basic.docx

basic.docx

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basic

TRAININGMATERIAL

BASICAUDITINGSTANDARDS

INTRODUCTION

TheAuditingStandardsoftheNationalAuditOfficeareprescribedinaccordancewiththeAuditLawofthePeople’sRepublicofChina.TheyrepresenttherequirementsoftheAuditor-GeneralinrelationtoallworkconductedbyAuditInstitutionsthroughouttheNation.

TogethertheStandardsprovideastatementofthelevelofprofessionalskillandpracticethattheAuditor-Generalexpectstobeappliedinallaudits.ThemainpurposeofsettingtheseAuditingStandardsistoensurethatallprofessionalworkisdonetoaconsistentlevelofqualityinAuditInstitutions.AnotherpurposeistoprovidepersonsandbodieswhoreceivethereportsoftheAuditInstitutionswithahighlevelofassuranceofthequalityoftheworkcarriedout.TheseusersofAuditInstitutionsreportscanthusrelyontheauditfindingsandopinionsexpressedinthosereports.

TheimplementationoftheStandardsistheresponsibilityofallemployeesoftheAuditInstitutions,includingofficersinexecutiveandmanagementpositions,auditdirectorsandteamleaders,aswellaseachmemberofauditteams.AuditInstitutionshavetheresponsibilitytoprovideallofficerswithappropriateguidanceonhowtoimplementtheStandards.ArrangementsshouldbemadetoconductappropriatetrainingforallemployeestoenablethemtomeettherequirementsoftheStandards.

AuditingStandardsdealwiththefollowingbroadsubjects:

∙ProfessionalandEthicalmatters;

∙Auditproceduresandmethods;

∙Auditreporting;and

∙AuditManagement.

QUALITYCONTROL

AuditInstitutionshaveaspecialresponsibilityfortheconductofreviewsofthequalityofauditworkconductedbyAuditInstitutionsatlowerlevelsofgovernment.Inthesereviews,AuditInstitutionsshouldpaycloseattentiontotheconductoftheauditworkandassesswhetheritisconductedinaccordancewiththeAuditingStandards.

GENERALPRINCIPLES

ThefirstsectionoftheBasicStandardsetsoutgeneralguidanceonthefollowingtopics:

∙TheneedforAuditInstitutionstoconductallactivitiesinaccordancewiththeAuditLaw;and

∙Themakingofauditevaluationsandconsequentsanctionsandpenalties.TheAuditingStandardsincludespecificregulationsdealingwiththemakingofsanctionsandpenalties.

GENERALSTANDARDS

ThissectionoftheAuditingStandardssetsoutanumberofqualificationsinrespectofAuditInstitutionsandtheirauditofficers.Therequirementsarestatedtobeessentialandauditsshouldnotbeconductedunlesstheyaremet.

TheprovisionsregardingAuditInstitutionsaresetatahighlevelandservetoremindtheAuditInstitutionsoftheirimportantposition.

IngeneraltermstheydrawattentiontothestatutorymandatesandlegislatedresponsibilitiesthatareastrongfeatureofthePRCAuditLawandshouldalsobereflectedinthelawsunderwhichAuditInstitutionsareestablishedatalllevelsofgovernment.

INDEPENDENTORGANIZATION

AnessentialprerequisiteisthattheAuditInstitutionshouldbeanindependentorganization.

TheessentialelementofthisrequirementisthatAuditInstitutionsshouldconducttheirworkindependently,accordingtotheprescribedstandardsandreachingtheirfindingsandconclusionsbasedonobjectiveauditwork.Theprincipalrequirementtomaintainindependenceshouldbemetthroughthisapproach.IndependencerelatestothemethodsbywhichtheAuditInstitutioncarriesoutitswork.Itisanimportantelementestablishingthecredibilityoftheresultsoftheauditsconducted.

FullindependenceoftheAuditInstitutionofallgovernmentinfluencesisnotnecessaryorlikelytobeachieved.AuditInstitutionsarepartofthepublicsector.Theirstructureandmanagementshouldaccordwithpublicsectorprinciples.Theyhaveaparttoplayinaddressingtheaccountabilityconcernsofthepublicsector,andneedtomaintainrelationshipswithotherbodiesthatsharetheseconcerns.

Structureandmanagement

AuditInstitutionshavenosourceofindependentfundingandareusuallysubstantiallydependentonthepublicbudgetsofthegovernmentstheyserve.Thismeansthattheyaresubjecttothenormalprocessesthatallgovernmentbodiesexperienceinobtainingresourcestoconducttheiractivities.Theycanexpect,forexample,toprovideexplanationstobudgetaryauthoritiesoftheirresourcerequirementsandtocomplywithrequestsforbudgetaryrestraints,ifany,thatareappliedtoallgovernmentbodies.

Similarly,AuditInstitutionsmayfindthattheyareexpectedtorecruitofficersforauditworkinthesamewayandsubjecttothesamerequirementsasothergovernmentbodies.Theymayfindthattheirabilitytodetermineappropriateclassificationsofpositionsandsalariesforofficersissubjecttorulesthatgenerallyapplytoallgovernmentbodies.

Asgovernmentbodies,AuditInstitutionsarealsosubjecttoallregulationsaffectingaccounting,purchasing,travelandotheractivities.

Theseelementsarepartoftheaccountabilitythatallgovernmentbodiesface,someduetoapositionofdependenceongovernmentbudgets.

TheexistenceoftheseaccountabilityrequirementsdoesnotrepresentreductionoftheindependencerequiredundertherelevantlawsandtheAuditingStandards.However,ifAuditInstitutionsconsiderthattheyarebeingsingledoutforspecialattentiontheyshouldconsiderwhetheranyspecificrestrictionscouldoperateasarestraintonindependence.

Relationswithotherbodies

AnimportantelementofindependenceistherighttodeterminetheprogramofauditcoverageperformedbyanAuditInstitution.MandatesexpressedintherelevantlawsshouldclearlystatethattheHeadofanAuditInstitutionhastherighttodeterminetheoverallauditprogram.Theheadshouldnotbesubjecttothedirectionofanyotherpersonorbodyintheexecutionofthisduty.

Asmentionedbefore,theAuditInstitutionisapartofthepublicsectorcommunity.Itshouldmaintainliaisonrelationshipswithotherpublicsectorbodies.InthisliaisonitistobeexpectedthattheAuditInstitutionswillbecomeawareofissuesofconcerntothesector.Theremaybematterssuchascorruptionandtheextensionofcomputeraccountingmethodsthatarewidelyapplicableandcouldbethesubjectofbroadgovernmentandcommunityconcern.Newgovernmentpoliciesmaybeintroducedthatreflecttheseconcerns.

ItcouldbeappropriatefortheHeadofanAuditInstitutiontorecognizetheseconcernsindevelopingtheprogramofauditactivityifthetopicsfallwithintheAuditMandate.

Inasimilarway,thereportsofAuditInstitutionsarereceivedandusedbygovernmentsandassemblies.ThesebodiesmayexpressinterestsinhavingtheHeadsofAuditInstitutionsexercisetheirmandatedpowersinrelationtoissuesandprogramsinwhichsomeareasofinterestorconcernexist.

Anotherpossiblesourceofrequestsforauditsliesinconcernsexpressedbymembersofthepublicorthroughthepress.

TheseareallinfluencesthattheHeadsofAuditInstitutionsmaytakeintoaccountwhendeterminingtheirannualauditprograms.TheultimateauthorityconcerningthecontentoftheprogrammustremainwiththeHeadsofAuditInstitutions.Ifindependenceismaintained,itisnotpossibleforanyexternalbodytodirectHeadsofAuditInstitutionsintheexerciseoftheirduties.TheHeadsofAuditInstitutionsmayindevelopingthetopicsofauditprojectstakeintoaccountanyconcernsaboutthebodiesandactivitiesthatfallwithintheAuditMandate.Theseconcernsmayarisefromvarioussources,includingpreviousauditsandprofessionalknowledgeofauditedbodies.Thesourcesalsoincludeideasandsuggestionsfromothergovernmentandexternalsources.

InsummaryAuditInstitutionsmustmaintainessentialindependenceintheoverallselectionoftheirprogramsofactivity,andintheprofessionalmethodsbywhichtheyconductauditprojects.Inallothermatters,itmaybequiteappropriateforAuditInstitutionstoreceiveinformationaboutpotentialauditsfromavarietyofsources.Ifconsideredofsufficientpriorityandsignificance,takingthisinformationintoaccountisnotusuallyseenasareductionofauditindependence.

AuditInstitutionsshouldaimatcreatingindependentorganizations,butthesemayalsoberesponsivetooutsidesuggestionsandconcerns.

AVAILABILITYOFFUNDS

TheBasicAuditingStandardrequiresAuditInstitutionstoensurethattheyhavefundsavailablepriortocommencingaudits.Asmentionedabove,itisusuallynecessaryforAuditInstitutionstoensurethattheyfullyparticipateingovernmentbudgetprocessestoacquiretheresourcesneededtocarryouttheAuditMandatespecifiedintherelevantlaws.

AuditInstitutionsshouldadoptinternalbudgetaryproceduresthatenablecontrolofthecostsofoperationandthecostsofperformingauditprojects.

THEAUDITMANDATE

AstatutorymandateisalegalexpressionofthepowersoftheAuditInstitutionandthegeneralscopeofitswork.SuchamandateisessentialtoprovideAuditInstitutionswithafirmfoundationfortheirwork.AmandateexpressestheareaofactivitywhereanAuditInstitutionhasauthoritytoconductaudits.ItalsoexpressestheexpectationofthelegislatorsoftheworkofauditingtobeconductedbyAuditInstitutionsestablishedunderthelaws.

TheauditmandateofAuditInstitutionscanbesummarizedasfollows.TheInstitutionsshouldhaveauthoritytoconductauditsin:

∙Variousdepartmentsofthepeople'sgovernmentattheirownlevelandthepeople'sgovernmentsatlowerlevels;

∙Statebankinginstitutions;

∙Enterprises,undertakingsandcapitalconstructionsunitsundertheownershipofthewholepeople;

∙Otherunitsreceivingstatefinancialappropriationsorsubsidi