Code of Ethics and Auditing StandardsAudi ‘tor Gon Code of Ethics of and Pe akistan ” Auditing y 2 : Standards Pea (Research & Development Wing) .Foreword It is indeed a matter of great pleasure for me to write these lines on the auspicious occasion of issuance of the Code of Ethics and Auditing Standards of the Department of the Auditor General of Pakistan that are in line with the INTOSAI Code of Ethics and Auditing Standards. Since these represent the best practices of Supreme Audit institutions (SAls), their application would further contribute to the quality of audit being conducted by my Department. My Department has all along been involved in developing better auditing techniques in its quest for transparency, accountability and good governance in public administration. General, as well as special guidelines, have been issued from time to time for quality assurance and adherence to acceptable standards of performance in my Department Nevertheless, there has been a realization to have a comprehensive set of auditing standards to make the audit coverage both adequate and qualitative. The issue of this Code of Ethics and Auditing Standards that have been adapted from the INTOSAI Code of Ethics and Auditing Standards is a step towards that direction, For the preparation of a Code of Ethics and Auditing Standards, | constituted a Committee of senior officers comprising Mr. Mohammed Mohsin Khan, DG(GA), Mr. Mohammad ‘Ayub Khan Tarin, DG(R&D) and Mr. Liagat Ali Chaudhary, DG(AP&M) with the advice that they should keep in view our own laws, rules, regulations, and administrative environment while making recommendations. The Committee diligently worked to come up with suitable adaptation. Their effort as well as the support services rendered by the staff of R&D Wing in this regard are really commendable. | would also take this opportunity to urge all those involved in the audit process -- the staff in the Head Office, the Field Audit Offices and those conducting the audit in the field — to steadfastly apply these standards. This is my firm belief that these standards, which are wide-ranging, shall bring about a significant change in the quality of audit output. Manzur Hussain Auditor General of Pakistan Islamabad June, 2002 *Preface A Committee was constituted by the Auditor General of Pakistan to review the INTOSAI Code of Ethics and Auditing Standards for adoption by the Department of the Auditor General of Pakistan. The Committee comprising Mr.Mohammed Mohsin Khan DG (GA), Mr. Mohammad Ayub Khan Tarin DG (R&D) & Mr. Liaqat Ali Chaudhary DG (AP&M) held a series of meetings and carried out a comprehensive review of the Code of Ethics & Auditing Standards as amended by the XVth Congress of INTOSAI in 1995. The review process was supplemented by subsequent scrutiny by Sheikh Naseer ul Haq DAG (AP&M). Views of all the Field Audit Offices were also invited on the proposed adaptation. The Committee, during the review, found that most of the standards / guidelines were applicable in our environment and therefore recommended these for adoption. But in quite a number of cases suitable adaptations have been made to suit our own circumstances. In a few cases, however, some guidelines, which were not found relevant in our context, have been deleted. This is in line with the explicit statement.of the INTOSAI Standards Committee which states that the authority for compliance is within the domain of each Supreme Audit Institution The standards have been adapted with due care, diligence and are required to be implemented by the Department of the AGP in letter and spirit, Any suggestions for improvement are welcome. Mohammad Ayub Khan Tarin Director General (R&D) Islamabad June, 2002Table of Contents Code of Ethics Auditing Standards ... Chapter | Basic Principles in Government Auditing .. Chart of Basic Principles in Government Auditing Chapter Il ...... 2.1 General Standards in Government Auditing 2.2 Standards with Ethical Significance Chapter Ill... Field Standards in Government Auditing 3.4 Planning 3.2 Supervision and Review 3.3 Study and Evaluation of Internial Control 3.4 Compliance with Applicable Laws and Regulations 3.5 Audit Evidence . 3.6 Analysis of Financial Statements Chapter IV Reporting Standards in Government Auditing . Glossary 10 " 18 19 19 23 30 30 31 33 34 34 36 37 39 39 45C. of Ethics of the Department of the Auditor General of Pakistan June, 2002Chapter | Introduction Concept, Background and Purpose of the Code of Ethics 1. The Auditor General of Pakistan (AGP) has deemed it essential to establish a Code of Ethics for auditors in the public sector. 2. This Code of Ethics is a comprehensive statement of the values and principles, which should guide the daily work of auditors. The independence, Powers and responsibilities of the public sector auditor place high ethical demands on the Department of the Auditor General of Pakistan and the staff deployed on audit work. This code of ethics for auditors in the public sector outlines the ethical precepts of civil servants in general and the particular requirements of auditors, including the latter's professional obligations 3. With the Lima Declaration of Guidelines on Auditing Precepts as its foundation, this Code of Ethics should be seen as a necessary complement, reinforcing the Auditing Standards issued by the Auditor General of Pakistan in June 2002 in line with INTOSAI Code of Ethics and Auditing Standards. 4. The Code of Ethics is directed at the individual auditor, the Auditor General of Pakistan, executive officers and all individuals working for or on behalf of the AGP who are involved in audit work It is the responsibility of the AGP to ensure that afl its auditors acquaint themselves with the values and principles contained in this Code of Ethics and act accordingly. 5. The conduct of auditors should be beyond reproach at all times and in all circumstances. Any deficiency in their professional conduct or any improper conduct in their personal life places the integrity of auditors, the Department of the AGP that they represent, and the quality and validity of their audit work in an unfavorable light, and may raise doubts about the reliability and competence of the Department of the AGP itself. This code of ethics for auditors should Promote trust and confidence in the auditors and their work. 6. It is of fundamental importance that the Department of the AGP is looked upon with trust, confidence and credibility. The auditor promotes. this by adopting and applying the ethical requirements of the concepts embodied in the key words Integrity, Independence and Objectivity, Confidentiality and Competence.Trust, Confidence and Credibility 7. The legislative and/or executive authority, the general public and the audited entities are entitled to expect the conduct and approach of the officers and the staff of the Department of the AGP to be above suspicion and reproach and worthy of respect and trust. 8. Auditors should conduct themselves in a manner which promotes co-operation and good relations among themselves and within the profession. The support of the profession by its members and their co-operation with one another are essential elements of professional character. The public confidence and respect which an auditor enjoys is largely the result of the cumulative accomplishments of alt auditors, past and present. It is therefore in the interest of auditors, as well as that of the general public, that the auditor deals with fellow auditors in a fair and balanced way 9. The legislative and/or executive authority, the general public and the audited entities should be fully assured of the fairness and impartiality of all the work of the Department of the AGP. 10. In all parts of society there is a need for credibility. It is therefore essential that the reports and opinions of the Department of the AGP are considered to be thoroughly accurate and reliable by knowledgeable third parties. 1. All work performed by the Department of the AGP must stand the test of legislative and/or executive scrutiny, public judgments on propriety, and examination against this Code of Ethics. Chapter II Integrity 12. Integrity is the core value of this Code of Ethics. Auditors have a duty to adhere to high standards of behaviour (e.g. honesty and candidness) in the course of their work and in their relationships with the staff of audited entities. In order to sustain public confidence, the conduct of auditors should be above suspicion and reproach. 13. Integrity including financial, moral, and intellectual can be measured in terms of what is right and just. Integrity requires auditors to observe both the form and the spirit of auditing and ethical standards. Integrity also requires auditors to observe the principles of independence and objectivity, maintain irreproachable standards of professional conduct, make decisions with the public interest in mind, and apply absolute honesty in carrying out their work and in handling the resources of the Department of the AGP.