The principles relating to the auditing subject are personal in nature and affect the professional competence of the auditor and his team, the independence of the control bodies and auditors, the professional diligence of the auditors and the scope of their responsibility.
ENUMERATION AND DEFINITION
- Technical training and professional capacity
The audit must be carried out by people with adequate technical training and professional capacity.
- Independence
During their professional performance, both the external control bodies and the auditors will maintain an independent attitude and a position of total objectivity, especially in relation to the administrative structure itself.
- Professional diligence
The execution of the works and the issuance of the reports will be carried out with due professional care.
- Responsibility
The auditor must carry out his work in accordance with the established auditing standards and will be responsible for his report with the limitations to the scope expressed, if applicable, therein.
- Professional secret
The auditors must maintain and guarantee the confidentiality of the information obtained in the course of their actions.
RULES FOR THE DEVELOPMENT OF THE PRINCIPLES RELATING TO THE AUDIT SUBJECT
TECHNICAL TRAINING AND PROFESSIONAL CAPACITY
"The audit must be carried out by people with adequate technical training and professional capacity."
The norms that develop the previous principle must contemplate three basic aspects: training, experience and updating of knowledge.
Training
The auditors must know:
* The methods and techniques used in auditing.
* Accounting and budgeting principles and rules.
* The operation, organization and characteristics of the Public Sector.
Experience
Since professional capacity is the result of the conjunction of training and experience, the audit organization will establish the experience that the audit staff must have for the proper performance of their functions.
Upgrade
The permanent updating of knowledge is a necessary requirement to maintain professional capacity. The audit organization will be responsible for establishing and executing a program that ensures awareness, among others, of new developments in auditing, accounting, statistical sampling, and data evaluation and analysis.
Independence
"During their professional performance, both the control bodies and the auditors will maintain an independent attitude and a position of total objectivity, especially vis-à-vis the administrative structure itself."
This principle focuses both on the auditor and on the organization of the audit the responsibility of preserving their independence, through compliance with the standards of: impartiality, appearance of impartiality and absence of incompatibilities.
Impartiality
The auditor's opinions, conclusions and recommendations require an objective consideration of the facts and his impartial judgment.
Appearance of fairness
The auditor must not only be impartial, but must avoid any attitude or situation that allows third parties to doubt their independence.
Absence of incompatibility
The independence of the auditor may be diminished by personal and external incompatibilities and in their relations with the administrative structure. In the event of any such limitation, the auditor should refuse to perform the audit or clearly explain its situation.
PROFESSIONAL DILIGENCE
"The execution of the works and the issuance of the reports will be carried out with due professional care."
The rules that develop the principle of professional diligence extend to the entire audit process, from the beginning of its planning to the conclusion of the report, and refer to: care in compliance with the rules, supervision, use of specialists, the use of external auditors and the limits on accepting audits.
Care in compliance with regulations
Professional diligence requires the auditor to comply with the standards established in the performance of their work, and in the preparation and presentation of reports.
Supervision
The work done by all people at all levels, as well as the judgments made by them and the reports issued, must be critically supervised.
Appeal to external specialists
When the auditor uses the advice of specialists whose opinion is essential for the exercise of his function, he must ensure his competence and capacity at the time of his selection.
Appeal to external auditors
Using third-party audits reduces the amount of work required to achieve audit objectives. In order to be able to rely on these audits, it is necessary to verify the professional competence of the auditors, their independence and the work carried out by them.
Limits to the acceptance of conducting audits
Only work that can be carried out with professional due diligence should be accepted.
RESPONSIBILITY
"The auditor must carry out his work in accordance with the established auditing standards and will be responsible for his report with the limitations to the scope expressed, where appropriate, therein".
The standards derived from the principle of responsibility refer to the delimitation of the auditor's responsibility and scope limitations.
Limitation of liability
All audit work carried out in accordance with established standards limits the auditor's responsibility to the content of his report.
Scope limitations
Limitations on the scope of the audit are factors external to the organization of the audit, which may prevent the auditors from formulating their opinions and conclusions objectively. The auditors should indicate the scope limitations of their report and mention their impact on the results of the audit.
PROFESSIONAL SECRET
"The auditors must maintain and guarantee the confidentiality of the information obtained in the course of their actions."
The development of the principle of professional secrecy includes the rules regarding the purpose of the information, its proper use and its conservation, and is binding on all members of the audit team.
Purpose of the information
The data relating to the audited entities obtained by the auditors in the exercise of their functions should not be used for purposes other than the audit itself.
Proper use of information
The information obtained should not be provided to third parties or used for personal gain.
Conservation of information
The audit body must keep the working papers that constitute the support of its conclusions duly guarded in its files.
PRINCIPLES AND RULES ON THE PERFORMANCE OF THE AUDIT WORK
PRINCIPLES ON CONDUCTING THE AUDIT WORK
When audits are carried out following the recommended principles for carrying out these tasks, there will be a guarantee that the auditors apply procedures that will allow them, in given circumstances, to achieve the audit objectives.
Compliance with the stated principles will provide sufficient and valid evidence to reasonably support the opinions, judgments and conclusions regarding the audit objectives.
ENUMERATION AND DEFINITION
- Planning
The auditor should plan his work in order to identify the objectives of the audit to be performed and determine the method to achieve them economically, efficiently and effectively.
- Supervision
Supervision of the work carried out by each and every team member is essential to ensure compliance with the audit objectives and maintenance of the quality of the work.
- Internal control
The auditor, to determine the nature and extent of the audit to be carried out, must study and assess the existing internal control.
- Evidence
To substantiate their opinions and conclusions, the auditor must obtain sufficient, pertinent and valid evidence by performing and evaluating the various audit tests that are deemed necessary.
- Review of legal compliance
Compliance with applicable laws and regulations should be reviewed.
- Materiality and risk in the audit
The auditor must consider the relative importance and risk in the audit when planning, selecting the methodology, determining the probes to be carried out and the procedures to be applied, especially when deciding to introduce a qualification on a given point.
RULES ON THE DEVELOPMENT OF THE PRINCIPLES RELATING TO THE PERFORMANCE OF THE AUDIT WORK
PLANNING
"The auditor should plan his work in order to identify the objectives of the audit to be performed and determine the method to achieve them economically, efficiently and effectively."
The planning of an audit work consists of the development of a global plan based on the objectives of the same. The nature and characteristics of planning vary according to the nature of the body to be audited, the knowledge of its activity, its operating environment, the quality of internal control and the type of audit to be carried out.
The rules that develop the planning principle contemplate, consequently: the priority, the objectives, the global plan, the programs, the calendar and the planning memory.
Priority
The auditing body must give absolute priority to those legally mandatory audits, respond to parliamentary requests and establish an order of priority for those that it is discretionary to carry out.
Identification of objectives
The objectives of the audit must be clearly identified and will be determined by the type of audit to be performed.
In the case of regularity audits, the objectives will be aimed at obtaining reasonable assurance that the information of the audited entity is presented in accordance with the accounting principles that are applicable to it and that it complies with the legal provisions.
In the case of operational audits, it must be evaluated whether the procedures of the audited entity guarantee that the management of resources is carried out with criteria of effectiveness, efficiency and economy.
Elaboration of the global plan
The development of the global plan should include:
- a) The definition of the type of audit to be carried out b) The collection of prior information on:
* The legal regulations that regulate the entity or object of the audit, from its legal nature and its degrees of responsibility to the knowledge of its objectives and its budgetary development, since the public administrative function is strongly determined by the legal provisions;
* the study of previous audits or reports, including the possible analysis of the corresponding working papers;
* knowledge of the organizational and functional structure of the entity;
* the accounting procedures and principles applicable to it;
* the degree of reliability of the internal control, insofar as it conditions the greater or lesser depth of the audit to be performed.
- c) Identification of the operating and accounting systems to be reviewed d) Estimation of risk areas, understood as those with possible errors or significant irregularities, for which specific tests must be designed e) Selection of the ideal audit team and the setting of the work schedule. f) Once the previous stages have been completed, it will be possible to set the scope of the audit.
Programs audit
The audit program is a document that provides a list of controls and procedures to be followed to perform the audit and prepare the report. A written program should be developed for each area into which the work to be carried out is divided.
In preparing each program, the following must be taken into account:
- a) The assignment of specific tasks to the components of each team b) The breakdown of the program according to the objectives set, taking into account the prior evaluation of the internal control and operating systems of the audited entity c) The forecast of the collaboration expected from the audited body and the possible participation of experts or external auditors d) The successive review of the program and, where appropriate, its variation as the audit work progresses.
Audit schedule
* The time necessary to carry out the different phases of the audit must be estimated, in order to ensure compliance with the planned schedule.
* The time estimate should include a category breakdown of audit team personnel.
* Estimating work time is essential, even accepting the possibility of unforeseen events that force the initial forecasts to be redone.
Planning memory
The entire content of the planning must be included in a report, which must be approved by the person responsible for the audit before starting the rest of the work.
In the event of significant changes to the scope of work in the post-planning phases, such changes should be incorporated into a supplemental report.
Audit follow-up
The auditor must assess the provisions adopted by the audited entity as a consequence of the conclusions and recommendations of previous reports, as well as provide for subsequent checks on the planned audit.
SUPERVISION
"Supervision of the work carried out by each and every team member is essential to ensure compliance with the audit objectives and maintenance of the quality of the work."
The norms that develop this principle refer to the subject who in each case must supervise, the work that must be supervised and the purposes that are to be achieved with supervision.
Supervising subject
The work performed by the assistants should be supervised by the members of the senior audit team, while the final supervision corresponds to the person responsible for the overall work. All members of the team must know their functions and the objectives pursued in each audit.
Object or scope of supervision
Supervision will range from planning to writing the report, through the performance of the audit work.
Supervision purposes
The supervision should check the following aspects:
- compliance with auditing standards; that the approved work programs are respected and, in any case, that any modification thereof is duly justified and authorized; that the working papers correctly support the comments, conclusions and recommendations included in the report; that the audit objectives are met; that the report adequately and clearly includes the conclusions, opinions and recommendations.
In turn, the reviews and supervisions must be documented in the working papers.
INTERNAL CONTROL
"The auditor, in order to determine the nature and extent of the audit to be carried out, must study and assess the existing internal control."
For these purposes, the internal control system comprises the methods and procedures established by the management of the organization to reasonably guarantee the achievement of the specific objectives set.
The need to assess internal control procedures and the points on which this assessment should focus, vary depending on the audit objectives.
Financial audit
The examination will fall on the devices established to protect assets and resources and ensure that the accounting entries are made properly.
This examination implies ensuring that internal control correctly supervises the following points:
- that the transactions are executed under the authorized terms; that there are no incompatible functions from the point of view of accounting control; that the transactions and their accounting are carried out within the appropriate timeframes; that the accounting of the transactions is carried out in accordance with the principles accounting that are applicable.
Legal compliance audit
The methods and procedures established to assist managers in complying with laws and regulations will be assessed.
Operational audit
The established systems and procedures that support the audited entity to carry out its activities effectively, efficiently and economically should be assessed. For such an assessment it is important to ensure that internal control analyzes:
- The organizational plan The procedures adopted to achieve the objectives That the resources are used in accordance with the planned policies and are not wasted.
EVIDENCE
"To substantiate their opinions and conclusions, the auditor must obtain sufficient, pertinent and valid evidence, by conducting and evaluating the audit tests that are deemed necessary."
The facts, conclusions and recommendations collected in an audit should be based on evidence. Depending on the source of its collection, the evidence can be obtained from material, documentary, testimonial and analytical evidence.
- Physical evidence is obtained from inspection or direct observation of people, tangible assets and events. Physical evidence must be documented in the form of real memos, photographs, graphics, maps or samples.
- The documentary evidence consists of information materialized in media such as letters, contracts, accounting records and invoices.
They can be both information produced and maintained by third parties and held by the audited body, as well as information produced and maintained by the latter.
- Testimonial evidence consists of information obtained from other people through answers given to questions from the auditor. These responses can provide information that was not available or corroborate evidence already obtained.
- The testimonial evidences must be endorsed by other evidences, and be evaluated considering the origin of the testimony. Analytical tests are estimates, comparisons, reasoning and analysis carried out from available information.
Documentary and material evidence take precedence over analytical and testimonial evidence.
Given that on few occasions it is possible to have absolute certainty about the validity of the information, the auditor, in order to have a reasonable basis on which to support his opinion or evaluation, requires that the evidence is sufficient, relevant and valid.
Sufficient evidence
The term sufficient refers to the quantification of the evidence obtained. It is the presence of a sufficient number of convincing evidence to support the auditors' findings and recommendations.
The assessment of the sufficiency of the number of evidence depends on the judgment of the auditor, who may use statistical methods for this assessment.
Relevant evidence
The concept of relevant evidence refers to its relevance and reasonableness. It consists of the appreciation of the relationship between the evidence and its use. In this sense, the information used to prove or disapprove a piece of information is relevant if it has a logical and sensitive relationship with that piece of information, while information that does not have this characteristic should not be used as evidence.
Valid evidence
When we speak of the validity of the evidence, we mean its authenticity. It means that the evidence must be reliable. If there are doubts about the validity or reliability of the tests, the auditors should obtain new evidence, or indicate the state of affairs in their report.
There are a number of assumptions that allow judging the validity of the evidence, such as the following:
- evidence obtained from an independent source is more reliable than that obtained from the audited body;
- evidence collected under a good internal control system is more reliable than evidence collected under an unsatisfactory internal control system; evidence derived from examination, observation, estimation and physical inspection is more reliable than those obtained indirectly; original documents are more reliable than copies; testimonies obtained freely have greater credibility than those obtained under conditions of commitment.
Work papers
A final aspect of the audit tests concerns the working papers and their preservation.
Working papers are documents that contain the supporting evidence for the auditor's findings, conclusions and judgments. They include all the evidence prepared or obtained by the auditor during the audit and are the link between the field work and the report.
Auditing organizations should establish procedures that guarantee the protection and preservation of worksheets for the necessary time.
The working papers, together with the copy of all the documentation used in the planning and the conclusions, will constitute the audit file, which must be filed.
LEGAL COMPLIANCE REVIEW
"Compliance with applicable laws and regulations should be reviewed."
Compliance with laws and regulations is important in auditing the public sector, since both agencies and programs, activities and functions are derived from laws and follow more specific principles and rules than in the case of the private sector.
The standards derived from compliance with the law refer to the responsibility of the audited body, the sufficiency of the scope of the review and the possible detection of irregular situations.
Compliance with the law and its control
The management of the audited entity is responsible for ensuring that its actions comply with the applicable laws and regulations. Internal control must supervise the management of the audited entity in order to verify compliance with the applicable legality.
For an effective review of legal compliance it will be necessary:
- Identify the laws and legal provisions that affect the economic-financial system of the audited entity and whose non-compliance may have a direct impact on the presentation or reality of the audited statements.
- Evaluate the effectiveness of internal control in the field of legality.
Sufficient reach
In determining the nature, timing and extent of controls and audit procedures required to verify compliance with laws and regulations, the auditor should assess the risk of a lack of compliance that may have an effect important information about the audit results.
Likewise, the auditor must assess the risk that the body does not comply with the laws and regulations and the risk that the internal control system adopted to comply with those laws and regulations is ineffective or does not allow detecting possible non-compliance.
In any case, legal compliance tests must be planned and carried out.
Detection of irregular situations
The auditor should establish audit controls and procedures to have a reasonable certainty to detect errors, irregularities and illegal acts that may have a significant impact on the results of the audit.
The auditor should also take into account the possibility of illegal situations that may have an effect on the results of the audit.
RELATIVE IMPORTANCE AND RISK IN THE AUDIT
"The auditor must consider the relative importance and risk in the audit when planning, selecting the methodology, determining the probes to be carried out and the procedures to be applied, especially when deciding to introduce a qualification on a given point."
Relative importance is understood to be the criterion by which the incidence of an omission or the inaccurate nature of information is assessed which, taking into account the concurrent circumstances, will probably lead a reasonable person, supported by this information, to modify their judgment.
Judgments about relative importance will be formulated taking into account the environment, and necessarily involve taking into account both quantitative and qualitative factors.
Consideration of risk in auditing involves the assessment of the error that may be committed due to the lack of evidence regarding a certain item, or due to the obtaining of deficient or incomplete evidence of it.
For the risk assessment, the criterion of relative importance should be considered, and vice versa, as they are interdependent elements for the formation of the auditor's judgment.
For public sector audits, the level of accepted risk may be lower than that of similar audits in the private sector, because there is an obligation in the public sector to be accountable and to comply with legal regulatory obligations, as well as due to the particular nature of the programs., activities and functions of the public sector.
PRINCIPLES AND RULES RELATING TO THE REPORT
PRINCIPLES RELATING TO THE REPORT
The reports include in writing the results and conclusions of the audits and must contain as much information as the audit body considers necessary to provide, for which it assumes responsibility in the terms indicated in the report.
In the enumeration of the principles and in the development of the standards relating to the report, reference shall be made to those corresponding to regularity audits and those corresponding to operational audits. In the case of integrated audit reports, the regularity audits and operational audits must be considered together. Even though some principles and standards have a greater impact on certain types of audits, all of them are stated, unless otherwise indicated, in a general way.
There is a variety of specific reports derived from the performance of the audit bodies, in which the aspects of legal or financial regularity will predominate, depending on the case, or the aspects connected with the analysis of effectiveness, efficiency and economy, and which are They will apply the rules, taking into account the nature of the audit in each case, and duly weighing the aspects under analysis.
Financial audit reports refer to accounts or facts on whose regularity, financial and / or legal, the audit body decides, incorporating into the report an opinion or conclusion with very specific meaning, content and modalities, which is why they are subject to also a specific regulation in the auditing standards.
On the contrary, the operational audit reports pronounce on the effectiveness, efficiency and economy in the management of public resources. The conclusions of these reports refer to very diverse facts, and cannot be specified in the same way as in the financial audit.
This same diversity is found in the specific reports that an auditing body may carry out on specific aspects, such as internal control evaluation, or advisory or advisory opinions.
The principles and standards included are not intended to exhaustively address the diversity of reports that may be presented, which raise problems and situations whose specific solution will have to be determined by the auditor, but rather to offer some broad lines that serve as guidance and a frame of reference.
ENUMERATION AND DEFINITION
- Presentation in due form
The actions of the external control bodies will give rise to written reports, which present the information in accordance with the requirements of clarity, conciseness, objectivity, weighting and adequate foundation or support.
- Delivery to recipients
The reports will be delivered in a timely manner to the recipients established by legal regulations, which, in principle, are the respective parliaments or plenary sessions.
- Preparation due
The reports should be prepared, as a general rule, in accordance with generally accepted auditing standards, adapted to the reality of the public sector and the content of these standards. Likewise, it will be convenient to obtain from the heads of the auditing entities written statements regarding significant aspects of the audit work carried out.
- Minimum content
The report must include, as a minimum content, the title, the identification of the persons, entities or bodies audited and those to whom it is addressed, a clear description of the reasons for the audit, its objectives, scope and audit standard. applied, comments on relevant issues and incidents, the opinion or conclusion, the recommendations, where appropriate, the date and the signature of the issuer of the report.
- Advertising
The reports will be published in accordance with the regulations applicable to each external control body.
RULES FOR THE DEVELOPMENT OF THE PRINCIPLES RELATING TO THE REPORT
PRESENTATION IN DUE FORM
"The actions of the external control bodies will give rise to written reports, which present the information in accordance with the requirements of clarity, conciseness, objectivity, weighting and adequate foundation or support."
Written form
The reports represent the written statement of what the audit body considers necessary to express as a result of its actions and define its responsibility for the work performed.
Clarity and uniformity in language
The reports should be written in clear and easy-to-understand language, avoiding the use of sophisticated terms and trying to maintain uniformity as much as possible.
Conciseness
The reports should show the relevant information in such a way that it can be easily highlighted within the overall report, and is not subsumed between comments and non-relevant data.
Objectivity
In every report, the facts must be presented objectively, including the aspects verified with accuracy and the conclusions reached in a convincing manner, avoiding vagueness or ambiguities, and collecting all the questions independently and impartially.
Sufficient information on the matters discussed will be included so that the user can make an adequate interpretation of them.
Important issues should be mentioned separately, and apart from the opinion, as long as they do not constitute exceptions or exceptions.
Weighing
The reports should be written with consideration, highlighting the improvements and avoiding the insistence on criticism of the past. Where appropriate, the difficulties in which those responsible for managing the audited entity have developed their activity must also be indicated. Avoid, in all cases, the use of sour language, as well as the adoption of positions of misunderstanding or intransigence.
Adequate foundation or support
Only information on aspects and conclusions that is duly supported by sufficient, pertinent and valid evidence will be included.
This evidence must appear clearly collected in the work papers on which all reports must be supported.
It is considered convenient to indicate in the report itself the magnitude of the samples used and the criteria for their selection.
DELIVERY TO RECIPIENTS
"The reports will be delivered in a timely manner to the recipients established by the legal regulations, which, in principle, are the respective Parliaments or Plenary sessions"
Opportunity
The reports must be presented as soon as possible to the addressees, in order to be useful, especially when the audited entity must adopt measures in relation to the content of the report. When there is a legally established delivery period, it must be respected; In the event of non-compliance with said deadline, the delay that may have occurred must be justified.
When the circumstances and characteristics of the events so advise, partial preliminary reports may be issued, in which their provisional nature will be clearly indicated, in order to enable the adoption of the appropriate measures.
Recipients
- Delivery to recipients. The reports will be delivered to the recipients established by the legal regulations, which, in principle, are the respective Parliaments and Plenary sessions.
- Knowledge by the audited entity. It is convenient, as it constitutes a very effective audit procedure to clarify and qualify the aspects susceptible to various interpretations, to comment with those responsible for the audited entity on the draft reports prepared by the audit body, once its work has been completed.
On the other hand, although the reports will only be delivered to those recipients who, in accordance with current regulations, are competent for their knowledge or use, it will be sought that in any case the persons responsible for the audited entity are aware of them, who generally They may formulate allegations prior to the drafting of the final version of the reports.
PROPER PREPARATION
“The reports should be prepared, as a general rule, in accordance with generally accepted auditing standards, adapted to the reality of the public sector and the content of these standards.
Likewise, it will be advisable to obtain written representations from the heads of the audited entities regarding significant aspects of the audit work carried out ”.
Compliance with generally accepted auditing standards
As a general rule, reports should be prepared applying the auditing standards in a uniform manner, so they should be adapted and put emphasis on those issues of greatest interest or relevance in this sector.
Adaptation to the reality of the public sector
In the application of the auditing standards and procedures relating to the reports, the characteristics and peculiarities of the audited public sector will be taken into account, for which reason they must adapt and emphasize those matters of greatest interest or relevance in this sector.
Adaptation to the content of these regulations
In any case, these rules will be applied in preference to any others, always with a criterion of flexibility.
Written representations of the audited entity
In order to complement the evidence obtained, it will be convenient to obtain written statements from the heads of the audited entities regarding relevant aspects of the audit work performed. The purpose of these statements is to clarify the responsibilities of the auditor and the auditee regarding the scope of work and information contained in the report, confirm explanations obtained verbally, and highlight the existence, where appropriate, of significant circumstances. These written statements must be signed by those responsible for the accounts and the events subject to audit and will bear the date of the determination of the audit work.
MINIMUM REPORT CONTENT
«The report must include, as a minimum content, the title, the identification of the persons, entities or bodies audited and that of those to whom it is addressed, a clear description of the reasons for the audit, its objectives, scope and standards of applied audits, comments on relevant issues and incidents, the opinion or conclusion, the recommendations, if applicable, the date and the signature of the issuer of the report ”.
Title
Every report must bear its corresponding title, which serves to distinguish it.
Identification of the audited persons, entities or bodies and of those to whom the report is directed
The name of the entity whose accounts are audited or whose management is analyzed must appear in its entirety in its full official version. This mention will be made at the beginning of the report for the purpose of proper identification; In the body of the report, the applicable legal and statutory regime must be clearly established.
The identity of the recipient must also be clearly stated.
Reasons, objectives and scope of the audit
The reports will indicate the reasons for the audit, the accounts or events that are the subject of it, the objectives pursued and the type of work or scope of the audit carried out.
- a) Reasons for the audit
The auditing actions of the external control bodies may be imposed by legal imperative, as is the case of the General Accounts, or they may be selective audits. The latter may have their origin in the initiative of the body itself, or in requests made by the respective Parliaments and by the governments and local entities, when the legislation so indicates.
- b) Audited accounts or facts
In each case, the accounts or events object of the audit will be indicated, incorporating a complete or summarized reproduction of the economic-financial information examined. It is considered advisable to include this information in annexes, in which case the text of the report will refer to the place where said information is found. It must also show whether the accounts contain the necessary and sufficient information to cover the informational objectives that correspond to them.
When information that has not been audited is included, it must be clearly identified in the text of the report, as well as in the annexes, with the indication "not audited" or a similar one that eliminates any responsibility of the audit body for it..
In any case, the part of the information that has been prepared by the audited entity or accountant must be differentiated from that which has been prepared by the audit body.
When the object of the audit is the General Account, the report must include:
- The period to which the Account corresponds, as well as the date to which the balance sheets refer.
- The information or documents that make up the Account; yThe origin of the information, in cases where there may be doubt.
In the case of operational audits, their objective will not be constituted primarily by accounts or financial statements, but by a scope of action, which must be duly identified in the report. The scope and nature of these reports are more diversified, and they tend to refer to more specific issues, with the period considered often extending over several years.
- c) Objectives
The objectives pursued by the audit will be clearly specified, and must be in accordance with the content of the specific regulations governing each audit body.
These objectives must always be written in detail, even when this implies an exact repetition of a legal text, in which case it is advisable to refer to its articles.
Normally, the objectives refer to the aspects of financial regularity, legal regularity, effectiveness, efficiency and economy.
Audit scope and standards applied
- a) General statement of the scope and standards applied
The type of verifications carried out for the evaluation of the information and formation of the judgment or opinion to be issued, as well as their scope, must be identified.
In normal situations, the statement that the examination or inspection has been carried out in accordance with generally accepted auditing standards is considered sufficient, including all those selective tests or technical procedures considered necessary, in accordance with the circumstances. This implies that there have been no limitations of any kind in the application of the corresponding techniques and that all those tests considered essential in auditing have been performed.
- b) Relative importance
When preparing and presenting the report, the criteria of relative importance and probable risk must be taken into account.
- c) Detail of the scope and tests carried out
When there have been no limitations in the application of the auditing procedures and standards, it will not be necessary to specify in detail the type of tests or the scope or coverage achieved with them; however, in specific situations it may be convenient to do so or it may even be requested by the audited entity; in its writing and presentation may vary depending on the case.
- d) Limitations on scope
In cases where there are limitations in the scope that affect the opinion or conclusion, they must be explained in detail, indicating their causes and consequences. When the limitations are numerous or of a general nature, it may be more practical to detail the procedures that have been possible to apply. In these cases, it is advisable to show the work carried out and the conclusions reached in each of the sections or areas into which the information examined is divided.
Comments on relevant issues and incidents
The reports must contain all the information and comments necessary for the proper interpretation of the financial statements and other facts under examination, such as the management of the audited entity.
Comments on the report may be due, among others, to the following reasons:
- Limitations in the scope of the work Qualifications or exceptions and uncertainties found that have an effect on the opinion or conclusion Explanations aimed at facilitating the understanding of the management, procedures and situation of the audited entity.
Subjective, justifying or laudatory comments or evaluations of the action carried out, not based on the evidence obtained, shall be avoided in the report, without prejudice to what is stated in section 4.2.1.5. of these standards. In any case, the statements of the auditor and those of the audited entity must be clearly differentiated.
At a minimum, information should be provided on the following aspects:
- Background of the audited entity, legal regime, activity, geographic scope and most significant economic characteristics.
- Legal regulations on compliance with which the report is pronounced. Accounting and management principles, criteria and practices applied by the entity. Description of the information under examination; bases of presentation of the same; accounting records system used; monetary unit used; treatment of audit adjustments, if applicable; indication of whether the information examined has been formally approved by the corresponding body, treatment or imputation of the remainder and the result of the year. Schematic description of the organization and internal control system established. Restrictions on the use of assets; contingencies due to guarantees granted, situations pending resolution and future commitments. Brief summary of possible irregularities, abuses, omissions, exceptions and uncertainties found and,where appropriate, its impact on the opinion or conclusion.
When there is information that cannot be disseminated, the report must highlight the nature of the omitted information and the legal provisions that support its non-inclusion in it. In these cases, a separate report will be drawn up, not subject to publication, addressed to the body legally authorized to access the information in question.
Opinion or conclusion
In the report, the audit body must pronounce itself, issuing a clear and precise opinion or conclusion on the fulfillment of the audit objectives regarding the adequacy of the audited accounts and / or the management to the applicable principles and criteria, and its utilization evenly.
In the case of the general accounts, their adaptation to the applicable principles and criteria must be understood as a manifestation that the information incorporated in them reasonably presents the situation and operations of the audited entity as a whole.
Opinion in regularity audits
- Opinion types
Once the necessary evidence has been obtained to issue an opinion in accordance with the auditing standards, it may present the following modalities: unqualified opinion, qualified opinion, adverse opinion. When there is not enough evidence to issue an opinion, an abstention or denial of the opinion will proceed.
- a) Opinion without qualifications. This type of positive opinion supposes the conformity of the auditing body with the content and presentation of the accounts examined, considered as a whole, and that the applicable regulations and principles have been substantially complied with, not only in the preparation and presentation of the economic information. financial, but also in the execution of operations and functioning of the control mechanisms.
The positive disclaimer opinion provides the recipients of the accounts with the best possible assurance and confidence in the information.
- b) Qualified opinion. The qualified opinion supposes the existence of exceptions or significant discrepancies in the fulfillment of the applicable principles, norms and criteria, without justifying an adverse opinion or an abstention or denial of opinion. A qualified opinion may respond to any of the following circumstances:
- That there are limitations to the scope of the audit That the financial statements are erroneous or incomplete, due to non-compliance with accounting principles and standards, non-uniform application of the same or existence of significant omissions of information That there is uncertainty regarding the content of the accounts and the events related to them, whose final development and quantitative impact are not susceptible to a reasonable estimate.
These circumstances must be verifiable, and be explicitly included in the report, concisely, duly justified, and quantifying as far as possible their incidence. In any case, the opinion must mention the existence of these exceptions.
- c) Adverse opinion. When the exceptions or breaches are of a general nature, very numerous or very significant, and have as an effect a distorted image of the management and situation or a significant breach of the applicable principles and criteria, an adverse or negative opinion must be expressed in relation to the audit objectives.
Exceptions or discrepancies must be clearly explained in the report, duly justified, and their incidence quantifying as far as possible. The opinion will clearly reflect its negative character.
- d) Abstention or denial of opinion. When it is not possible to issue a global statement, this impossibility must be manifested, which will give rise to an abstention or denial of opinion. In any case, this fact must be clearly stated in the report, stating the reasons that justify it.
Emphasis paragraph. In exceptional circumstances, the report may emphasize some significant matters related to the audited accounts, which contributes to a better understanding of the situation of the audited entity, without implying any type of exception or exception in the opinion.
Examples of these circumstances are indications that the audited entity has carried out important transactions with entities or persons related to it, that important events have occurred between the closing date of the financial year and the date of the audit report that do not modify the accounts, or that the entity has not applied any general accounting principle or standard to better provide a true picture of the entity's situation and operations.
Mentions of important issues will be collected in a separate paragraph, called the emphasis paragraph, which should not be mentioned in the opinion as it is not a qualification.
In no case may a reservation be substituted for an emphasis paragraph.
The conclusions in the operational audits
Due to their very characteristics, operational audit reports are more varied than regularity audit reports, generally incorporating more extensive and descriptive reasoning in their conclusions, which are not susceptible to detailed regulation.
Care will be taken that the conclusions of the operational audits are as objective as possible; However, the very nature of the audited facts, sometimes difficult to quantify, means that the conclusions are more influenced by subjective interpretations and judgments than in the case of regularity audits.
In the conclusions of the operational audits, there will not be frequent global pronouncements on the effectiveness, efficiency and economy achieved in the management of resources, unless these are limited to verifying the existence or not, and where appropriate, evaluating the operation of controls over these aspects in the organizations themselves; It will therefore be normal to incorporate more specific statements on specific actions and policies in the conclusions.
recommendations
The opinion or conclusions show whether there is conformity between the audited accounts and facts and the principles, criteria and standards that are applicable to them; it is the most objective verification of the facts, which must be presented in a concrete and concise manner. The audit body, however, usually has valuable information about the audited entity, and is in a position to indicate as recommendations, concrete measures to improve its performance.
These recommendations may refer to the application of accounting principles, legal standards or internal control procedures in regularity audits, and to management in operational audits.
For the recommendations to be more effective, it is important that a subsequent follow-up is carried out on the measures adopted to correct the deficiencies detected.
Recommendations for the improvement of internal control procedures
The audit body must carry out a review and evaluation of the internal control procedures, in order to establish the scope and depth of the audit techniques.
This evaluation usually detects situations and procedures that can be improved, which can be brought to the attention of the audited entity, either within the audit report itself, as an annex to said report or as an independent and separate report. The decision on the form of presentation is conditioned by the interpretation that each external control body makes of its specific regulations.
The external control bodies may also carry out specific internal control tasks, with a differentiated identity and issuing a report on the same, in which case it will be a report with the characteristics of the operational or management audit.
Date of completion of the work and delivery of the report
Report date
The report must indicate the date of completion of the audit work. This date represents the moment up to which the audit body has been in contact with the audited entity and is responsible for knowing the facts that may affect the information examined.
This date will therefore not coincide with the delivery date of the report, although it is recommended that the gap between these two moments be as short as possible.
The date of completion of the work can be placed at the moment in which all the tests that allow a judgment or opinion to be formed on the object of the audit have been completed, and which will normally be after the period to which the accounts themselves are referred. This moment is not easy to define at times, but it usually coincides with the end of the work in the dependencies of the audited entity.
Events after the closing of the audited accounts
The content of the report must refer to the closing date of the financial statements; However, the additional evidence provided by known facts between the closing date of the accounts and the completion of the work, provided that they refer to matters or situations that existed on said closing date, and that affect the estimates inherent to the accounting process. preparation of the accounts, must be used by the audited entity to modify them.
On the contrary, if the aforementioned matters or situations did not exist at the closing date of the accounts, it will not be appropriate to incorporate any modification to them; however, if subsequent events are very significant, an explanatory comment will be incorporated by the audited entity, to avoid erroneous or incomplete interpretations.
If the accounts are not modified, or an explanatory comment is not incorporated, as appropriate, the report of the audit body will have to highlight this circumstance.
Events after the completion date of the audit work
The auditor has no obligation to continue or extend his checks beyond the date of completion of the audit engagements. However, if between the date of completion of the work and the date of delivery of the report to the addressees there is knowledge of significant events that occurred after the completion of the audit work in the offices of the audited entity, the fact should be investigated, and check whether the financial statements have been modified or a negative comment has been incorporated, mentioning the omission in the audit report.
Firm
The responsibility for the reports must be assumed by the individual or legal entity that issues them, which will materialize when they are signed. When the control body is collegiate, the signing of the reports may be assumed by its president, on his behalf and on his behalf.
ADVERTISING
"The reports will be published in accordance with the regulations applicable to each external control body."
Circumstances that could introduce confusion about what information is covered by the report and what is not covered by the report must be avoided. In general, partial publication of the report should not be authorized.
The publicity of the report will be a transcript of the original, and will preserve its identity in form and content.
When the accounts are published, it is recommended that the audit report be reproduced with them. When there are circumstances that hinder or prevent this practice, it should be noted at least whether the accounts have been audited or not, and if so, the name of the audit body, the date of its report and the indication of whether it was denied or not. issued an opinion, and in this case whether it was positive or negative, with the exceptions incorporated.
In the case of operational audits, the reports can be published independently of the accounts, leaving in any case clearly established which are the facts or accounts to which the report refers.
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