1. High-quality results can be expected only from qualified staff Presentation by NAO of Estonia’s Advisor Olav Lüüs at the meeting of Supreme Audit Institutions of the Nordic and Baltic countries and Poland on 6 September 2007

2. 2. Reference points It is very difficult to judge yourself and your activities objectively If the organisation is so small that everybody socialises with everyone else on daily basis and they all depend on each other, it is unlikely that the members of the organisation would talk negatively about their colleagues

3. 3. Reference points II Only external pressure forces a small staff to judge critically its own activities and members Most SAIs do not adopt decisions that are binding on the others. Therefore, the auditees don’t practically care what SAI says about them and they rather avoid criticising the actions of SAIs, because, as a rule (in Estonia), the public supports the SAI

4. 4. SAIs must be very self-critical as to the quality of their work We accept in full the positions and recommendations on audit quality prepared by experts for discussion at the next EUROSAI Congress Small SAIs should be very self-critical as to the quality of their work and the qualifications of their employees

5. 5. Quality of work depends on the skills of employees I dare formulate the positions in documents to be submitted to the Congress in a manner that is used for describing the business success factors: - do the right things at the right time; - work professionally; - to succeed, you must know how to sell

6. 6. The qualification of SAI employees is never too high NAO of Estonia is quite successful in the first and third categories listed above, but the past and present problem is the professionalism of staff, i.e. the ability to plan and implement audit activities and to give judgments

7. 7. Having auditors with highest qualifications is a must for the NAO We have to judge the work of other financial auditors possessing generally recognised certificates of competency (according to the law, public companies, local governments and legal persons in public law must have their reports audited by them, plus the heads of internal audit services are applying for certificates). Our auditors cannot be less qualified

8. 8. Clear criteria needed to assess the employees ’ knowledge The training of our employees has not been sufficiently targeted and systematic. We have been of the opinion that audits will demonstrate the training results The increase in the competency of trainees has not been assessed. There haven’t been any clear criteria for that

9. 9. Specific training required for public sector auditing We value highly the work of our Austrian, Swedish and Danish colleagues in defining the specific knowledge and skills required for the work of SAIs, organising the relevant training, and certifications that verify the possession of these skills In principle, we find it reasonable to do the same

10. 10. NAO will not certify its employees itself Our NAO is not able to manage the certification of its employees itself. Given to the small size of our country, we find it reasonable to conduct the certification of our employees within the general system of auditor certification. This way their qualifications will be generally recognised

11. 11. Public sector auditor certificate The draft Audit Act being prepared in Estonia for the implementation of the requirements of Directive 43 provides for the Certified Public Sector Auditor (CPSA) status CPSAs would be at the top of the hierarchy of accountants and auditors, being the highest qualified auditor

12. 12. The requirement to use CPSAs to be laid down by law The implementing provisions of the Act would stipulate that the financial audit reports of public sector legal persons (except companies) may, from a certain date, be signed only by CPSAs If an audit company wants to keep its clients, it must employ CPSAs. And the NAO could also carry out financial audits and attestation engagements only on the basis of CPSAs

13. 13. Lot of preparatory work to be done for certifying the CPSAs It takes some years for Estonia to formulate the qualification requirements to CPSAs, carry out training and gain work experience necessary for achieving compliance with these requirements.

14. 14. Public sector reporting standards about to change! Formulation of the CPSA qualification requirements must take account of the fact that in the next few years the core of government reports will be providing an overview of whether and how effectively the public sector has used the resources at its disposal Accordingly, in the next few years, the qualification requirements to auditors will change – focus will shift from balance sheets and result statements to management reports

15. 15. There won ’ t be many public sector auditors About twenty CPSAs is probably enough for Estonia. We hope that in three or four years about ten auditors will obtain this certificate. For the NAO, measures to motivate some of them to work for the NAO are inescapable

16. 16. Certification requires support from large audit companies We believe that large audit companies will be very interested in employing specialists having the CPSA certificate and will thus be actively involved in solving the problems entailed by the introduction of this certificate

17. 17. Certification requires active measures from the government The problems entailed by the introduction of CPSAs can be solved only by way of co-operation between universities, professional associations of auditors, the NAO and the Ministry of Finance Organisational measures and considerable financial support are required from the government. Introduction of CPSAs will be costly for the state

18. 18. Certificate entails notable salary raise We clearly understand that the CPSAs will work for the NAO only if the NAO pays them a competitive salary, because the CPSA qualification allows auditors to freely choose their employer in Estonia and also work outside Estonia

19. 19. Why should auditors want to obtain certificate The perspective of achieving the highest position in the hierarchy of auditors should motivate the auditors to undertake additional training and gain public sector work experience required for getting the CPSA certificate

20. 20. We are not planning to certify performance auditors We are not planning to certify performance auditors, but we are considering the option of requiring auditors in certain positions to obtain a certificate that demonstrates knowledge of general audit practices, for example CGAP

21. 21. Certification does not replace quality assurance Adequate qualification of NAO staff creates the preconditions for high quality results by the NAO However, it does not mitigate the importance of internal quality control and internal and external quality assurance

22. 22. We are not satisfied with the effectiveness of our quality control Our work procedures provide for the use of all generally applicable quality control methods and for the internal quality assurance. However, we have identified several weaknesses in our control system

23. 23. What fits the large, might not suit the small The methods that work well in large audit organisations are not sufficiently effective in our small organisation (total of hundred employees, small structural units) Furthermore, all our expectations of receiving constructive feedback on audit reports from the auditees and the Parliament have not been met

24. 24. We will involve experts outside the NAO in quality control We have decided to start requesting assessments on our audits from experts outside our organisation We believe that impartial external expert assessment of audits forces our audit departments to request internal critical reviews of their work, which will improve the effectiveness of our internal controls

25. 25. Thank you!