1. The Chamber of Accounts The Republic of Azerbaijan
Compliance Audit on the Project of Improvement of Population’s Drinking Water Supply
The Chamber of Accounts
The Republic of Azerbaijan

2. New Law enacted on September 5, 2018
Outlined the boundaries of the Chamber of Accounts as Supreme Audit Institution in external public financial control;
Identified its status;
Increased its powers;
Improved financial, performance and compliance audits and other areas of its activity.
Identified the status of the Chamber in control system

3. Draft Project of “Compliance Audit Guideline”
Article 2.2 of the new Law of the Republic of Azerbaijan on the Chamber of Accounts;
INTOSAI P1 Principles (Founding Principles, the Lima Declaration);
ISSAI 100 (Fundamental Principles of Public-Sector Auditing);
ISSAI 130 (Code of Ethics);
ISSAI400 ( Fundamental Principles of Compliance Auditing);
ISSAI 4000 (Compliance Audit Standard);
Common principles of International Audit Standards.

4. Compliance audit included 3 stages:
Compliance Audit on the Project of Improvement of Population’s Drinking Water Supply
Compliance audit included 3 stages:
1. Audit preparedness and planning
2. Conducting audit and collecting evidences
3. Recording the outcomes

5. 1. Audit preparedness and planning
Question 1
According to which criteria do you determine audit planning time and how much time do you spend on it? How many days are the optimal time?

6. Goal of the audit
The aim of the audit was adopted as rendering an opinion on the compliance of the use of funds allocated to the Project on “Improvement of Population’s Drinking Water Supply” to existing legislation and achievement level of the intended goal.

7. Audit Planning was conducted including the following stages
1.1. Getting necessary information on the activity of audited government agency
1.2. Initial considerations
1.3. Risks
1.4. Internal Control
1.5. Defining criteria

8. 1.2 Initial considerations
Project–estimate documentation and expertise Procurements Construction Works

9. 1.3. Risks
In the process of preparation and expertise of Project- estimate documents;
In performing procurement procedures;
In construction process ;
In proper financial management .

10. 1.4 Internal Control elements
Monitoring
Control activity
Risk management
Control environment
Information and communication
Information and communication

11. 1.4.1 Control Environment
Analysis demonstrated that control system was established in a sense. So, it brings us to the conclusion that the reasons of existence of these risks and high probability of their realization are connected with employee’s professionalism, knowledge and performance level of tasks.

12. 1.4.2 Risk management
Management didn’t carry out special planning on the implementation of the project;
As a result, it didn’t identify risks associated with the implementation of the project.

13. 1.4.3 Internal control activity
Duties were segregated among these departments:
Management;
Department of economy
and accounting;
Internal audit department.
However , subdivisions didn’t organize their work effectively according to the functional classification which ultimately led to shortcomings.

14. 1.4.4 Information and communications
Foreign information and communication system didn’t fully ensure data exchange between Management and other entities.

15. 1.4.5 Monitoring
Monitoring should be conducted by internal audit department -structural division of the Management.
BUT
It should be noted that, though a year passed after conclusion of the Project, department hasn’t conducted internal audit on the Project yet.

16. Internal Control Assessment
If these functions on audit covered Project were conducted effectively, realization of above mentioned risks would likely be at a low level.
Question 2
How does the quality of the internal control in the auditee support you in determining the audit subject and performing the audit?

17. 1.5 Defining Criteria
Legislative acts;
The goal of the state program.

18. 2-3.Performing audit and collecting evidences, Recording Outcomes
Evidences collected were compared with criteria and following results were achieved:
Despite sufficient time for open tendering procedure, Management signed single source procurement contract;
Contracting entity signed procurement contract with 5 different subcontractors without the consent of the customer;
Via thorough study of the documents, physical examination of audit objects by experts it was found out that 1,6% less water spring was installed than the number envisaged in Project-estimate documents.
It resulted in failure to supply 6200 people for 4 villages with drinking water.

19. Question 3
Which opinion would you render on the mentioned findings of audit in current situation?

20. THANK YOU