Catalog

Audit Requirements – ADB Lending Operations¹

Executing Agency/Project Implementing Agency

1. For revenue generating projects, ADB requires a general purpose audit report covering the audited financial statements (AFS) for each executing agency and/or project implementation agency associated with the project, together with a management letter, by agency. The financial statements should be prepared and the audit conducted in accordance with accounting and auditing standards acceptable to ADB.²

Project Accounts

2. ADB requires a special purpose audit of project accounts. The engagement letter (issued by the EA/borrower to the external auditor) for the special purpose audit should lay down the coverage of the audit and nature of the audit opinion required including statements with respect to:

• scope of special purpose audit report and its use (including standards under which it was prepared) including period covered
• the accounting standards under which the financial statements were presented
• the standards under which the audit was conducted
• audit opinion covering current and cumulative project activity including how any outstanding audit observations have been dealt with
• compliance with financial covenants in the loan and project agreements
• the application of ADB’s funds and that they have been used for their intended purpose

In those cases where a management letter is not received for the entity as a whole, then a management letter covering internal controls, procedures associated with preparation of project accounts is required and should be submitted together with the audited project accounts (APA).

3. If a SOE and/or Imprest fund facility has been provided, the special purpose audit should include a separate opinion on (i) utilization of the imprest account; (ii) statement of expenditures including whether amount claimed was duly supported to the extent verified; and (iii) whether or not the EA was operating the imprest account in accordance with ADB's procedures.

Un-audited/Draft Financial statements

4. Submission of unaudited/draft financial statement may be requested but should not be used to determine compliance with loan and/or project agreement covenants.

Reporting Deadlines

5. Audited financial statements (for the EA, project accounts, and imprest fund as applicable) should be submitted to ADB not more than 6 months following the end of the fiscal year or project closing date (whichever is first). This reporting period could be extended to 9 months, for the following exceptions:

1. In cases of weak institutional capacity, submission of AFS/APA can be started at nine (9) months and later be reduced to six (6) months over the course of project implementation.
2. In cases of decentralization, the deadline could be extended up to nine (9) months if logistical considerations are such that they would impact the physical flow of information.

6. As State-Owned Enterprises (SOEs) are expected to behave as a corporate entity, and to operate on commercial principals, no exceptions beyond six (6) months should be considered for submission of audited financial statements and project accounts.

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