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Compliance Auditing

The document discusses compliance auditing in the public sector. Compliance auditing involves monitoring whether public sector entities' activities are in accordance with relevant laws and regulations. It also involves determining if information related to a subject matter complies with criteria such as laws, directives, contracts, and agreements. The objective is to promote transparency, accountability, and good governance. Compliance audit reports can take different forms such as separate short or long-form reports, opinions on compliance, or reports on specific instances of non-compliance.

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Amir Usman
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203 views2 pages

Compliance Auditing

The document discusses compliance auditing in the public sector. Compliance auditing involves monitoring whether public sector entities' activities are in accordance with relevant laws and regulations. It also involves determining if information related to a subject matter complies with criteria such as laws, directives, contracts, and agreements. The objective is to promote transparency, accountability, and good governance. Compliance audit reports can take different forms such as separate short or long-form reports, opinions on compliance, or reports on specific instances of non-compliance.

Uploaded by

Amir Usman
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Compliance Auditing

The concept of compliance audit is encompassed by the description of the purpose of a public sector
audit as set out in INTOSAI's Lima Declaration: 'The concept and establishment of audit is inherent in
public financial administration as the management of public funds represents a trust. Audit is not an end
in itself but an indispensable part of a regulatory system whose aim is to reveal deviations from
accepted standards and violations of the principles of legality, efficiency, effectiveness and economy of
financial management early enough to make it possible to take corrective action in individual cases, to
make those accountable accept responsibility, to obtain compensation, or to take steps to prevent--or at
least render more difficult--such breaches.'

3. In the public sector, the concepts of transparency, accountability, stewardship and good governance
are basic and important principles. Laws and regulations may set out what activities public sector
entities are charged with carrying out for the citizens, any limits or restrictions on such activities, the
overall objectives to be achieved and how due process rights of individual citizens are protected.
Furthermore, public funds are entrusted to public sector entities for their proper management. It is the
responsibility of these public sector bodies and their appointed officials to be transparent about their
actions, accountable to the citizens for the funds with which they are entrusted, and to exercise good
stewardship over such funds.

4. The need to monitor that the activities of public sector entities are in accordance with the relevant
authorities that govern them, and that the due process rights of citizens are protected are important
public sector control functions. Through public sector auditing in general, and compliance auditing
specifically, public sector auditors help to monitor that the basic principles set out above are being
followed and put into operation. In the context of compliance auditing, this monitoring responsibility
includes determining whether information related to a particular subject matter is in compliance, in all
material respects, with relevant criteria such as relevant laws, regulations, directives, terms of contracts
and agreements, etc. The result of such monitoring is reported to the audited entity and the legislature.
In addition, the result is normally made available to the general public. This is done to support
accountability and transparency in the public sector.

ISSAI 4000

1. Compliance audit deals with the responsibility of the SAI to monitor that the activities of public sector
entities are in accordance with the relevant laws, regulations and authorities that govern such entities.
This involves reporting on the degree to which the audited entity is accountable for its actions and
exercises good public governance. More specifically, these elements may involve monitoring to what
extent the audited entity follows rules, laws and regulation, budgetary resolutions, policy, established
codes, or agreed upon terms, such as the terms of a contract or the terms of a funding agreement.
Compliance audit tasks performed by SAIs may cover a wide range of subject matters and may vary
widely on an international basis.

2. The objective, scope and nature of a particular compliance audit depends on a number of factors,
including the mandate and constitutional role of the SAI, as well as laws and regulations that are
relevant to the audited entity. However, in general, the objective of compliance auditing is to enable the
SAI to report to the appropriate bodies on the audited entity's compliance with a particular set of
criteria. Such criteria may include relevant financial reporting frameworks, laws, regulations,
parliamentary decisions, terms of contracts or agreements, or other criteria deemed by the auditor to
be suitable criteria.

5. Depending on the structure of the public sector and the mandate of the SAI, the Compliance Audit
Guidelines cover compliance audit at all levels of government: central, regional as well as local.
Furthermore, the guidelines may also be applied to audits of private entities when they are involved in
the management of public services, for instance through partnership arrangements or as recipients of
public grants or subsidies.

9. According to the Terms of Reference agreed upon at the ASC meeting in Budapest 10 October 2004,
the overall objective of the Working Group was to develop INTOSAI guidelines for compliance audit that
support the audit relating to prevention and detection of fraud, corruption and misuse of public funds,
and promote the development of good governance, and accountability and transparency in the public
sector.

15. Compliance audit reports may take different forms, such as:

a) Separate compliance audit reports which may be either short form or long form reports depending on
the needs of the users of the report

b) Opinions on compliance, which may be included in the auditor's report on the financial statements, or
in a separate report

c) Opinions stating whether transactions that have come to public sector auditors' attention in the
course of discharging other audit responsibilities were carried out in compliance with authorities,

d) Reports on specific instances of non-compliance,

e) Reports that no instances of non-compliance have come to the auditors' attention during the course
of the audit.

Related Complaince Audit:

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