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Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.4. Auditing Standards and Auditor Engagement
5.4.6. Selecting Auditors
5.4.6.1. Auditors for public sector
projects and public sector EAs may be drawn from commercial or state
audit practitioners. Government auditors will not be acceptable
for private sector projects and for public sector EAs of revenue-earning
entities, unless confirmed by ADB when a review of capacity, capability,
and ongoing performance has been conducted.
5.4.6.2. The EA, or its controlling
authority, is normally responsible for this selection and appointment,
except in cases where a government auditor is required by law to
provide the service. Therefore, where no auditor is currently engaged,
steps should be taken during project preparation to ensure that
the borrower will engage an auditor acceptable to ADB by the date
of loan signing or start up of the project.
5.4.6.3. Where an auditor is currently
engaged, staff should ensure that they carefully review the past
performances of the auditor with respect to the quality of reports
and opinions, and management letters. If the capabilities and capacity
of the auditor to perform to ADB-required standards would be questioned
by the appraisal mission, the borrower/EA should be advised as to
the possible deficiencies, and should be asked to convey these concerns
to the auditor.
5.4.6.4. In cases where the auditor
fails to respond to the concerns raised or the auditor is clearly
unacceptable to ADB, the borrower/EA should be advised that another
auditor be selected prior to loan signing.
5.4.6.5. When private or commercial
auditors are to be used, staff may, if requested, assist borrowers
to review the qualifications and experience of an auditor. For this
purpose, in order to form a judgment on their competence, it may
be necessary to visit the local offices of the auditors and request
samples of their previous or ongoing work, including typical audit
reports prepared by them.
5.4.6.6. Examination of data on auditors
submitted to ADB prior to their engagement by a borrower should
include the ability and track record of an auditor to meet the requirements
set out in the Handbook for Borrowers on the Financial Management
of Investment Projects Financed by the ADB. Borrowers should
be notified on the auditors who do not meet these criteria.
5.4.6.7. An auditor's engagement
should be kept under review to ensure consistent quality of performance,
including ability to adapt to changes in an entity's accounting
and general operations, and to adopt improved audit techniques.
For example, development of computerized accounting would require
complex and expensive auditing techniques. Auditors inexperienced
in this field may not be able to provide these services, or may
be constrained from appropriate expansion of services by an inadequate
audit fee. In such cases, inclusion of audit costs in the project
costs would be appropriate.
5.4.6.8. Borrowers should therefore
be encouraged to restrict audit engagements to relatively short-term
assignments.
5.4.6.9. It is common practice in
some countries to appoint the auditor each year. However, engagements
should normally be long enough to enable an auditor to become familiar
with the project or EA under audit and to permit efficient operation,
but short enough to facilitate a change of auditor, if necessary.
Engagements of 3 to 5 years are in the optimum range.
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5.4.5. Issues in Auditor Selection | Next
5.4.7. Terms of Reference for an Auditor |
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