APPLICATION OF ISSAI IN NATIONAL AUDIT OFFICE OF LITHUANIA Audronė Vaitkevičiūtė Head of Audit Methodology Division Audit Development Department 4 September 2012

Legislation – basis for applying ISA and ISSAI Amended Law on NAOL introduces changes: provided application of ISAs and ISSAIs; Distinguished concepts of financial audit and regularity audit (in addition to performance audit) – establishing a separate type of audit – regularity audit. For the period when the amended Law on NAOL will be approved, the amendments in Public Auditing Requirements were made, which indicate the main principles of audit and work of the NAOL and state that audits are performed following the Public Auditing Requirements, as well as ISAs and ISSAIs.

Gap analysis – the basis to identify the mismatching areas Results of gap analysis : in principle the audit is already performed according to ISAs and ISSAIs; nevertheless, there is a need to make respective adjustments to guidelines (Audit Manuals) of the NAOL.

Adjustment of audit manuals (I) Audit manuals should provide practical information and recommendations, which would ensure that all the relevant ISAs and ISSAIs are comprehended equally by all users, but still an auditor is independent to make professional judgment in the audit performed. Panel discussions were organized through this financial audit period – to discuss relevant ISAs and ISSAIs, give auditors opinion on the usefulness of standards and identify areas, which need to be elaborated, and in doing so they not only familiarize with standards, but also analyze them.

Adjustment of audit manuals (II) Performance Audit Manual – small changes according to ISSAIs for performance audit. Financial and Regularity Audit Manual – substantial adjustments, because it explains and gives practical information on the application of ISAs.

Adjustment of audit manuals (III) Challenges in making amendments in Financial and Regularity Audit Manual are to give practical instructions for auditors on subjects, which are not in detail in ISA’s and ISSAI’s, for example: group audit in compliance audit; audit sampling: determining sample size; written representations; auditing accounting estimates.

Challenge to be a group auditor for audit of national set of statements An undergoing reform of accounting and financial reporting system of the public sector in Lithuania – as from 2012, there will be consolidated national set of statements consisting of sets consolidated statements of the State, municipalities, Compulsory Health Insurance Fund, and State Social Insurance Fund. Pursuant to the Law on NAOL, the responsibility for the audit of the national set of statements lies with the NAOL. The biggest challenge here – as sets of consolidated statements of municipalities are audited by municipal control and audit services, the NAOL as group auditor will be responsible for the direction and supervision of audits performed by municipal control and audit services. So the NAOL has initiated cooperation agreements and signed them with a number of municipal control and audit services each year.

Translation of ISSAI framework into the national language ISAs have already been translated by the Lithuanian Chamber of Auditors. ISSAI framework has to be translated into Lithuanian – it is time and money consuming work. Some of it we are doing using NAOL internal resources, some translation is outsourced; also it demands attention to the clarification of terms.

Thank you for your attention Questions?