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Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.4. Auditing Standards and Auditor Engagement
5.4.4. Auditor Selection and Appointment
5.4.4.1. Legal and professional requirements
will normally determine the scope and depth of an audit examination,
but these may also be supplemented by client instructions in the
form of a TOR. These instructions would usually extend an audit's
scope and detail, but they may restrict an auditor's activities
rendering them unacceptable. Care should be taken when framing a
request for additional work from an auditor.
5.4.4.2. Borrowers should be asked
to remove unacceptable restrictions, or otherwise arrange for an
acceptable audit to be carried out. A borrower is responsible for
the selection, appointment, and performance of an auditor. ADB wishes
to be informed by a borrower of an ongoing or proposed appointment
of an auditor, who should meet the required standards in terms of
independence, experience, and competence. More specifically, ADB
should indicate the acceptability of an auditor in the form of a
“no objection” provided that actual or proposed auditors
satisfy the following criteria:
- They
must be impartial and independent of the management of the entity
to be audited, and of the person appointing them. In particular,
the auditors should not otherwise be employed by, serve as directors
for, or have any financial or close business relationship with
the entity during the period covered by the audit.
- They
must be well-established and reputable using procedures and methods
that conform to ISAs or INTOSAI auditing standards, and employ
adequate staff with the skills and competence required for their
responsibilities.
- They
must be able to demonstrate experience in auditing the accounts
of projects or entities comparable in nature, size, and complexity
to the assignments they are to undertake (specialized auditing
experience, obtainable only from external sources, may be necessary
for some projects).
- The
audit work should be assigned to personnel who have the professional
and technical training and proficiency required in the circumstances.
5.4.4.3.
ADB requires that the borrower and
the project implementing entity select and appoint an auditor acceptable
to ADB within sufficient time to carry out its responsibilities,
including a review of the financial management systems at the beginning
of project implementation, and periodically thereafter.
5.4.4.4. ADB does not normally advise
on the selection of auditors, but prefers to review a list of several
auditors submitted from whom an appointment will be made by the
borrower, and indicating any auditor who may not meet ADB's
criteria. ADB will indicate its agreement to a proposal to engage
an auditor when it is satisfied that an existing auditor, or the
auditor under consideration for engagement, would be acceptable
to ADB in terms of independence and competence to carry out the
audit.
5.4.4.5. Many prospective borrowers
and EAs have ongoing audit arrangements. In other cases, borrowers
initiate audit engagements at the start of a project. Whenever an
auditor is to be appointed by a borrower, or the auditor is a statutory
appointee, ADB may seek information to be satisfied regarding independence
and experience of the proposed auditor. To ascertain acceptability,
ADB routinely seeks information to be satisfied on the independence
and competence of the proposed auditor. The required information
includes: (i) the name of the auditor; (ii) the names, qualifications,
and experience of the principals and managers; (iii) the approximate
number of professional staff employed; (iv) a listing of some of
the main audits currently and previously carried out by the auditor;
and (v) a statement of the independence of the firm of auditors
vis-à-vis the entity it is proposed to audit.
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5.4.3. Auditing Procedures | Next
5.4.5. Issues in Auditor Selection |
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