General conditions Financial audit

2 Individual audit at engagement level

2.1 Introduction

To assess the adequacy of quality controls at individual engagement level the Peer Review team selected fourteen audits divided over the three types of audits financial audit, performance audit and special purpose audit. We reviewed eight financial audits, three performance audits and three special purpose audits. We performed the following activities for our assessment: • Assessment of the audit manual and guidelines; • Familiarisation with the performance of the audit by means of a presentation by the audit team to gain a brief overview of its audit activities, audit results and qual- ity control measures within the three main stages of the audit planning, fieldwork and reporting. • Interviews with the responsible audit team during and after the presentation. • A review of the audit files, selected key documents and translations to analyse per- formance in more detail. In the next section 2.2 we describe our findings concerning financial audit, followed by performance audit 2.3 and special purpose audit 3.4.

2.2 Financial audit

2.2.1 General conditions

Financial audit methodology To perform a financial audit in accordance with bpk ’s rules the auditor needs to be acquainted with: • State finance audit standard spkn; • Financial audit implementation guidelines; • Technical guidelines on audits of financial reports central government, ministries, government agencies and regional government. bpk ’s financial audit methodology complies with international standards issued by ifac , intosai and asosai. The manual follows the three steps of auditing planning, fieldwork and reporting; each step is worked out in detail. The planning phase is divided into 10 steps from understanding the audit objective and audit expectation to setting the audit programme and individual working programme. The field phase is divided into seven steps from analytical tests to reporting audit findings to the auditee. The reporting phase consists of five steps from compiling the draft audit report to reporting the audit result and compiling the final draft. Responsibilities, checks and balances All the actors’ responsibilities are clearly described. The right checks and balances are in place in the design. Supervision is part of the process and the files showed us that it is effective. Supervision is performed at different levels. Reviews are also performed by the actors that perform quality checks. Audit performance and documentation The audits performed comply with bpk ’s manual and guidelines. The elements of quality control as identified by bpk were all evident in the audit process. The following elements of quality control are in place: • clear rules; • mandate and individual engagement; • worked out working papers; • supervision and internal review; • communication of findings with the entity audited. The working papers we reviewed were sufficient to prepare the right audit activities. The files were also systematically structured and gave a good view of the audit procedures, the audit findings and evaluation of the findings. We found evidence of internal control activities, such as signatures of the reviewers during the successive steps of the audit performance. Professionals and knowledge The auditors involved in the selected audits showed good knowledge of their audit subject and objective. They followed internal guidelines and showed the documentation of the audit. They also took various update courses last year. Independence of auditors Measures are in place to ensure the auditors’ independence. Auditors are obliged to sign a form, for instance, declaring that they are independent. Besides these procedural controls, bpk also identifies risks concerning payments by the auditee to cover bpk ’s costs, such as transport and food costs, and takes action in such situations. Auditees are not allowed to pay bpk ’s audit costs.

2.2.2 Planning financial audit