PI-30. EXTERNAL AUDIT
ABOUT THE INDICATOR
This indicator examines the characteristics of external audit. It contains the following four dimensions and uses the M1 (WL) method for aggregating dimension scores:
- Dimension 30.1. Audit coverage and standards
- Dimension 30.2. Submission of audit reports to the legislature
- Dimension 30.3. External audit follow-up
- Dimension 30.4. Supreme Audit Institution independence
IMPACT ON BUDGETARY OUTCOMES
Reliable and extensive external audit is an essential requirement for ensuring accountability and creating transparency in the use of public funds. Such an audit provides assurance that information in financial reports is accurate and contains no material errors that would affect the reports’ interpretation. This helps to ensure budget outcomes by giving stakeholders an accurate picture of financial results.
INDICATOR MEASUREMENT GUIDANCE
30:1. The first three dimensions of this indicator focus on audit of the government’s annual financial reports. The indicator does not consider other reports, analysis or assessments that may be performed by the external auditor. Inclusion of certain aspects of a performance audit would also be expected of an audit function, but this is covered in dimension 8.4.
30:2. As mentioned under PI:29.2.3, when there is no external audit, the government’s annual financial statements should be submitted directly to the legislature (which may then choose to seek an external audit, see PI-31). If the government does not submit its statements to the legislature, then the score for PI-29.2 is D. In this case, the score for PI-30 is also D.
Dimension 30.1. Audit coverage and standards
DIMENSION MEASUREMENT GUIDANCE
30.1:1. This dimension assesses key elements of external audit in terms of the scope and coverage of audit, as well as adherence to auditing standards. The scope of audit indicates the entities and sources of funds that are audited12 in any given year and should include extrabudgetary funds and social.
Dimension 30.1. Scoring
|Score||Minimum requirements for scores|
|A||Financial reports including revenue, expenditure, assets, and liabilities of all central government entities have been audited using ISSAIs or consistent national auditing standards during the last three completed fiscal years. The audits have highlighted any relevant material issues and systemic and control risks.|
|B||Financial reports of central government entities representing most total expenditures and revenues have been audited using ISSAIs or national auditing standards during the last three completed fiscal years. The audits have highlighted any relevant material issues and systemic and control risks.|
|C||Financial reports of central government entities representing the majority of total expenditures and revenues have been audited, using ISSAIs or national auditing standards during the last three completed fiscal years. The audits have highlighted any relevant significant issues.|
|D||Performance is less than required for a C score.|
12 I.e., fall within the implementation of the overall risk-based audit plan of the external auditor for the given year, regardless of whether or not the plan requires substantive audit work to be carried out on that entity/fund.
Pillar Seven: External Scrutiny and Audit