Professional Documents
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Topic 5 Overvier of Forensic Accounting
Topic 5 Overvier of Forensic Accounting
What is forensic accounting? Why should companies investigating fraud within their
organisations
engage a forensic accountant?
The use of accounting skills to investigate fraud or embezzlement and to analyze financial
information for use in legal proceedings
Forensic accounting in its present state can be broadly classified into two categories
encompassing
litigation support and investigative accounting.
Forensic accounting is the specialty area of the accountancy profession which describes
engagements that result from actual or anticipated disputes or litigation. „Forensic" means
suitable for use in a court of law" and it is to that standard and potential outcome that forensic
accountants generally have to work. It is often said „Accountants look at the numbers but
Forensic accountants look behind the numbers. Forensic accountants are trained to look
beyond the numbers and deal with the business realities of the situation. Analysis,
interpretation, summarization and presentation of complex financial and business related
issues are prominent features of the profession Bhasin 2007.
1. Business valuations
2. Divorce proceedings and matrimonial disputes
3. Personal injury and fatal accident claims
4. Professional negligence
5. Insurance claims evaluations
6. Arbitration
7. Partnership and corporation disputes
8. Shareholder disputes (minority shareholders claiming
9. Civil and criminal actions concerning fraud and financial irregularities - cross
examination, formulate questions
10. Fraud and white-collar crime investigations
Forensic accountants are engaged by both government and private agencies cutting across
industries ranging from insurance companies, banks, police forces, regulatory agencies and
other financial and business organizations.
The services rendered by forensic accountants cover a wide spectrum of which the following
are commonly provided:
To properly carry out these functions, the forensic accountant must also be familiar with legal
concepts and procedures, including the ability to differentiate between substance and form
when struggling with any issue.
The forensic accountant can provide more specific assistance in the following ways.
Investigative accounting
A logical question to pose is why bring in a forensic accountant and his team when the
organisation's internal auditor and management team can handle the situation which can
range from a simple employee fraud to a more complex situation involving management
itself? The answer would be ' obvious when management itself is involved and the fallout to
the discovery of the fraud leads to low employee morale, adverse public opinion and
perception of the company's image and organisational disorganization generally. Engaging an
external party can have distinct advantages from conducting an internal investigation.
1. Objectivity and credibility - there is little doubt that an external party would be far
more independent and objective than an internal auditor or company accountant who
ultimately reports to management on his findings. An established firm of forensic
accountants and its team would also have credibility stemming from the firm's
reputation, network and track record.
2. Accounting expertise and industry knowledge - an external forensic accountant would
add to the organisation's investigation team with breadth and depth of experience and
deep industry expertise in handling frauds of the nature encountered by the
organisation.
3. Provision of valuable manpower resources - an organisation in the midst of
reorganisation and restructuring following a major fraud would hardly have the full-
time resources to handle a broad-based exhaustive investigation. The forensic
accountant and his team of assistants would provide the much needed experienced
resources, thereby freeing the organisation's staff for other more immediate
(iii)Fraud Investigations
Forensic accountants might be called upon to assist in business investigations
which could involve funds tracing, asset identification and recovery, forensic
intelligence gathering and due diligence review. In cases involving fraud
perpetrated by an employee, the forensic accountant will be required to give his/her
expert opinion about the nature and extent of fraud and the likely individual or
group of individuals who have committed the crime. The forensic expert
undertakes a detailed review of the available documentary evidence and forms
his/her opinion based on the information gleaned during the course of that review.
2. Ability to grasp internal control systems of the client and to set up a system that
achieves management objectives informs employees of their control responsibility
and monitors the quality of program and changes made to them. ‘
6. Thorough insight and knowledge into company's governance policies and laws that
regulate these policies.
8. Command of criminal and civil laws, legal system and court procedures.
3. A "sixth" sense that can be used to reconstruct details of past accounting transactions
is also beneficial.
4. A photographic memory that helps when trying to visualize and reconstruct these
past events.
7. Ability to maintain his composure when detailing these events on the witness stand.
1. Lawyers;
2. Police Forces;
3. Insurance Companies;
4. Government Regulatory Bodies and Agencies;
5. Banks;
6. Courts; and
7. Business Community.
Fraud is quite common in big organizations where the number of daily financial
transactions is huge. In such an environment, an employee can easily undertake fraudulent
activities without being caught. Forensic accounting helps in analyzing whether the
company's accounting policies are followed or not, and whether all the transactions are
clearly stated in the books of accounts. Any deviation observed in the books of accounts
can help in identifying fraud, and necessary measures can be taken to prevent it in the
future.
Various cases of fraud that becomes evident after forensic analysis act as a reference for
the government to formulate improved economic policies that would be able to curb such
fraudulent activities in the future. By doing so, the government can strengthen the
economy and prevent such illegal activities in the country.
1) Confidentiality Issue
Forensic accounting can be an expensive affair because the procedures which accountants
use involve high-end accounting software. If study results have to be presented in a trial,
the overall expenditure goes up even further, because the fees of forensic accountants are
quite high. This can be a matter of concern for the organization.
It is quite obvious for employees to feel offended when they come to know that their job is
under scrutiny by a third person. If no fraud is identified, employees are left with the
feeling that the employer does not have faith in them. Lost trust can be difficult to regain
in such cases.
Federal regulations limit the use of services from a single accounting firm. Suppose a
company has tied up with one firm for auditing, it cannot ask the firm to provide other
services to it. Therefore, a company has to reach out to several firms for carrying out its
accounting tasks.
Despite the disadvantages associated with forensic accounting, it is, and will continue to
be an important part in the world of business. This is because it helps organizations and
individuals to figure out whether their financial accounts are accurate or fabricated to hide
illegal activities going on within the organization.
The forensic accountant could be asked to investigate many different types of fraud. It is
useful to categorize these types into three groups to provide an overview of the wide range
of investigations that could be carried out. The three categories of frauds are corruption,
asset misappropriation and financial statement fraud
Corruption
There are three types of corruption fraud: conflicts of interest, bribery, and extortion.
Research shows that corruption is involved in around one third of all frauds.
Bribery is when money (or something else of value) is offered in order to influence
a situation.
Extortion is the opposite of bribery, and happens when money is demanded (rather
than offered) in order to secure a particular outcome.
Asset misappropriation
By far the most common frauds are those involving asset misappropriation, and
there are many different types of fraud which fall into this category: The common
feature is the theft of cash or other assets from the company, for example:
Cash theft - the stealing of physical cash, for example petty cash, from the
premises of a company.
Misuse of assets - employees using company assets for their own personal
interest. Financial statement fraud
CONDUCTING AN INVESTIGATION
The process of conducting a forensic investigation is, in many ways, similar to the process
of conducting an audit, but with some additional considerations. The various stages are
briefly described below.
The forensic accountant must initially consider whether their firm has the necessary skills
and experience to accept the work. Forensic investigations are specialist in nature, and the
work requires detailed knowledge of fraud investigation techniques and the legal
framework. Investigators must also have received training in interview and interrogation
techniques, and in how to maintain the safe custody of evidence gathered.
The investigating team must carefully consider what they have been asked to achieve and
plan their work accordingly. The objectives of the investigation will include:
identifying the type of fraud that has been operating, how long it has been
operating for, and how the fraud has been concealed
identifying the fraudster(s) involved
quantifying the financial loss suffered by the client
gathering evidence to be used in court proceedings
Providing advice to prevent the reoccurrence of the fraud.
Gathering evidence
In order to gather detailed evidence, the investigator must understand the specific type of
fraud that has been carried out, and how the fraud has been committed. The evidence
should be sufficient to ultimately prove the identity of the fraudster(s), the mechanics of
the fraud scheme, and the amount of financial loss suffered. It is important that the
investigating team is skilled in collecting evidence that can be used in a court case, and in
keeping a clear chain of custody until the evidence is presented in court.
If any evidence is inconclusive or there are gaps in the chain of custody, then the evidence
may be challenged in court, or even become inadmissible. Investigators must be alert to
documents being falsified, damaged or destroyed by the suspect(s).
testing controls to gather evidence which identifies the weaknesses, which allowed
the fraud to be perpetrated
using analytical procedures to compare trends over time or to provide comparatives
between different segments of the business
applying computer assisted audit techniques, for example to identify the timing and
location of relevant details being altered in the computer system
discussions and interviews with employees
Substantive techniques such as reconciliations, cash counts and reviews of
documentation.
The ultimate goal of the forensic investigation team is to obtain a confession by the
fraudster, if a fraud did actually occur. For this reason, the investigators are likely to avoid
deliberately confronting the alleged fraudster(s) until they have gathered sufficient
evidence to extract a confession. The interview with the suspect is a crucial part of
evidence gathered during the investigation.
Reporting
The client will expect a report containing the findings of the investigation, including a
summary of evidence and a conclusion as to the amount of loss suffered as a result of the
fraud. The report will also discuss how the fraudster set up the fraud scheme, and which
controls, if any, were circumvented. It is also likely that the investigative team will
recommend improvements to controls within the organisation to prevent any similar frauds
occurring in the future.
1. Implement internal controls to reduce fraud risk: Many businesses depend on one
person to process payments and invoices, make bank deposits, handle petty cash, and
reconcile bank statements. This is asking for trouble. Your business should implement
a system that spreads and, if possible, rotates the financial duties of the business
among two or more employees. Insist that all employees, especially those with
financial responsibilities, take a mandatory vacation of at least one week of
consecutive days.
2. Tone at the Top: An effective way to prevent fraud in your business is to create a
positive work culture. It is important that the business owner and senior management
serve as role models of honesty and integrity. Set clear standards example zero
tolerance policy for fraud.
Whistle blower: Every company should establish a system that makes it easy for employees,
vendors and customers to anonymously report suspected fraud activities.
Usually in any typical fraud investigation, the forensic accountant and his team would
encounter similar factual scenarios or frauds, which are not peculiar to any organisation. The
more common types are illustrated in the following table:
1. The public-sector audit environment is that in which governments and other public-sector
entities exercise responsibility for the use of resources derived from taxation and other
sources in the delivery of services to citizens and other recipients. These entities are
accountable for their management and performance, and for the use of resources, both to
those that provide the resources and to those, who depend on the services delivered using
those resources, for example citizens, Public-sector auditing helps to create suitable
conditions and reinforce the expectation that public-sector entities and public servants
will perform their functions effectively, efficiently, ethically and in accordance with the
applicable laws and regulations.
1. Providing the intended users with independent, objective and reliable information,
conclusions or opinions based on sufficient and appropriate evidence relating to public
entities;
3. Reinforcing the effectiveness of those bodies within the constitutional arrangement that
exercise general monitoring and corrective functions over government, and those
responsible for the management of publicly-funded activities;
In general, public-sector audits can be categorized into three main types: audits of financial
statements, performance audits and audits of compliance with authorities.
All public-sector audits have the same basic elements: the auditor, the responsible party,
intended users (the three parties to the audit), the subject matter and the criteria for assessing the
subject matter.
1. The auditor: In public-sector auditing the role of auditor is fulfilled by the Head of the
SA1 and by persons to whom the task of conducting the audits is delegated. The overall
responsibility for public-sector auditing remains as defined by the SAI's mandate.
2. The responsible party: In public-sector auditing the relevant responsibilities are
determined by constitutional or legislative arrangement. The responsible parties may be
responsible for managing the subject matter or for addressing recommendations, and may
be individuals or organizations.
3. Intended users: The individuals, organizations or classes thereof for whom the auditor
prepares the audit report. The intended users may be legislative or oversight bodies, those
charged with governance or the general public.
Types of engagement
In attestation engagements the responsible party measures the subject matter against the
criteria and presents the subject matter information, on which the auditor then gathers
sufficient and appropriate audit evidence to provide a reasonable basis for expressing an
opinion on the reasonableness of a certain assertion.
In direct reporting engagements it is the auditor who measures or evaluates the subject
matter against the criteria. The auditor selects the subject matter and criteria, taking into
consideration risk and materiality. The outcome of measuring the subject matter against
the criteria is presented in the audit report in the form of findings, conclusions,
recommendations or an opinion. The audit of the subject matter may also provide new
information, analyses or insights.
The Intended users will wish to be confident about the reliability and relevance of the
information which they use as the basis for taking decisions. Audits therefore provide
information based on sufficient and appropriate evidence, and auditors should perform
procedures to reduce or manage the risk of reaching inappropriate conclusions. The level of
assurance that can be provided to the intended user should be communicated in a transparent
way. Due to inherent limitations, however, audits can never provide absolute assurance.
Through opinions and conclusions which explicitly convey the level of assurance. This
applies to ah attestation engagements and certain direct reporting engagements.
In other forms in some direct reporting engagements the auditor does not give an explicit
statement of assurance on the subject matter. In such cases the auditor provides the users
with the necessary degree of confidence by explicitly explaining how findings, criteria
and conclusions were developed in a balanced and reasoned manner, and why the
combinations of findings and criteria result in a certain overall conclusion or
recommendation.
Levels of assurance
Assurance can be either reasonable or limited. Reasonable assurance is high but net absolute.
The audit conclusion is expressed positively, conveying that, in the auditor's opinion, the subject
matter is or is not compliant in all material respects, or, where relevant, that the subject matter
information provides a true and fair view, in accordance with the applicable criteria.
When providing limited assurance, the audit conclusion states that, based on the procedures
performed, nothing has come to the auditor's attention to cause the auditor to believe that the
subject matter is not in compliance with the applicable criteria. The procedures performed in a
limited assurance audit are limited compared with what is necessary to obtain reasonable
assurance, but the level of assurance is expected, in the auditor's professional judgement, to be
meaningful to the intended users. A limited assurance report conveys the limited nature of the
assurance provided.
General principles
1. Ethics and independence- Auditors should comply with the relevant ethical requirements
and be independent Ethical principles should be embodied in an auditor's professional
behaviour. The SAIs should have policies addressing ethical requirements and
emphasising the need for compliance by each auditor. Auditors should remain
independent so that their reports will be impartial and be seen as such by the intended
users.
2. Professional judgement, due care and skepticism- Auditors should maintain appropriate
professional behaviour by applying professional skepticism, professional judgment and
due care throughout the audit. The auditor's attitude should be characterized by
professional skepticism and professional judgement, which are to be applied when
forming decisions about the appropriate course of action. Auditors should exercise due
care to ensure that their professional behaviour is appropriate. Professional skepticism
means maintaining professional distance and an alert and questioning attitude when
assessing the sufficiency and appropriateness of evidence obtained throughout the audit.
It also entails remaining open-minded and receptive to all views and arguments.
Professional judgement implies the application of collective knowledge, skills and
experience to the audit process. Due care means that the auditor should plan and conduct
audits in. a diligent manner. Auditors should avoid any conduct that might discredit their
work.
3. Quality control- Auditors should perform the audit in accordance with professional
standards on quality control An SAI's quality control policies and procedures should
comply with professional standards, the aim being to ensure that audits are conducted at a
consistently high level. Quality control procedures should cover matters such as the
direction, review and supervision of the audit process and the need for consultation in
order to reach decisions on difficult or contentious matters.
4. Audit team management and skills- Auditors should possess or have access to the
necessary skills The individuals in the audit team should collectively possess the
knowledge, skills and expertise necessary to
successfullycompletetheaudit.Thisincludesanunderstandingandpracticalexperieaceofthety
peof audit being conducted, familiarity with the applicable standards and legislation, an
understanding of the entity's operations and the ability and experience to exercise
professional judgement. Common to all audits is the need to recruit personnel with
suitable qualifications, offer staff development and training, prepare manuals and other
written guidance and instructions concerning the conduct of audits, and assign sufficient
5. Audit risk- Auditors should manage the risks of providing a report that is inappropriate in
the circumstances of the audit The audit risk is the risk that the gudit report may be
inappropriate. The auditor performs procedures to reduce or manage the risk o.f reaching
inappropriate conclusions, recognising that the limitations inherent to all audits mean that
an audit can never provide absolute certainty of the condition of the subject matter. When
the objective is to provide reasonable assurance, the auditor should reduce audit risk to an
acceptably iow level given the circumstances of the audit. The audit may also aim to
provide limited assurance, in which case the acceptable risk that criteria are not complied
with is greater than in a reasonable assurance audit. A limited assurance audit provides a
level of assurance that, in the auditor's professional judgment, will be meaningful to the
intended users.
Planning an audit
1. Auditors should ensure that the terms of the audit have been clearly established Audits
may be required by statute, requested by a legislative or oversight body, initiated by the
SAI or carried out by simple agreement with the audited entity, in ali cases the auditor,
the audited entity's management, those charged with governance and others as applicable
should reach a common formal understanding of the terms of the audit and their
respective roles and responsibilities, important information may include the subject,
scope and objectives of the audit, access to data, the report that will result from the audit,
the audit process, contact persons, and the roles and responsibilities of the different
parties to the engagement.
3. Auditors should conduct a risk assessment or problem analysis and revise this as
necessary in response to the audit findings. The nature of the risks identified will vary
according to the audit objective. The auditor should consider and assess the risk of
different types of deficiencies, deviations or misstatements that may occur in relation to
the subject matter, Both general and specific risks should be considered. This can be
achieved through procedures that serve to obtain an understanding of the entity or
programme and its environment, including the relevant internal controls. The auditor
should assess the management's response to identified risks, including its implementation
and design of internal controls to address them, in a problem analysis the auditor should
consider actual indications of problems or deviations from what should be or is expected.
This process involves examining various problem indicators in order to define the audit
4. Auditors should identify and assess the risks of fraud relevant to the audit objectives
Auditors should make enquiries and perform procedures to identify and respond to the
risks of fraud relevant to the audit objectives. They should maintain an attitude of
professional scepticism and be alert to the possibility of fraud throughout the audit
process.
5. Auditors should plan their work to ensure that ’fee audit is conducted m an effective and
efficient manner
Strategically, planning should define the audit scope, objectives and approach. The
objectives refer to what the audit is intended to accomplish. The scope relates to the
subject matter and the criteria which the auditors will use to assess and report on the
subject matter, and is directly related to the objectives. The approach will describe the
nature and extent of the procedures to be used for gathering audit evidence. The audit
should be planned to reduce audit risk to an acceptably few fever.
Operationally, planning entails setting a timetable for the audit and defining the nature,
timing; and extent of the audit procedures. During planning, auditors should assign the
members of their team as appropriate and identify other resources that may be required,
such as subject experts
Conducting an audit
1. Auditors should perform audit procedures that provide sufficient appropriate audit
evidence to support the audit report. The auditor's decisions on the nature, timing and
extent of audit procedures will impact on the evidence to be obtained. The choice of
procedures will depend on the risk assessment or problem analysis.
2. Auditors should evaluate me the audit evidence and draw conclusions After completing
the audit Procedures, the auditor will review the audit documentation in order to
determine whether the subject matter has been sufficiently and appropriately audited.
Before drawing conclusions, the auditor reconsiders the initial assessment of risk and
materiality in the light of the evidence collected and determines whether additional audit
procedures need to be performed.
Auditors should prepare a report based on the conclusions reached. The audit process involves
preparing a report to communicate the results of the audit to stakeholders, others responsible for
governance and the general public. The purpose is also to facilitate follow-up and corrective
action. In some SAIs, such as courts of audit with jurisdictional authority this may include
issuing legally binding reports or judicial decisions. Reports should be easy to understand, free
from vagueness or ambiguity and complete. They should be objective and fair, only including
information which is supported by sufficient and appropriate audit evidence and ensuring that
findings are put into perspective and context. The form and content of a report will depend on the
nature of the audit, the intended users, the applicable standards and legal requirements. The SAIs
mandate and other relevant laws or regulations may specify the layout or wording of reports,
which can appear in short form or long form.
Attestation engagements. In attestation engagements the audit report may express an opinion as
to whether the subject matter information is, in all material respects, free from misstatement
and/or whether the subject matter complies, in all material respects, with the established criteria,
in an attestation engagement the report is generally referred to as the Auditor general’s report
Direct engagements In direct engagements the audit report needs to state the audit objectives and
describe how they were addressed in the audit, ft includes findings and conclusions on the
subject matter and may also include recommendations. Additional information about criteria,
methodology and sources of data may also be given, and any limitations to the audit scope
should be described.
The audit report should explain how the evidence obtained was used and why the resulting
conclusions were drawn, this will enable it to provide the intended users with the necessary
degree of confidence.
Opinion
When an audit opinion is used to convey the level of assurance, the opinion should be in a
standardized format. The opinion may be un modified or modified. An unmodified opinion is
used when either limited or reasonable assurance has been obtained. A modified opinion may be:
Adverse ~ where the auditor, having obtained sufficient and appropriate audit evidence,
concludes that deviations or misstatements, whether individually or in the aggregate, are
both material and pervasive;
Disclaimer of opinion - where the auditor is unable to obtain sufficient and appropriate
audit evidence due to an uncertainty or scope limitation which is both material and
pervasive.
The Office of the Auditor General draws its mandate from the Constitution of Kenya. Chapter
12, Part 6, Article 229 establishes the Office of the Auditor General. Article 229 states:
1. There shall be an Auditor-General who shall be nominated by the President and, with the
approval of the National Assembly, appointed by the President.
3. The Auditor-General holds office, subject to Article 251, for a term of eight years and
shall not be eligible for re-appointment.
4. Within six months after the end of each financial year, the Auditor-General shall audit
and report, in respect of that financial year, on:-
6. An audit report shall confirm whether or not public money has been applied lawfully and
in an effective way.
8. Within three months after receiving an audit report, Parliament or the county assembly
shall debate and consider the report and take appropriate action.
a) consultancy that aims to identify the obstacles which prevent the conduct of
normal course of processes, establishment of causes, the determination of
consequences, presenting solutions for their elimination;
b) facilitating understanding in order to obtain additional information for in-depth
knowledge of the operation of a standard or a normative provisions, necessary for
the personnel carrying out their implementation;
c) Training and professional development to provide theoretical and practical
knowledge by organizing courses and seminars on financial management, risk
management and internal control.
Internal auditing may analyze strengths and weaknesses of an organization's internal
control, considering its governance, organizational culture, and related threats and
opportunities for improvement which can affect whether the organization is able to
achieve its goals. The analysis assesses whether risk management identifies the risks and
puts controls in place to manage public funds in an effective and efficient manner
Internal auditing works with those charged with governance, 1 such as board, audit
committee, senior management or, where appropriate, an external oversight body, in
Oversight
Detection is intended to identify inappropriate, inefficient, illegal, fraudulent, or abusive sets that
have already transpired and to collect evidence to support decisions regarding criminal
prosecutions, disciplinary actions, or other remedies. Detection efforts can take many forms
including:
Deterrence
Deterrence is intended to identify and reduce the conditions that allow corruption. Auditors seek
to deter fraud, abuse, and other breaches of public trust by:
Insight
Auditors provide insight to assist decision-makers by assessing which programs and policies are
working and which are not, sharing best practices and benchmarking information, and looking
horizontally across public sector entities and vertically among the levels of the public sector to
find opportunities to borrow, adapt, or reengineer management practices. The audit activity helps
institutionalize organizational leaning by providing ongoing feedback to adjust policies. Auditors
conduct their work systematically and objectively to develop a detailed understanding of
operations and draw conclusions based on evidence. Therefore, audits can provide an insightful
Foresight
Auditors also help their organizations look forward by identifying trends and bringing attention
to emerging challenges before they become crises. The audit activity can highlight challenges to
come — such as from demographic trends, economic conditions, or changing security threats —
and identifying risks and opportunities arising from rapidly evolving science and technology, the
complexities of modern society, international events, and changes in the nature of the economy.
These issues often represent long-term risks that may far exceed the terms of office for most
elected or appointed officials, and can sometimes receive low priority for attention where scarce
resources drive more short-term focus on urgent concerns. Additionally, a common audit
approach — risk-based auditing — focuses the cuds: on the organization's: overall risk
management framework, which can help identify and deter unacceptable risks. Through risk-
based auditing, the audit activity provides useful and relevant information to the organization or
managing its risks.
The international Standards for Supreme Audit Institutions (ISSAIs) is a framework of standards
within INTOSAI (The international Organization of Supreme Audit institutions).
The purpose of the ISSAIs is to support INTOSAI members by providing standards and
guidelines aimed to safeguard independent and effective auditing, furthermore, the ISSAIs are
intended to provide members with guidance in the development c: their professional standards
and methods on the basis of their specific mandate- The guidelines provide INTOSAI members
with a common language and approach in the areas of financial, compliance and performance
audit. Using 2 common frameworks of standards and guidance will allow auditors to share
experiences and benchmarks. It will also simplify cooperation in training and implementation
activities across borders. The standards also provide a framework against which it is possible to
measure SAI performance.
Quality
Carrying out audits in accordance with globally accepted standards will ensure a certain level of
quality and consistency m audits. All SAIs strive to earn the trust of citizens and stakeholders
alike. Applying internationally accepted standards in audits is one important step in the direction
of earning this trust. A high-quality standard will reduce auditor’s risk. The credibility of all
audit organizations is built on the quality achieved in its audits. The use of globally accepted
standards will simplify benchmarking, regional quality assurance initiative and peer reviews as
well as the sharing of experiences in other ways. Using similar audit methods in different
countries can inspire organizations to continuous improvement.
Credibility
Using globally accepted standards will strengthen the credibility of both the audit organization
and its auditors, external stakeholders will gain increased confidence and trust in the work of
auditors using globally accepted standards. The results and conclusions of an audit conducted in
accordance with globally accepted standards can stand up to external scrutiny. The transparency
provided by using standards well-known to audited organizations and other stakeholders also
leads to increased credibility of the audit results
Standards form the basis for professionalization of auditors and audit organizations by providing
a structured process for the audit work. Common standards can improve opportunities for
exchange of professional views and experiences across national and sector borders. Joint training
activities and sharing experiences will be easier if auditors apply the same set of professional
standards. Globally I accepted standards also provide a common language between public and
private sector auditors in areas of similar responsibilities. Applying globally accepted standards
will strengthen the audit profession in general.
It is important to recognize that there may be challenges facing a SAI when implementing the
ISSAls. Those challenges will differ depending on the development level of the SAI, the context
in which it operates, the legal requirements, available resources including personnel, technical
resources and funding, and the ambitions of the office. Below you will find some examples of
such challenges, but it is very important for each office to make its own assessment to be well
prepared for the implementation process.