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Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.4. Auditing Standards and Auditor Engagement
5.4.7. Terms of Reference for an Auditor
5.4.7.1. ADB requires that the auditor's
opinion be of such scope and detail as ADB may reasonably request,
and requires that a TOR acceptable to ADB be prepared for each audit.
For different types of audits, the scope of the audit will vary
according to the nature of the implementing organization and type
of operation being audited. For example, the TOR for the audit of
a Financial Institution will require the auditor to pay particular
attention to the loan portfolio, while the area of greatest emphasis
for auditing of a public utility may be the accounting of its fixed
assets and its accounts receivable.
5.4.7.2. ISAs suggest that the auditor
determine the scope of the audit of financial statements in accordance
with the requirements of legislation, regulations, and generally
accepted auditing standards. The TOR must not restrict the auditor's
obligations with respect to the above. The auditor should not be
allowed to claim in the event of poor performance that the TOR prevented
performance with respect to statutory, regulatory, or professional
requirements.
5.4.7.3. However, the TOR provides
the opportunity for drawing special attention to areas of concern
that may not be covered or emphasized under a normal audit, such
as compliance with loan covenants; for example, a special review
of procurement documents. The TOR should always include in the scope
of the audit the requirement to give an opinion on any specific
items. A Management Letter will always be required.
Appointing an Auditor - Using the Model Terms of Reference
5.4.7.4. The Knowledge Management
section of these Guidelines provides a Model TOR for an auditor.
5.4.7.5. Whenever ADB wishes to approve
the TOR of an auditor to be engaged by a borrower or a project entity,
it is preferable that staff should remain independent of the drafting
thereof. Staff will hence be free to advise on the documentation
prepared by a borrower or EA. There is no objection, however, to
staff giving borrowers advice based on the model TOR.
5.4.7.6. The model should not be regarded
as universally applicable to audits of ADB projects or project entities.
Staff should select those components they consider appropriate for
a particular audit engagement, omit inappropriate items and add
relevant matters that are not in the model to develop a working
draft.
5.4.7.7. This model relates only to
the appointment of auditors to carry out an audit, as defined in
these Guidelines. The model is not intended for the appointment
of accountants for other forms of investigation, assessment, design
or installation of accounting or internal auditing systems.
5.4.7.8. The drafting of these TOR
should neither restrict an auditor's obligations with respect
to legislation, regulations, and generally accepted auditing standards,
nor give reasons for an auditor to claim that adherence to the TOR
prevented adequate statutory, regulatory or professional performance.
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5.4.6. Selecting Auditors | Next
5.4.8. Contract or Engagement Letter of Auditor |
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