Application of international auditing standards (ISA and ISSAI) to increase efficiency and effectiveness of external public sector auditing

Dr Duko njegota, Auditor General of the Supreme Office for Republika Srpska Public Sector Auditing
The authors views expressed in this presentation do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

Law on Public Sector Auditing of Republika Srpska (RS), 2005 Auditor General and his deputy are responsible to ensure that the functions of the SAI are performed independently, impartially, and in accordance with INTOSAI auditing standards, IFAC-auditing standards, and standards of Republika Srpska; According to the Law on Accounting and Auditing of Republika Srpska, the international auditing standards (ISA) are applied in Republika Srpska.

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What international accounting and auditing standards are applied in Republika Srpska? INTOSAI auditing standards International auditing standards (ISA) International public sector accounting standards (IPSAS) International accounting standards (IAS) International financial reporting standards (IFRS) International financial reporting standards for SMEs (IFRS for SMEs)

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ISSAI framework of auditing standards

Includes 4 levels of standards, principles essential for public sector auditing prescribed by the Law: Level 1: Basic principles Level 2: Preconditions for functioning of SAIs Level 3: Basic principles of auditing, and Level 4: Auditing guidelines In the field of financial auditing, the level 4 encompasses ISA standards established by IFAC, and guidelines for application of such standards by SAIs.

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Basic info on the Supreme Office for Republika Srpska Public Sector Auditing (SAI RS) Established in 1999 Its mandate is to perform financial and performance audits Performance audits are done within financial auditing, especially in relation to the requirement of ISA 250 Currently employs 50 auditors out of which 10 work in the performance audit division Performance audits have been done since 2006

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Subject of auditing by SAI RS Mandatory financial auditing of Republika Srpska budget beneficiaries Financial auditing of the part of local self-government units is performed every year Every one of the total of 63 local self-government units has on average been subject to financial auditing 2 or 3 times SAI RS has the mandate to perform auditing of public enterprises and public institutions. This is performed occasionally, depending on available
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What has the practice of applying international accounting and auditing standards shown so far? High level of adjustment between domestic and international legislations; Confirmed in official evaluations by international institutions such as European Commission, World Bank, IMF, IFAC, SNAO, SIGMA etc.; Established relatively efficient legal and professional frameworks that can ensure capability of domestic stakeholders to successfully monitor change and respond to challenges.
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Impact of economic and financial crisis on adoption and further development of good practice Relatively high Causes restrictions in financial and human resources Slows down the development of individual processes essential for the quality of external auditing by SAI RS, such as further development of treasury operations, introduction of full accounting basis for budget accounting, effective connection between government financial statistics (GFS) and national accounting statistics (per ESA 95 methodology) etc.
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Key recommendations

Consistent application of internationally recognized accounting and auditing methodologies is essential for establishing and maintaining of transparent system of public funds management in Republika Srpska and in Bosnia and Herzegovina; Complete and updated adjustment of methodology applicable in local conditions to internationally accepted methodologies is by all means a process that has to go on continuously; Full respect for specificities of local economic and other circumstances is necessary.
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Key messages Efficiency and effectiveness of public sector external auditing that SAIs are in charge of largely depends on the level of application of ISSAI framework Consistent application of ISSAI framework enables clear positioning of SAIs and the public recognition of their actual role and importance All this is especially significant for clear and proper definition of the role of each SAI in prevention and in other types of fight against crime and corruption

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Some of the key challenges for SAI of RS Prompt application of ISSAI framework; Keeping independence of SAI RS as one of the fundamental principles for its effective and efficient work; Ensuring of effective and efficient system of external control of the quality of work of SAI RS; Increase functionality of the system of internal control and quality, both at the level of SAI RS and at the level of each individual auditing engagement; Further improvement of international cooperation; Professional development and stronger application of IT in auditing.
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THANK YOU FOR YOUR ATTENTION

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