TURKISH COURT
OF ACCOUNTS
(TCA)
EUROSAI COMPLAINCE AUDIT SEMINAR
Use of the Compliance Audit Guidelines ISSAI 400 and 4000-4999 and Best Practice
VILNIUS 28-29 OCTOBER 2014
CASE STUDY:
SAMPLING FOR REASONABLE ASSURANCE IN REGULARITY AUDIT
About TCA’s audit and judicial functions:
The TCA carries out regularity (financial and compliance) and performance audits.
Financial audits; consist of an evaluation and an opinion on the reliability and accuracy of
public administrative bodies' financial reports and statements, and whether or not those
bodies' financial decisions and transactions and any programs and activities are compliant
with the law. The auditors also evaluate the auditees' financial management and internal
control systems.
Compliance audits; take the form of an examination whether auditees' revenue, expenditure,
assets and other accounts and transactions comply with the law and other legal arrangements.
In performance audit, the auditors evaluate whether or not public resources have been used
effectively, efficiently and economically. They also assess auditees' activities against the
goals and indicators which the latter have set with regard to accountability.
At the end of audit examinations, auditors prepare “Audit Reports” and “Judicial Reports”.
While audit report results are reported to the Turkish Grand National Assembly, judicial
reports are sent to the Chambers of Turkish Court of Accounts.
In the exercise of its judicial function, the TCA decides whether or not the accounts and
transactions of the competent departments are in accordance with the legal arrangements. At
the end of the audit process, the auditors prepare an enquiry into any losses to the public
purse. If the auditors are still dissatisfied with the counter-arguments of the competent
officials, they prepare a judicial report, which will contain the auditees' arguments and the
auditors' opinion. The chambers reach a final decision on any charges of public loss in the
judicial report, though there are still legal remedies such as appeal, revision of trial and
correction of decision.
1
TURKISH COURT
OF ACCOUNTS
(TCA)
EUROSAI COMPLAINCE AUDIT SEMINAR
Use of the Compliance Audit Guidelines ISSAI 400 and 4000-4999 and Best Practice
VILNIUS 28-29 OCTOBER 2014
Background Information About The Scientific and Technological Research Council of
Turkey (TÜBİTAK)
The Scientific and Technological Research Council of Turkey (TÜBİTAK) is the leading
agency for management, funding and conduct of research in Turkey.
It was established in 1963 with a mission to advance science and technology, conduct
research and support Turkish researchers. The Council is an autonomous institution and is
governed by a Scientific Board whose members are selected from prominent scholars from
universities, industry and research institutions.
TÜBİTAK is responsible for promoting, developing, organizing, conducting and coordinating
research and development in line with national targets and priorities.
TÜBİTAK not only supports innovation, academic and industrial R&D studies but also in line
with national priorities develops scientific and technological policies and manages R&D
institutes, carrying on research, technology and development studies. Furthermore, TÜBİTAK
funds research projects carried out in universities and other public and private organizations,
conduct research on strategic areas, develops support programs for public and private sectors,
publishes scientific journals, popular science magazines and books, organizes science and
society activities and supports undergraduate and graduate students through scholarships.
The entity has 10 sub-offices and in the course of understanding entity, the audit team realized
that the controls at each sub-office are not the components of one overall control system. And
also there have been identified material control weaknesses concerning TUBİTAK’s project
incomes, property, plant and equipment and payrolls. Team determined materiality level as
7.230.000 TL by amount.
2
TURKISH COURT
OF ACCOUNTS
(TCA)
EUROSAI COMPLAINCE AUDIT SEMINAR
Use of the Compliance Audit Guidelines ISSAI 400 and 4000-4999 and Best Practice
VILNIUS 28-29 OCTOBER 2014
Case study is taking place on the audit of following five areas:
1. Project incomes
2. Payrolls
3. Property, plant and equipment (tangible fixed assets)
4. Procurements
5. Daily allowances
Details available about five account areas are given above:
1. Project Incomes:
The entity generates income from carrying out research, technology and development studies
for public and private sector. Each sub-office has special aims and technical capacity in order
to carry out projects. Project revenues are nearly 70% of total incomes.
Audit team considered that the value of above mentioned account area is above the materiality
level and has no overall control environment. Owing to lack of sufficient information in the
accounting system about projects, auditors examined Fiscal Source Management System
which is set up to follow projects’ income-expenditures. Audit team found out that each
project has a project budget and when the money is transferred, the related amount is recorded
as income to the project budget and project’s expenses are incurred from project’s income.
And also all transactions are recorded to accounting system. When the project is finished,
project budget is closed and residual income is recorded as entity’s revenue. Because of
account area’s nature, it is not possible to choose sample from transactions. Instead of using
records, team provided each sub office’s project list and selected projects from each office on
the basis of amount, type and closing dates corresponding 2013. Through 100 projects, 50
projects were selected to conduct audit on income and expenditure transactions. At the end of
audit, errors detected through compliance audit are mostly irregularities arising from noncompliance with existing legal requirements and these findings are included in audit report
but are not taken into account in audit opinion. And team also detected classification errors
3
TURKISH COURT
OF ACCOUNTS
(TCA)
EUROSAI COMPLAINCE AUDIT SEMINAR
Use of the Compliance Audit Guidelines ISSAI 400 and 4000-4999 and Best Practice
VILNIUS 28-29 OCTOBER 2014
which are systematic and having high amount, so all projects classification errors were
calculated and taken into consideration in order to reach an audit opinion. Total and net
classification error was 2.560.000 TL.
2. Payrolls:
The entity has 10 sub-offices and in payroll process each human research office has authority
to insert data and make necessary amendments for their sub-offices. In 2013, personnel
turnover was high for six sub office. The payroll system for the entity is complex and there
are several different pay scales used. And also each office uses different human resources
computer programme.
Since each office functions as a separate entity and has high personnel turnover, audit team
decided to audit a whole payrolls with 100 % in each of six office. Payrolls are paid monthly
and each month nearly includes 2500 personnel payroll record. Audit team carried out
analytical test to confirm recorded amount’s accuracy for each month. And also examined
new employer’s folders whether the personnel’s employment was complied with regulations
and salaries were calculated correctly. On the other hand, salaries paid by four sub-office
were examined only for January and July’s because of salary increases taken place in these
months. At the end of the audit, team found losses from public resource that were reported in
judicial report and also in audit report. The other findings are some irregularities concerning
employment of new personnel.
3. Tangible fixed assets:
In the planning stage, the audit team detected the existence of non-recorded assets in the
accounting system, besides that, there was no established information management system for
property, plant and equipment. Therefore, audit team decided that this area is material. To
provide this criterion, auditor compared entity’s assets list with land register list and finally
reached that some of entity’s estate properties were not placed in assets list and also in
accounting records. In addition to that, some of the recorded estate value was not correct in
4
TURKISH COURT
OF ACCOUNTS
(TCA)
EUROSAI COMPLAINCE AUDIT SEMINAR
Use of the Compliance Audit Guidelines ISSAI 400 and 4000-4999 and Best Practice
VILNIUS 28-29 OCTOBER 2014
respect of regulations, and also asset types in the accounting system were not in line with the
real situation.
4. Procurements
Procurements are divided in sub-populations such as goods and services purchasing.
Goods and services purchasing are divided in contracting and non -contracting procurements.
Contracting procurements are audited 100% with procurement notices and contracts. Non
contracting goods and services are audited with using statistical sampling method, MUS.
After auditing contracting procurements, some detected losses from public resource were
reported in judicial report and also in audit report. For non- contracting procurements, audit
team found out irregularities in respect of public procurement law and regulations and internal
control weaknesses about documentation.
5. Daily Allowance:
When comparing materiality level, total amount of the account seems material. (4.573.471, 40
TL) However, audit team evaluated that account area was non-significant by context and had
strong controls. There were 5.118 transactions in accounting system and within this total 2007
transactions were recorded by only one sub-office and monetary value was 2.902.069,5 TL.
Therefore, team decided to divide population as one sub-office transactions population and
other sub-offices transactions population and implemented statistical sampling (MUS) for
each sub population to determine sample size. One sub-office population sample size includes
185 transactions and value of them was 70.971 TL. However, value was regarded as low by
the team and sample size was increased to 250 transactions. Value of the new sample size was
226.165,76 TL and team considered this amount as a reasonable level. The other sub-office
population area’s sample size was calculated again by MUS and sample size was 95
transactions and value was 91.274,13 TL which was regarded as reasonable. At the end of
audit, team hasn’t detected any error.
5