Financial Audit of Autonomous Bodies Reporting 1 Reporting Standards and Drafting of Audit Reports and Audit Comments

Financial Audit of Autonomous Bodies Reporting 2 Session Overview In the previous sessions we discussed all the issues relating to financial audit of autonomous bodies, including the ‘uniform format of financial statements’ prescribed by the Committee of Experts.

Financial Audit of Autonomous Bodies Reporting 3 Session Overview Every audit culminates with a report by the Auditor, stating his comments, observations, objections and suggestions. Auditors Report is an important and crucial document, eagerly awaited by the management, the owners, the government and other users of financial information. The report allows the readers to form their opinion on the reliability of the data given in the financial statements and the report gives them an assurance that they can rely on financial statements when read with the Auditor’s Report.

Financial Audit of Autonomous Bodies Reporting 4 Session Overview Therefore, on the completion of each audit assignment, the Auditor should prepare a written report setting out the observations and conclusions in an appropriate form; its content should be easy to understand and free from vagueness and ambiguity, include only information which is relevant and supported by sufficient and competent audit evidence and be independent, objective, fair, complete and accurate, constructive and concise as the subject-matter permits.

Financial Audit of Autonomous Bodies Reporting 5 Session Coverage In this session, we would be discussing the following points: (a) Reporting Standards of IAAD (b) Objectives of audit report (c) Form and content of the audit report (d) Types of audit opinion

Financial Audit of Autonomous Bodies Reporting 6 Learning Objective At the end of this session, the participants will be able to describe the form and content of the audit report, identify the types of audit opinion prepare a draft report or comments in accordance with audit objectives and the reporting standards of the IAAD.

Financial Audit of Autonomous Bodies Reporting 7 Reporting Standards On the completion of each audit assignment, the Auditor should prepare a written report setting out the observations and conclusions in an appropriate form; its content should be easy to understand and free from vagueness and ambiguity; include only information which is relevant and supported by sufficient and competent audit evidence and be independent, fair, complete and accurate, constructive and concise as the subject matter permits.

Financial Audit of Autonomous Bodies Reporting 8 Objectives of Audit Report The primary objective of the audit report is to express, on the basis of audit tests and audit procedures and sufficient appropriate audit evidence, an objective opinion whether the financial statements present fairly the financial position of the entity in accordance with the generally accepted accounting principles.

Financial Audit of Autonomous Bodies Reporting 9 Legal and Accountability Requirements

Financial Audit of Autonomous Bodies Reporting 10 LEGISLATURE Accountability Authority` Audit Report Auditing EXECUTIVE GOVERNMENT SAI Slide 3.2-1

Financial Audit of Autonomous Bodies Reporting 11 CAG’s Report (i) Whether the accounts are properly maintained. (ii) Whether public money is spent in accordance with relevant laws and, are properly accounted for. (iii) Whether the essential records are maintained in accordance with laid down rule. (iv) Whether the money is spent with due regard to economy and efficiency.

Financial Audit of Autonomous Bodies Reporting 12 CAG’s Report (v) Whether satisfactory procedures have been established to measure and report the effectiveness of the programme or activity. (vi) Whether the expenses are within the voted amounts. (vii) Whether the expenditure conforms to the canons of financial propriety and normal prudence. (viii) Whether the expenditure conforms to the relevant legislation and regulation of the entity.

Financial Audit of Autonomous Bodies Reporting 13 Contents and Format of the Audit Report  Title  Addressee  Introduction/Identification of subject matter  Basis of opinion or scope  Opinion  Date  Signature  Address

Financial Audit of Autonomous Bodies Reporting 14 Types of Audit Opinion Types of opinion:  Unqualified  Unqualified with explanatory paragraph  Qualified / reservations  Adverse  Disclaimer of an opinion

Financial Audit of Autonomous Bodies Reporting 15 Materiality and Types of Opinion Immaterial-Decisions are not likely to be affected- Unqualified Material -Decisions are likely to be affected only if the information in question is important to the specific decisions being made. The overall financial statements are considered fairly stated- Except For Material and Pervasive -Most or all decisions based on the financial statements are likely to be significantly affected. -Disclaimer or Adverse

Financial Audit of Autonomous Bodies Reporting 16 Report Finalization Process The report finalization process includes: - Obtaining and reviewing management response - Discussing audit results, audit opinion and financial statements with audit superiors, - Completing a draft audit report - Completing a report finalization memorandum - Ensure editing;

Financial Audit of Autonomous Bodies Reporting 17 Report Finalization Process - Clearance with audit superiors and resolve any contentious issue; - Discuss with auditee at sufficiently higher level and obtain auditee’s acceptance pr approval; - Obtain signature of the audit report from the Accountant General or the prescribed competent authority; - Ensure printing/typing and distribution to all concerned.

Financial Audit of Autonomous Bodies Reporting 18 Style guide To introduce uniformity in drafting/reporting style of Audit Reports, a ‘Style Guide’ has been prepared in August 2003 in the Headquarters Office. It has been stressed that while drafting the Audit Reports, the suggestions made in the Guide should be adopted.

Financial Audit of Autonomous Bodies Reporting 19 Style guide Keep in mind the following elementary rules:  Avoid clichés and slang;  Never use a long word when a short word will do;  If it is possible to cut out a word, always cut it out;

Financial Audit of Autonomous Bodies Reporting 20 Style guide  Never use a foreign phrase, a scientific word or jargon word if you can think of a straightforward English equivalent;  Avoid a desire to impress. Your job is to help readers understand you readily and precisely and not tom show them how clever you are; and

Financial Audit of Autonomous Bodies Reporting 21 Style guide  Do your best to be lucid. Simple sentences and short paragraphs help to break down slabs of text into manageable chunks. Avoid complicated constructions and gimmicks

Financial Audit of Autonomous Bodies Reporting 22 Style guide  For every report, meeting these objectives means putting a premium on:  Having a strong, clear report structure;  Avoiding a temptation to include as much as possible of the information and analysis gathered during investigation to support IAAD’s findings and conclusions;

Financial Audit of Autonomous Bodies Reporting 23 Style guide  Concentrating less on narrative description of how things are done and more on why they are done, how well they are controlled and the results achieved; and  Used hard evidence and telling examples to reinforce the message in the report.

Financial Audit of Autonomous Bodies Reporting 24 IAAD style of report writing Structure Is it clear Simple and brief Accurate Complete Balanced and fair

Financial Audit of Autonomous Bodies Reporting 25 IAAD style of report writing Constructive Length of reports, paragraphs, reviews and appendix Structure of reviews Appendix Diagrams, Tables etc: Glossary

Financial Audit of Autonomous Bodies Reporting 26 IA&AD conventions which must be used Abbreviations Active not passive Apostrophes Capitals Consistency Chapter numbers Dates

Financial Audit of Autonomous Bodies Reporting 27 IA&AD conventions which must be used Figures Font Page numbers Paragraph numbers Percentages Preface Singular/plural

Financial Audit of Autonomous Bodies Reporting 28 A to Z of common errors and weaknesses