Establishing an Audit Quality Management System

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THEME 1: ESTABLISHING
AN AUDIT QUALITY MANAGEMENT SYSTEM WITHIN A SUPREME AUDIT INSTITUTION

PRINCIPAL PAPER

Prepared by:
State Audit Office, Hungary (chair)
European Court of Auditors
National Audit Office, Malta
National Audit Office, Denmark
Accounts Chamber, Russian Federation

February 2007

Table of Contents

INTRODUCTION5
Achieving excellence in audit activity5
Glossary7
Chapter I: Leadership9
Leadership and Supreme Audit Institutions9
Leadership's main factors for ensuring audit quality10
Chapter II: Strategy and Planning13
Strategic planning13
Operational planning14
Chapter III: Human Resource Management17
Human resource planning18
HRM policies and procedures18
Job descriptions18
Employee recruitment and selection18
Staff training and development19
Performance appraisals and recognition19
Employee remuneration and benefits20
Chapter IV: Building Quality into the Audit Process21
Audit standards21
Guidelines, procedures and methods21
Supervision and review22
Support22
Chapter V: External Relations25
Audited organisations25
Parliament and its committees26
Media and the general public27
International organisations and other SAIs27
Chapter VI: Continuous Development and Improvement29
Continuous review and monitoring29
Post-audit quality review30
Self-assessment of the organisation30
Other ways of continuous development and improvement within the organisation31 External opinions31
Concluding Remarks33
Reference Documents35
Collection of Questions37
Introduction

1. THE EUROSAI GOVERNING BOARD DECIDED TO DISCUSS AUDIT QUALITY DURING THE VII EUROSAI CONGRESS IN KRAKOW DUE TO BE HELD BETWEEN 2 AND 5 JUNE 2008. IT WAS ALSO AGREED UPON THAT THE SUBJECT OF THEME I OF THE CONGRESS WOULD BE ‘ESTABLISHING AN AUDIT QUALITY MANAGEMENT SYSTEM WITHIN A SUPREME AUDIT INSTITUTION’. DISCUSSIONS ON THEME I WILL PROVIDE EUROSAI MEMBER INSTITUTIONS WITH INSIGHTS ON THE PRINCIPLES AND PRACTICES OF AN EFFECTIVE QUALITY MANAGEMENT SYSTEM. IN LINE WITH THIS OBJECTIVE, A GOOD PRACTICE GUIDE WILL BE DEVELOPED AND SUBMITTED TO THE VII EUROSAI CONGRESS FOR APPROVAL.

2. The purpose of this Principal Paper is to give an overview to EUROSAI members in the preparation of their respective country papers. EUROSAI member institutions should describe, in these papers, their individual audit quality management systems, including the key elements presented in this Principal Paper.

Achieving excellence in audit activity

3. The Lima Declaration of Guidelines on Auditing Precepts lists the following specific objectives of auditing as being necessary for the stability and the development of states:

• the proper and effective use of public funds;
• the development of sound financial management;
• the proper execution of administrative activities; and • the communication of information to public authorities and the general public through the publication of objective reports.

From the point of view of stakeholders, the acceptance of the audit conclusions and recommendations depends on the trust in the Supreme Audit Institution (SAI) itself and the audit activities undertaken. Therefore, the SAI should seek to develop systems and methods to assure excellence in their work and outcomes.

4. The process of establishing, implementing and continuously developing a quality management system within an SAI can contribute to ensuring trust with stakeholders. The fundamental goal of setting up such a system is to guarantee consistent good quality of audit work and outcomes. An effective quality management system also leads to the development and maintenance of a comprehensive framework that regulates those factors and conditions that have a direct impact on audit activity.

5. An SAI is in a better position to deliver quality...
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