Seminar “Local Government Finance: Future Challenges” and the 2nd Annual Meeting of EUROSAI TFMA members

Belgrade, 6 November 2018

OVERVIEW OF METHODOLOGIES USED IN LOCAL GOVERNMENT AUDITING

Ivana Krmić

Tomislav Saić

State Audit Office of the Republic of Croatia

CONTENT

I PREFACE

II GENERAL INFORMATION

III FINANCIAL AUDITS IN LOCAL GOVERNMENTS

IV COMPLIANCE AUDITS IN LOCAL GOVERNMENTS

V PERFORMANCE AUDITS IN LOCAL GOVERNMENTS

VI CONCLUSION

I PREFACE (1)

I PREFACE (2)

• Strategic goal II – making the external municipal auditing system more efficient

• Activity 2.4.

• Activity 2.5.

• Out of 27 SAIs, 24 of them have provided us with the questionnaire

• Local government – public institution with legal personality, part of the state structure, below the level of central government and accountable to citizens

II GENERAL INFORMATION (1)Authoritative (national) standards for financial, compliance and performance audit based on international standards on auditing

II GENERAL INFORMATION (2)Internal regulation for carrying out financial, compliance and performance audit

II GENERAL INFORMATION (3)

• More than half (63 %) of SAIs do not use methodologies, process descriptions, handbooks, guidelines specifically tailored to local government audits

• Risk analysis to identify areas for auditing and up-to-date audit topics in the sphere of local government auditing

II GENERAL INFORMATION (4)

• Methods for obtaining evidence in compliance and performance audits in local governments (from the most important to lessimportant)• inspection• inquiry• substantive testing • analytical procedures • test of key controls • observation• re-calculation • re-performance • external confirmation • other

II GENERAL INFORMATION (5)

• International guidelines for local government auditing• monitoring/coverage of risks at local government level

• strategic research

• selecting audit sample

• monitoring how local government debts are reflected at national level

• inspection of local government budget creation process

• other

III FINANCIAL AUDITS IN LOCAL GOVERNMENTS (1)

IV COMPLIANCE AUDITS IN LOCAL GOVERNMENTS (1)

• Part of financial audit, combimed with performance audit, stand –alone audit

• Criteria used to choose local government for compliance and performance audit• risk analysis

• materiality (based on value)

• other

IV COMPLIANCE AUDITS IN LOCAL GOVERNMENTS (2)

• Criteria used in compliance audits of local government• primary legislation

• statutory instruments

• ministerial agreements

• generally accepted management principles

• accurate financial management

• code of ethics

• respecting internal acts by the auditee

• Suitability of criteria

V PERFORMANCE AUDITS IN LOCAL GOVERNMENTS (1)

• Stand – alone audit, part of another type of audit

• Limitations to choosing the subject matter

• Pre-study approach• a separate phase of the audit cycle

• synonymous with the audit planning phase

• included in the audit planning phase

• not recognised

• Audit objectives – an audit question

V PERFORMANCE AUDITS IN LOCAL GOVERNMENTS (2)

V PERFORMANCE AUDITS IN LOCAL GOVERNMENTS (3)

• Methodology of SAIs for performance audit follows ISSAI, but many SAIs do not have sufficiently defined criteria for performance auditing of local governments

• Three E

• Discussing the audit criteria

VI CONCLUSION

• Preliminary results of overview of methodologies used in local government auditing

• Complete analysis

• Identification areas where recommendations and/or end of 2018

guidelines on local government could be useful

Contact details

• Baiba Bebre, State Auditor – Lawyer, Baiba.Bebre@lrvk.gov.lv

• Oskars Erdmanis, Sector Head of the Fifth Audit Department, Oskars.Erdmanis@lrvk.gov.lv

• Tomislav Saić, Head of Regional Office, tomislav.saic@revizija.hr

• Ivana Krmić, Senior State Auditor, ivana.krmic@revizija.hr

• Roxana Seitan, External Public Auditor, roxana.seitan@rcc.ro

THANK YOU FOR YOUR ATTENTION!