproducing Standards

Issued by the International Federation of Accountants

44

.

43 http://www.ifac.org/Transations/database.php

44 http://www.ifac.org/Downoads/TransationOfStandards.pdf


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Appnix 1 link twn th INTOSAI fnanta Aiting

Pincips (ISSAI 100-400) an th INTOSAI financia

Ait Giins (ISSAI 1000-2999)

1. This appendix is provided to reect the interrelation between the INTOSAI Fundamental Audit-

ing Principes and the Internationa Standards of Auditing as incuded in the INTOSAI Financia

Audit Guideines together with a Practice Note. The ink is presented with the starting point in

the INTOSAI Fundamenta Auditing principes. To each reevant topic or paragraph, in the Fun-

damenta Principes, where further guidance coud be found in an ISSAI incuded in the Financia

Audit Guideines, the reated ISA is presented with number and tite and a short description of the

context.

2. This ist is not intended to be a compete ist of a the paragraphs of the INTOSAI FundamentaPrinciples and the related ISSAIs. It is provided to present an overview of how the nancial audit

guidelines and the ISAs t into the INTOSAI structure.

ISSAI 100 basic Pincips in Govnnt Aiting

The Fundamental

Auditing Principles Related guidance in ISSAI 1000-2999

Genera ISSAI 1000 Introduction to the INTOSAI Financia Audit Guideines

General ISSAI 1200 Overall Objectives of the Independent Auditor and theConduct of an Audit in Accordance with Internationa

Standards on Auditing

8 11 ISSAI 1320 Materiaity in Panning and Performing an Audit

16 ISSAI 1500 Audit Evidence

ISSAI 1501 Audit Evidence- Specic Considerations for Selected

Items

31 ISSAI 1315 Identifying and Assessing the Risks of Materia Misstate-

ment through Understanding the Entity and Its Environ-

ment

ISSAI 1450 Evaluation of Misstatement Identied during the Audit


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ISSAI 200 General Standards in Government Auditing and Standards with Ethical Signicance

General Standards Related guidance in ISSAI 1000-2999

Genera ISSAI 1000 Introduction to the INTOSAI Financia Audit Guideines

Genera ISSAI 1220 Quaity Contro for an Audit of Financia Information

1.2.(d), 1.15 ISSAI 1300 Panning an Audit of Financia Statements

Standards with

Ethical Signifcance Related guidance in ISSAI 1000-2999

General ISSAI 1200 Overall Objectives of the Independent Auditor and the

Conduct of an Audit in Accordance with Internationa

Standards on AuditingGenera ISSAI 1210 Agreeing the Terms of Audit Engagements

2.34 Audit Opinion ISSAI 1700 Forming an Opinion and Reporting on Financia

Statements

2.35 43 ISSAI 1220 Quaity Contro for an Audit of Financia Statements

2.2.37 ISSAI 1520 Anaytica Procedures

Methodoogies ISSAI 1530 Audit Samping

ISSAI 1315 Identifying and Assessing the Risks of Materia

Misstatement through Understanding the Entity and

Its Environment

ISSAI 1450 Evaluation of Misstatements Identied during the Audit

2.41 Fraud ISSAI 1240 The Auditors Responsibiity Reating to Fraud in an Auditof Financia Statements.

2.2.43 45 ISSAI 1600 Specia Considerations- Audits of Group Financia State-

ments (Incuding the Work of Component Auditors)

ISSAI 1610 Using the Work of Interna Auditors

ISSAI 1620 Using the Work of an Auditors Expert

2.46 ISSAI 1230 Audit Documentation

Condentiality


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ISSAI 300 fi Stanas in Govnnt Aiting

Auditing Standards Related guidance in ISSAI 1000-2999

1.1 1.4. ISSAI 1300 Panning an Audit of Financia Statements

ISSAI 1315 Identifying and Assessing the Risks of Materia Misstatements

through Understanding the Entity and Its Environment

ISSAI 1320 Materiaity in Panning and Performing an Audit

ISSAI 1330 The Auditors Responses to Assessed Risks

2.1 2.5 ISSAI 1220 Quaity Contro for Audits of Financia Statements

3.1 3.4 ISSAI 1315 Identifying and Assessing the Risks of Materia Misstatements

Study and evauation through Understanding the Entity and Its Environment

of interna contro

ISSAI 1330 The Auditors Responses to Assessed Risks 4.1 4.7 ISSAI 1250 Considerations of laws and Reguations in an Audit of

Compiance with Financia Statements

appicabe aws

and reguations

ISSAI 1240 The Auditors Responsibiity Reating to Fraud in an Audit

of Financia Statements

5.2 Computer- ISSAI 1315 Identifying and Assessing the Risks of Materia Misstatements

based Systems through Understanding the Entity and Its Environment

ISSAI 1330 The Auditors Responses to Assessed Risks

5.3 Materiaity ISSAI 1320 Materiaity in Panning and Performing an Audit

5.1 5.7 ISSAI 1500 Audit EvidenceAudit evidence ISSAI 1501 Audit Evidence-Specic Considerations for Selected Items

ISSAI 1230 Audit Documentation

5.3 Techniques to ISSAI 1505 External Conrmations

Coect Audit Evidence

ISSAI 1510 Initia Audit Engagements Opening Baances

ISSAI 1520 Anaytica Procedures

ISSAI 1530 Audit Samping

ISSAI 1540 Auditing Accounting Estimates, Incuding Fair Vaue

Accounting Estimates and Reated Discosures

ISSAI 1550 Reated Parties

ISSAI 1560 Subsequent Events

ISSAI 1570 Going Concern

ISSAI 1580 Written Representations

6.1 6.4 Anaysis ISSAI 1520 Anaytica Procedures

of nancial statements


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ISSAI 400 rpoting Stanas in Govnnt Aiting

Related guidance in ISSAI 1000-2999

Genera Reporting ISSAI 1700 Forming an Opinion and Reporting on Financia

Statements

ISSAI 1705 Modications to the Opinion in the Independent

Auditors Report

ISSAI 1706 Emphasis of Matter Paragraphs and Other Matter

Paragraphs in the Independent Auditors Report

ISSAI 1260 Communication with Those Charged with Governance

ISSAI 1265 Communicating Deciencies in Internal Control to

Those Charged with Governance and Management

ISSAI 1800 Specia Considerations-Audits of Financia StatementsPrepared in Accordance with Specia Purpose Frameworks

ISSAI 1805 Specia Considerations-Audits of Singe Financia State-

ments and Specic Elements, Accounts or Items of a

Financia Statement

ISSAI 1810 Engagements to Report on Summary Financia Statements

4.3 Objectives ISSAI 1200 Overall Objectives of the Independent Auditor and the

Conduct of an Audit in Accordance with Internationa

Standards on Auditing

4.17 Interna Contro ISSAI 1315 Identifying and Assessing the Risks of Materia Misstate-

ments through Understanding the Entity and its Environ-

ment 4.17 Fraud ISSAI 1240 The Auditors Responsibiity Reating to Fraud in an Audit

of Financia Statements


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Appendix 2 ISSAIs, effective for audits of nancial statements for

pios ginning on o at dc 15, 2009

ISSAI No. Note Description

ISSAI 1000 *46 Genera Introduction to the INTOSAI Financia Audit Guideines

ISSAI 1003 ***47 Gossary of Terms to the INTOSAI Financia Audit Guideines

ISSAI 1200 **48 Overall Objectives of the Independent Auditor and the Conduct of an Audit in

Accordance with Internationa Standards of Auditing

ISSAI 1210 ** Agreeing the Terms of Audit Engagements

ISSAI 1220 ** Quaity Contro for an Audit of Financia Statements

ISSAI 1230 ** Audit Documentation

ISSAI 1240 ** The Auditors Responsibiity Reating to Fraud in an Audit of Financia State-

ments

ISSAI 1250 ** Considerations of laws and Reguations in an Audit of Financia Statements

ISSAI 1260 ** Communication with Those Charged with Governance

ISSAI 1265 ** Communicating Deciencies in Internal Control to Those Charged with Gover-

nance and Management

ISSAI 1300 ** Panning an Audit of Financia Statements

ISSAI 1315 ** Identifying and Assessing the Risks of Materia Misstatements through Under-

standing the Entity and Its Environment

ISSAI 1320 ** Materiaity in Panning and Performing an Audit

ISSAI 1330 ** The Auditors Responses to Assessed Risks

ISSAI 1402 ** Audit Considerations Reating to an Entity Using a Service Organization

ISSAI 1450 ** Evaluation of Misstatements Identied during the Audit

ISSAI 1500 ** Audit Evidence

ISSAI 1501 ** Audit Evidence Additional Considerations for Specic Items

ISSAI 1505 ** External Conrmations

ISSAI 1510 ** Initia Audit Engagements Opening Baances

ISSAI 1520 ** Anaytica Procedures

ISSAI 1530 ** Audit Samping

ISSAI 1540 ** Auditing Accounting Estimates, Incuding Fair Vaue Accounting Estimates,

and Reated Discosures

ISSAI 1550 ** Reated Parties

ISSAI 1560 ** Subsequent Events

ISSAI 1570 ** Going Concern

ISSAI 1580 ** Written Representations

46* These ISSAIs consist of INTOSAI deveoped guidance

47*** ISSAI 1003 wi incude a gossary issued by the IAASB and additiona expanations reevant for audits of pubic

sector entities.

48** These ISSAIs consist of the reevant Internationa Standard on Auditing and a Practice Note issued by INTOSAI.


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ISSAI 1600 ** Specia Considerations Audits of Group Financia Statements (Incuding the

Work of Component Auditors)

ISSAI 1610 ** Using the Work of Interna Auditors

ISSAI 1620 ** Using the Work of an Auditors Expert

ISSAI 1700 ** Forming an Opinion and Reporting on Financia Statements

ISSAI 1705 ** Modications to the Opinion in the Independent Auditors Report

ISSAI 1706 ** Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Indepen-

dent Auditors report

ISSAI 1710 ** Comparative Information Corresponding Figures and Comparative Financia

Statements

ISSAI 1720 ** The Auditors Responsibiities Reating to Other Information in Documents

Containing Audited Financia Statements

ISSAI 1800 ** Specia Considerations Audits of Financia Statements Prepared in Accor-

dance with Specia Purpose Frameworks

ISSAI 1805 ** Special Considerations Audits of Single Financial Statements and Specic

Eements, Accounts or Items of a Financia Statement

ISSAI 1810 ** Engagements to Report on Summary Financia Statements


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Appnix 3 Th Athoity Attach to th ISAs

Excerpt from ISA 200 (effective for periods beginning on or after December 15, 2009)

2. ISAs are written in the context of an audit of nancial statements by an auditor. They are to be

adapted as necessary in the circumstances when applied to audits of other historical nancial

information. ISAs do not address the responsibiities of the auditor that may exist in egisation,

reguation or otherwise in connection with, for exampe, the offering of securities to the pub-

ic. Such responsibiities may differ from those estabished in the ISAs. Accordingy, whie the

auditor may nd aspects of the ISAs helpful in such circumstances, it is the responsibility of the

auditor to ensure compiance with a reevant ega, reguatory or professiona obigations.

An Audit of Financia Statements

3. The purpose of an audit is to enhance the degree of condence of intended users in the nancial

statements. This is achieved by the expression of an opinion by the auditor on whether the nan-

cial statements are prepared, in all material respects, in accordance with an applicable nancial

reporting framework. In the case of most genera purpose frameworks, that opinion is on whether

the nancial statements are presented fairly, in all material respects, or give a true and fair view

in accordance with the framework. An audit conducted in accordance with ISAs and reevant

ethica requirements enabes the auditor to form that opinion. (Ref: Para. A1)

4. The nancial statements subject to audit are those of the entity, prepared by management of the

entity with oversight from those charged with governance. ISAs do not impose responsibiitieson management or those charged with governance and do not override aws and reguations that

govern their responsibiities. However, an audit in accordance with ISAs is conducted on the

premise that management and, where appropriate, those charged with governance have acknow-

edged certain responsibiities that are fundamenta to the conduct of the audit. The audit of the

nancial statements does not relieve management or those charged with governance of their

responsibiities. (Ref: Para. A2-A11)

5. As the basis for the auditors opinion, ISAs require the auditor to obtain reasonabe assurance

about whether the nancial statements as a whole are free from material misstatement, whether

due to fraud or error. Reasonabe assurance is a high eve of assurance. It is obtained when the

auditor has obtained sufcient appropriate audit evidence to reduce audit risk (that is, the risk

that the auditor expresses an inappropriate opinion when the nancial statements are materially

misstated) to an acceptaby ow eve. However, reasonabe assurance is not an absoute eve of

assurance, because there are inherent imitations of an audit which resut in most of the audit evi-

dence on which the auditor draws concusions and bases the auditors opinion being persuasive

rather than concusive. (Ref: Para. A28A52)

6. The concept of materiaity is appied by the auditor both in panning and performing the audit,

and in evaluating the effect of identied misstatements on the audit and of uncorrected misstate-

ments, if any, on the nancial statements49. In genera, misstatements, incuding omissions, are

49 ISA 320, Materiality in Planning and Performing an Audit and ISA 450, Evaluation of Misstatements Identied during the Audit.


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considered to be materia if, individuay or in the aggregate, they coud reasonaby be expected

to inuence the economic decisions of users taken on the basis of the nancial statements. Judg-

ments about materiaity are made in the ight of surrounding circumstances, and are affected by

the auditors perception of the nancial information needs of users of the nancial statements,

and by the size or nature of a misstatement, or a combination of both. The auditors opinion deas

with the nancial statements as a whole and therefore the auditor is not responsible for the detec-

tion of misstatements that are not material to the nancial statements as a whole.

7. The ISAs contain objectives, requirements and application and other explanatory material that are

designed to support the auditor in obtaining reasonabe assurance. The ISAs require that the audi-

tor exercise professional judgment and maintain professional skepticism throughout the planning

and performance of the audit and, among other things:

Identify and assess risks of material misstatement, whether due to fraud or error, based on an

understanding of the entity and its environment, incuding the entitys interna contro. Obtain sufcient appropriate audit evidence about whether material misstatements exist,

through designing and impementing appropriate responses to the assessed risks.

Form an opinion on the nancial statements based on conclusions drawn from the audit evi-

dence obtained.

8. The form of opinion expressed by the auditor will depend upon the applicable nancial reporting

framework and any appicabe aw or reguation. (Ref: Para. A12-A13)

9. The auditor may aso have certain other communication and reporting responsibiities to users,

management, those charged with governance, or parties outside the entity, in reation to matters

arising from the audit. These may be estabished by the ISAs or by appicabe aw or reguation50.

Effective Date

10. 10. This ISA is effective for audits of nancial statements for periods beginning on or after De-

cember 15, 2009.

Overall Objectives of the Auditor

11. In conducting an audit of nancial statements, the overall objectives of the auditor are:

(a) To obtain reasonable assurance about whether the nancial statements as a whole are free

from materia misstatement, whether due to fraud or error, thereby enabing the auditor to express

an opinion on whether the nancial statements are prepared, in all material respects, in accor-

dance with an applicable nancial reporting framework; and

(b) To report on the nancial statements, and communicate as required by the ISAs, in accor-

dance with the auditors ndings.

50 See, for exampe, ISA 260, Communication with Those Charged with Governance; and paragraph 43of ISA 240, The Auditors Responsibiities Reating to Fraud in

an Audit of Financia Statements.


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12. In all cases when reasonable assurance cannot be obtained and a qualied opinion in the auditors

report is insufcient in the circumstances for purposes of reporting to the intended users of the -

nancia statements, the ISAs require that the auditor discaim an opinion or withdraw (or resign)51

from the engagement, where withdrawa is possibe under appicabe aw or reguation.

Denitions

13. For purposes of the ISAs, the foowing terms have the meanings attributed beow:

(a) Applicable nancial reporting framework The nancial reporting framework adopted by

management and, where appropriate, those charged with governance in the preparation of the

nancial statements that is acceptable in view of the nature of the entity and the objective of

the nancial statements, or that is required by law or regulation.

The term fair presentation framework is used to refer to a nancial reporting framework thatrequires compiance with the requirements of the framework and:

(i) Acknowledges explicitly or implicitly that, to achieve fair presentation of the nancial

statements, it may be necessary for management to provide discosures beyond those spe-

cically required by the framework; or

(ii) Acknowedges expicity that it may be necessary for management to depart from a re-

quirement of the framework to achieve fair presentation of the nancial statements. Such

departures are expected to be necessary ony in extremey rare circumstances.

The term compliance framework is used to refer to a nancial reporting framework that

requires compiance with the requirements of the framework, but does not contain the acknow-

edgements in (i) or (ii) above.

(b) Audit evidence Information used by the auditor in arriving at the concusions on which the

auditors opinion is based. Audit evidence incudes both information contained in the ac-

counting records underlying the nancial statements and other information. For purposes of

the ISAs:

(i) Sufciency of audit evidence is the measure of the quantity of audit evidence. The quantity

of the audit evidence needed is affected by the auditors assessment of the risks of materia

misstatement and aso by the quaity of such audit evidence.

(ii) Appropriateness of audit evidence is the measure of the quaity of audit evidence; that is,

its reevance and its reiabiity in providing support for the concusions on which the audi-

tors opinion is based.

(c) Audit risk The risk that the auditor expresses an inappropriate audit opinion when the

nancial statements are materially misstated. Audit risk is a function of the risks of material

misstatement and detection risk.

(d) Auditor Auditor is used to refer to the person or persons conducting the audit, usuay

the engagement partner or other members of the engagement team, or, as appicabe, the

rm. Where an ISA expressly intends that a requirement or responsibility be fullled by the

51 In the ISAs, ony the term withdrawa is used.


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engagement partner, the term engagement partner rather than auditor is used. Engage-

ment partner and rm are to be read as referring to their public sector equivalents where

reevant.

(e) Detection risk The risk that the procedures performed by the auditor to reduce audit risk to

an acceptaby ow eve wi not detect a misstatement that exists and that coud be materia,

either individuay or when aggregated with other misstatements.

(f) Financial statements A structured representation of historical nancial information, includ-

ing reated notes, intended to communicate an entitys economic resources or obigations at a

point in time or the changes therein for a period of time in accordance with a nancial report-

ing framework. The related notes ordinarily comprise a summary of signicant accounting

policies and other explanatory information. The term nancial statements ordinarily refers

to a complete set of nancial statements as determined by the requirements of the applicablenancial reporting framework, but can also refer to a single nancial statement.

(g) Historical nancial information Information expressed in nancial terms in relation to a

particuar entity, derived primariy from that entitys accounting system, about economic

events occurring in past time periods or about economic conditions or circumstances at points

in time in the past.

(h) Management The person(s) with executive responsibiity for the conduct of the entitys

operations. For some entities in some jurisdictions, management includes some or all of those

charged with governance, for exampe, executive members of a governance board, or an

owner-manager.

(i) Misstatement A difference between the amount, classication, presentation, or disclosure of

a reported nancial statement item and the amount, classication, presentation, or disclosure

that is required for the item to be in accordance with the applicable nancial reporting frame-

work. Misstatements can arise from error or fraud. Where the auditor expresses an opinion

on whether the nancial statements are presented fairly, in all material respects, or give a

true and fair view, misstatements also include those a