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Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.4. Auditing Standards and Auditor Engagement
5.4.5. Issues in Auditor Selection
5.4.5.1. The scope and detail of an
audit may also depend upon laws or regulations that may constrain
a government auditor from providing the depth of examination required
by ADB. For example, the following are unlikely to be acceptable
auditors for ADB lending operations: (i) a government auditor whose
staff may be required by laws or regulations to participate in the
processing of financial transactions, (ii) an auditor who acts for
an EA for the preparation of annual financial statements, or (iii)
an auditor who designs and constructs components of the EA's
financial management system. In each case, the financial analyst
must thoroughly review the circumstances and have adequate support,
if necessary, by seeking an independent opinion, for the exclusion
of the proposed auditor from doing the auditing assignment.
5.4.5.2. In certain instances, staff
constraints may cause the borrower and PIU to request an auditor
to compile part or all of the annual or supplementary financial
statements. Where this is necessary, to be eligible to carry out
the audit, the auditor should play no part in any aspect of the
decision making and/or management of the entity concerned, including
maintaining and finalizing accounting and financial reporting preparation
services for the current year of audit and at least the most recent
preceding fiscal year of the project. The extent of the auditor's
involvement in accounting should be discussed in the Management
Letter.
5.4.5.3. It is essential that auditors
are able to commence work at project start-up, and thereafter sufficiently
early in each fiscal year to complete the audit expeditiously after
the year-end; for example, the checking of stocks and balances at
critical times in a year may require the presence of an auditor
if a qualified report is to be avoided. Therefore, an auditor should
be appointed by the borrower before the beginning of each fiscal
year. The borrower will be expected to provide ADB with an assurance
that the initial auditor has been notified of ADB's requirements,
including the timing of the audit and issuance of the auditor's
report. In all cases, this will not be later than the starting date
of the project or the date of the ADB's Board approval to
the loan, whichever is the earlier. Financial analysts are also
encouraged to meet with the auditor at the first opportunity following
their appointment.
5.4.5.4. Where a government auditor
is to serve during execution and operation of a revenue-earning
project until the loan period expires, the borrower will be expected
to provide ADB with an assurance that the government auditor will
begin and complete the audit operations within the timetable required.
This timely appointment allows the auditor to carry out interim
audits, therefore reducing their work at the year-end to facilitate
timely reporting. Also, it allows the earlier identification of
possible errors and frauds and enables quicker corrective actions
where required.
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5.4.4. Auditor Selection and Appointment | Next
5.4.6. Selecting Auditors |
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