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p. 106 of 203 BACK | NEXT Foreword 1. Introduction to the Guidelines 2. User Instructions 3. Preparing and Appraising Investment Project 4. Financial Management of Executing Agencies 5. Reporting and Auditing 5.1. Financial Reporting and Auditing Overview 5.2. Accounting Standards and Policies 5.3. Financial Reporting 5.4. Auditing Standards and Auditor Engagement 5.4.1 Introduction 5.4.2. ADB Requirements 5.4.3. Auditing Procedures 5.4.4. Auditor Selection and Appointment 5.4.5. Issues in Auditor Selection 5.4.6. Selecting Auditors 5.4.7. Terms of Reference for an Auditor 5.4.8. Contract or Engagement Letter of Auditor 5.4.9. International Standards on Auditing 5.4.10. Government Auditors 5.5. Reviewing Financial Reports 5.6. Reviewing Auditors' Reports 6. Financial Institutions 7. Knowledge Management

Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.4. Auditing Standards and Auditor Engagement

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5.4.10. Government Auditors

5.4.10.1. In some countries where projects are to be executed by government controlled/sponsored entities, statutory requirements may specify the use of the government auditor. Under such circumstances, ADB will continue to require that the auditor is independent and competent; that the auditor has the capacity and professional capability to provide audit reports and opinions of the quality required by ADB, and is generally acceptable to ADB. Normally, the independence of a government auditor would not be questioned if the auditor's position is established under constitutional or legal provisions designed to assure independence (e.g., by reporting directly to a legislature).

5.4.10.2. In circumstances where the government auditor is acceptable, but the auditor's report will be placed before a governing national assembly for approval (e.g., a Parliament), the borrower should provide ADB a draft of the report, certified by the Chief Financial Officer and the auditor, immediately on completion of the audit. As specified in the loan agreement, the approved version of the auditor's report should be submitted to ADB as soon as this becomes available.

5.4.10.3. Circumstances exist where government auditors are involved directly or indirectly in pre-expenditure and revenue collection decision-making-a status that compromises their independence. ADB then may seek to agree with a borrower either that auditor, or that ADB, will be provided with opinions and reports prepared by an independent private or commercial auditor in addition to the report of a government auditor. A government auditor who does not control, and is not under the control of the department or agency of government to be audited, and who is not involved in any aspects of its management, may in some instances be considered as independent.

5.4.10.4. Where ADB has doubts with respect to the auditor's independence and/or competence, ADB will seek an agreement with the borrower to have the government auditor subcontract the audit to an independent and competent private auditor to carry out the audit on their behalf. In appropriate circumstance, ADB could include this expenditure in the loan. In general, ADB requires that private auditors, using their experience in the use of ISAs, carry out the audit of a commercial or revenue-earning entity.

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