Supreme Audit Institutions (SAI) are national authorities responsible for auditing government revenues and spending. Along with the national parliaments, the SAIs act as an important pillar of prudent public financial management through their oversight and auditing functions. SAIs’ legal mandates and reporting relationships with the government and legislature vary, reflecting different governance systems and government policies.
The International Organisation of Supreme Audit Institutions (INTOSAI) brings together the SAIs of the world as an international organisation of external auditors of governments. Since its inception in 1953, the INTOSAI has succeeded in acting as a globally accepted platform for the exchange of expertise, ideas and best practices for its 194 members with different languages, cultures and an enriching wealth of experiences. Today the INTOSAI is recognised as a pioneer international body of government auditors and as a leading standard setter for government audit.
The standard setting structure of INTOSAI is primarily guided by the plurality of its membership and the INTOSAI principle of equality of SAIs and voluntary participation. True to its motto – Experientia Mutua Omnibus Prodest, i.e. mutual experience benefits all- the INTOSAI as a community draws upon the conceptual bases of government audit developed by its members who voluntarily participate in various sub committees, working groups, task forces and project groups to develop auditing standards and guidance.
With the establishment of the INTOSAI committees and working groups in mid 1980s work started on drafting of audit guidelines which contributed significantly to the development of INTOSAI as a standard setting body. Initially, these guidelines were issued as official INTOSAI documents. In 1989 the INTOSAI document called the “INTOSAI Guidelines” was adopted. A Handbook of Committees was adopted at in 1995 at the XV INCOSAI at Cairo which formally laid down INTOSAI’s criteria for drafting of the auditing guidelines.
Standard setting was established as one of INTOSAI’s main goals in its first Strategic Plan (2005-2010)1 , although the work of developing standards had started much earlier. The goal of professional standard setting was further supported by the goal of supporting SAIs in building their capabilities and professional capacity, and the goal of knowledge sharing and providing audit guidance material to the SAIs. Each of these strategic goals was steered by respective Goal Chairs2 – SAIs who provided leadership to the collective efforts of the INTOSAI to achieve the INTOSAI’s strategic goals.
These efforts culminated in one of the most significant developments that influence the work of SAIs globally, i.e. the introduction of the International Standards of Supreme Audit Institutions (ISSAI) framework in the XIX Congress in Mexico in 2007and already existing guidelines were included into the ISSAI framework. Over the next three years, work was done to further develop the framework. The ISSAI framework was formally adopted at the XX Congress in South Africa in 2010 as well as the due process for the development and approval of new standards was put in place. The introduction of the ISSAI framework displayed the organisation’s commitment to provide a professional framework of standards and guidelines for auditors across the world who faced similar challenges.
The ISSAI framework draws its strength from the fundamental principles that are embedded in the Lima (1977)3 and Mexico (2007)4 declarations of independence which codify the pillars of independent government auditing and the core principles of independence. After INCOSAI’s endorsement of the standards in 2010, the ISSAI Framework was developed quite comprehensively which included guidance on financial, compliance and performance auditing and could fairly be considered a first comprehensive set of standards for public-sector auditing.
Snapshot of the ISSAI Framework
The framework consisted of documents categorised in a hierarchy of four levels :
Level 1 - Founding Principles, which lay down the fundamental requirements for SAI to work independently and objectively.
Level 2 - Prerequisites for Functioning of SAIs, which provide core principles for achieving SAI independence, achieving value and benefits of SAIs, enhancing quality of their work and laying down the code of ethics for SAI staff.
Level 3 - Fundamental Auditing Principles, which lay down the conceptual framework for financial, compliance and performance auditing.
Level 4 - Auditing Guidelines, which provide guidance on the audit procedures and certain specific subjects to enable the SAI staff to conduct high quality audits.
Level 4 also consisted of a set of documents called the INTOSAI Govs which represented INTOSAI’s guidance on good governance and was mostly addressed to the external stakeholders, governments and audited entities.
Together, these represented the INTOSAI standards lending a credible base for a professional and high quality outputs of SAIs to be recognized as valuable contributors to the strengthening of governance and oversight.
The three Goal Chairs5 ,supported by their sub committees, working groups and task forces were instrumental in developing the standards and guidance which found place in the ISSAI framework.
Subsequent to the adoption of the ISSAI framework in 2010, the standard setting in INTOSAI grew in complexity due to a variety of documents being written as standards. The standard setting procedure which involved drafting of documents by the task forces and working groups under different Goal Chairs resulted in preponderance of such documents but without an agreed plan on how these documents would contribute in the shaping of the standards framework. Concerns were being raised regarding the actual implementation of the ISSAI framework by SAIs due to its extensive and varied nature.
An important feature of standard setting in INTOSAI is that it has sought to build on the existing standards that have been developed by other professional standard setters. This approach allowed the INTOSAI to focus its efforts and resources on issues that are specific to the public sector notably to clarify how public sector auditing differs from auditing in the private sector6 . The ISSAIs on financial auditing are a good example of this approach where the ISSAIs were built on the standards created by the International Federation of Accountants (IFAC). However, the Professional Standards Committee in its report7 to the Congress in 2013 stated that while this approach offers many advantages, it remains a key challenge for INTOSAI to build its own independent standard-setting capacity. Without sufficient independent standard-setting capacity, it is also difficult for INTOSAI to engage in cooperation with other standard-setters on an equal and mutual basis. In order to promote and safeguard public-sector auditing, INTOSAI must be able to develop and maintain clear and reliable standards in the key areas where SAIs have special needs, i.e. performance and compliance auditing.
It was evident from these developments that those in the INTOSAI community who were closely associated with the INTOSAI standard setting activities saw the challenges within the standard setting structure as it existed and realised the current practices involved in developing of standards, despite making a huge progress over a decade or more, could not be fully considered as sufficiently strong, to support INTOSAI’s intended status as an independent and internationally recognized standard setter.
As already mentioned above, the ISSAI framework since its endorsement in 2010 grew rapidly and the total volume of text within the ISSAI Framework spread over 93 pronouncements covering more than 3000 pages. One of the reasons for this voluminous growth could be attributed to the new documents being developed by the Goal Chairs under whom groups of SAIs worked on a voluntary basis to create new guidance materials, but not dedicating enough time and resources for maintaining and updating the existing texts. The inclusion of each new ISSAI in the ISSAI Framework triggered a need for additional resources in the INTOSAI community as such, as well as in the individual SAI that was considering whether and how to implement the new ISSAI.
Thus, a strong need was felt for recognising what would be mandatory standards that the SAIs should adopt in order to be ISSAI compliant, and for separating the standards from other pronouncements which provided guidance on implementing the standards.
Finally, there were changes in the external environment within which the SAIs were operating as new and emerging issues like sustainable development, cross boundary migrations, emergence of new and fragile states and so on became part of socio-economic and political policies of governments. These issues demanded attention and review by the INTOSAI as a community of professional public sector auditors to look deep into its standard setting process and assess whether the SAIs were being supported adequately and appropriately for them to engage themselves as external auditors looking into these newly emerging areas in a way that benefits the national governments and citizens.
The proposal to review the prevalent structure and practices for standard setting and the review of the ISSAI framework itself found a strong support during the Beijing Congress in 2013.
In 2014, the Professional Standards Committee (PSC) brought out an extensive report8 on evaluation of standard setting in the INTOSAI which recognised a number of challenges in the existing standard setting procedures of the INTOSAI.
These challenges emerged from the need for greater coordination and planning by all the Goal Chairs for development of the standards framework in a cohesive manner, need for a strong quality assurance of documents being issued as standards, need for an expanded resource base for competencies required for developing the standards, enhanced financial resources required for standard setting. These called for good strategies to be deployed to overcome these challenges such that there was a wider external recognition of the INTOSAI standards as the standards for public sector auditing.
The report of the PSC along with extensive discussions within the INTOSAI community and with the external partners of the INTOSAI have had the desired impact of bringing about positive changes in the INTOSAI’s standard setting process. Some of these transformational features are evident in the steps taken by the INTOSAI to revise the structure of the ISSAI Framework, which is now known as the INTOSAI Framework of Professional Pronouncements9 (IFPP) and contains clearly defined pronouncements as standards (mandatory) and guidance (non-mandatory) along with many other features. A revised Due Process has been put in place which clarifies the role of different players in the standard setting and introduces a permanent standard setting body of the INTOSAI10 . The INTOSAI has also introduced a Strategic Development Plan as a planning instrument that sets up a general strategy and a working plan for developing INTOSAI pronouncements.
Though the INTOSAI is a comparatively younger player in the arena of international standard setters considering that it started developing guidance documents only in the decade of eighties, the standards that have been developed by the INTOSAI have fundamentally influenced the work of the SAIs all over the world and have provided a definitive professional edge to the work of the SAIs as public sector auditors. The application of the INTOSAI standards help the SAIs enhance their credibility and quality of work, improve competence of the organisation and support in the capacity development and professionalisation of SAI staff.
The recognition to the INTOSAI as a standard setter, - which are aimed specifically at public sector auditing (even if one agrees that its principles are not fundamentally different from existing auditing standards) –rests in the fact that these standards have a stamp of legitimacy in the SAI community and can be easily adopted by the SAIs. The role of the INTOSAI as a standard setter has found recognition with the UN as well as amongst other international standard setters in the field of accounting and auditing.
Recognizing the importance given by SAIs and other stakeholders to the standards produced by INTOSAI, recent changes in INTOSAI Statutes (2016) mean that they now specifically define that one of the purposes of INTOSAI is to “set standards for public sector auditing”. Furthermore, the 2017-2022 INTOSAI Strategic Plan has as part of the organisation’s mission to “provide high quality auditing standards for the public sector”.
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