ANNEX 10
Audit Instruction
for programs supported by the Danish Red Cross (DRC)
with use of Danish Government funds
The present Audit Instruction covers the audit and reporting requirements for the audit of programs
supported by the Danish Red Cross with use of Danish Government funds.
Appointment of auditor
1. The auditor of the accounts related to the programs supported by the Danish Red Cross shall be
appointed jointly by the Danish Red Cross and the National Society. The auditor must be a certified
public accountant, affiliated with an internationally recognised audit company.
1.2 In case of a change of auditor, the newly appointed auditor must approach the resigning auditor,
who is obliged to inform the National Society, the Danish Red Cross and the newly appointed
auditor about his reasons for resigning.
General audit requirements
2. The financial audit must be carried out according to international standards on auditing (IFAC).
2.2 The auditor shall verify if the financial statements “give a true and fair view of the program's
assets and liabilities, financial position and result". In addition the auditor should check whether
the transactions included in the financial statements are in conformity with the project document,
the contract, and the national legislation and other rules for grant management. The auditor must
also assess whether due economic considerations have guided the transactions covered by the
financial statements.
Audit Scope
3. The scope of the audit depends upon the organisational structure and the administrative
procedures of the National Society, including the internal control and other conditions pertinent to
the accounting process.
4 At the audit at the end of the reporting period the auditor should verify:

that the financial statements have been prepared as prescribed in the “General Requirements on
Accounting, Documentation and Reporting for Recipients of Danish Red Cross Supported
Projects” (annex 12). , and expenditure has been specified with at least the same degree of
details as in the budget and in such a way that the items of the budget and the accounts are
comparable. (See annex 12);

that the accounts are correct and accurate and do not contain significant errors or omissions;
Audit Instruction DEC2002
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
that the transactions comprised by the financial statement are in conformity with the conditions
and general objectives for the grants as agreed with the Danish Red Cross in the contract.
4.2 The auditor must check that the grant received from Danish Red Cross has been kept in a
separate bank account, and that all transfers to and from the account have been reconciled with
confirmations received from Danish Red Cross. The auditor should based hereon check that the
funds received from Danish Red Cross are not commingled with other funds administered by the
national society.
Reporting requirements
5. If the auditor becomes aware of illegal activity or significant non-compliance with the
stipulations and requirements in the contract and the Programme Document, the auditor is required
to immediately inform the Society’s management and board. The auditor should also ensure that the
National Society informs the Danish Red Cross within 3 weeks from the date when the issue is
identified by the auditor. The information to the Danish Red Cross must be accompanied by the
auditor’s observations related to the matter. If the national society fails to forward this information
to the Danish Red Cross, it is the obligation of the auditor to do so.
5.2 The instructions contained in 5. also apply if the auditor, either as part of his audit or in other
ways, becomes aware that the program's continuance (going concern) is uncertain due to financial
or other reasons.
6. The audited financial statements must include an audit opinion, stating that the financial
statements have been audited in accordance with the stipulations and guidelines in the present Audit
Instruction. The audit opinion must also include the auditor’s qualifications, if any.
6.2 The auditor shall also prepare an audit report, describing the following:

audit tasks performed and conclusions hereon;

significant uncertainty, errors or omissions in connection with the National Society’s
bookkeeping, accounting system or internal checks;
The audit report must contain information as to whether the auditor is independent, whether during
the audit the auditor has received all information requested, and whether the auditor has noted any
instances where the grant has not been used as stipulated in the contract and the Programme
Document. The audit report should also contain information regarding any special reports or
declarations, special explanatory statements and advisory functions and assistance rendered.
6.3 No later than 30 days after the end of the reporting period, a draft audit opinion and a draft audit
report on the financial statements should be issued to the management of the national society. The
draft audit opinion and the draft audit report have to be submitted DRC. The National Society is
required to submit to the Danish Red Cross no later than 2 months after the end of the reporting
period 3 sets of audited financial statements and 3 copies of the audit report.
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Additionally, a copy of the national society’s audited general financial statements and the
accompanying audit report should be send to the Danish Red Cross, as soon as the financial
statements have been approved by the National Society’s authorized body.
Other issues
7. As stipulated in the contract, the National Society will provide the necessary assistance, so that
the program accounts can be audited as efficiently as possible. The National Society management is
required to give the auditor any information that may be material to the auditor’s assessment of the
accounts and of the Society’s administration of the program, in particular in regards to goals and
results attained. Similarly the Society’s management must give the auditor access to initiate any
examination that auditor considers necessary, and ensure that the auditor receives the information
and assistance needed for performing the audit.
8. Before signing the agreement, the National Society is obliged to obtain written confirmation from
the auditor that auditor will carry out the audit in accordance with the present instruction.
8.2. The Danish Red Cross reserves the right to appoint other auditors if deemed necessary.