The Context
 A paradigm shift taking place in governance. Stakeholders expectations are
rising who expect government to be accountable, transparent, effective ,
efficient, equitable and inclusive and enforcing the rule of law.
 Public auditors have to respond to such rising expectations and provide a report
card as to the quality of Governance.
 Accordingly, Audit Reports should provide assurance to the stakeholders that
public investments are being administered economically, efficiently and
effectively
 thereby significantly contributing to the improvement of public policy, delivery of public
services and quality of governance for the benefit of the people.
 In this context the quality of our audit reports assumes significance. There is
an urgent need to address quality issues.
The Context
 An added responsibility in view of the Department’s Mission of promoting
accountability, transparency and good governance through high quality
auditing and accounting and providing independent assurance to our
stakeholders
Existing Guidelines in place to address Quality issues
 Auditing Standards
 PA Guidelines
 Financial Attest Guidelines
 Supplementary Guidelines on Evidence Gathering Analysis and Evaluation
Techniques
 An AQMF developed by the Department to ensure compliance with the DPC
Act, Auditing Standards and Policies and guidelines
 Department has thus taken several initiatives to put in place a rigorous quality
review and assurance mechanism but these have not been assimilated in our
working.
Findings of the Peer Review
 Indias AQMF is conceptually sound..however there is a need to strengthen
the AQMF to increase the level of assurance provided to the C&AG that
these Auditing requirements are consistently being met.
 The principal area where SAI could improve its adherence to Auditing
Requirements is the application of auditing standards. Auditing Standards
require the Audit reports to be balanced..there was scope for around
half(out of 35)of the reports reviewed to have been more balanced in
content and tone.
Background
This Committee was set up in mid-February 2015 to suggest improvement in
the quality of the audit reports in line with the rising expectations for good
governance.
 Shri R N Ghosh, DG (WR)
 Shri Parag Prakash, DG, Defence Services, New Delhi
 Shri P K Mishra, DG (Commercial)
 Ms. Meenakshi Sharma, DG (PPG)
 Shri K S Subramanian, DG (IR)
 Shri Purushottam Tiwary, PD (personnel) – then (PAC)
Audit Quality – a continuous process
 The Committee noted that the department has developed a credible
audit quality management framework and specific implementation
guidelines like Performance Auditing Guidelines, Financial Auditing
Guidelines etc.
 The Committee felt that quality improvement is work in progress
and is an ongoing and a continuous process.
Improving Audit Quality – an ongoing process
 there is always scope for further fine-tuning our work methodologies
for imbibing the lessons learned from audit experiences to help
ensure consistent quality in our audits
 that the quality features inbuilt into our audit processes needed to be
reiterated and re emphasised to carry forward the goal of
improvement and up gradation forward.
Audit Quality – an evolving process
 The recommendations in the following slides should be taken as
supplemental to the already existing audit guidelines and best
practices.
 Like any evolving document, these recommendations would need
revisiting with the passage of time, with technological advancements
and changes in the audit environment and as the audit processes and
methodologies further evolve.
What is Quality?
Quality Dimensions
 Significance and value of matters addressed in audits
 Scope and completeness in planning and execution of audits
 Efficiency in the performance of audits and audit-related work
 Objectiveness and fairness in assessments
Ensured through
 Reliability, relevance and validity of the findings
 Timeliness of the issue of audit reports
 Clarity in the presentation of audit reports
 Effectiveness in terms of results and impacts achieved
What needs to be fixed?
 Enormous amount of time is spent in editing the Draft Report.
 Hardly any time for understanding the entity and study its internal processes and control systems.
 Pilot studies are extremely superficial and highlight none of the aspects essential for effective
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planning.
Planning exercise needs improvement. We need to devote greater time to planning and field Audit.
Unchecked proliferation of audits & Audit Reports is spreading our resources too thin over too many
areas, with none getting adequate attention and time
Average no of Central reports: 1948-87: 6 ; 2013-14: 32
Average no of State AR: Till 1980s- 1; 2009-10: 3; 2013-14: 6: total impact from 25 in 1987 to more than
140 now
 A widely held perception that not enough btime being given for field work.
 Despite proliferation of reports, assurance is missing.
Quality deficit – the elements
 Assurance on adherence to manuals and guidelines:
The Committee felt that the only way to ensure quality is to reemphasize the need to follow the control procedures as laid
down in our Guidelines.
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Weak evidence gathering and weaker documentation
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Level of acceptance of audit observations and their compliance
(i.e. audit observations/ recommendations accepted and acted upon
by government) is low.
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Quality deficit – the elements
 The size of the reports. Often too voluminous and verbose.
 Excessive emphasis of facts and figures; not enough analysis and
insight
 Language used is extremely monotonous and does not hold reader
attention
 Any report that tends to be verbose and is replete with excessive
facts and figures not central to the Audit findings induces reader
fatigue and ennui and does not address stakeholders’ expectations.
Suggestions for enhancement of quality.
Shift in audit orientation from fault finding to assurance.
 There is an urgent need for a decisive shift in the focus of audit on
exception reporting of shortcomings to a more holistic approach and
providing a balanced view.
 There is need for Institutionalising assurance mechanism on adherence to
Manuals and Guidelines
Setting evidence and documentation requirements
 There should be rigorous adherence to guidelines relating to evidence
gathering and documentation at every stage of the audit process.
 Insistence on documenting the entire universe of audit work, and not merely of
what was detected will ensure audit accountability and improve adherence to
auditing standards and guidelines.
Suggestions for enhancement of
quality
Improving acceptability of audit results
 We need to reiterate our existing PA Guidelines instructions about
engaging actively with audited entities throughout the audit process,
by means of constructive interaction
 Consultation with outside experts – drawing up a panel
Reporting of audit results
 A good Audit should result in findings/ recommendations that are specific,
actionable and implement able .
Suggestions for enhancement of quality
 Setting benchmarks for audit effectiveness
Benchmarks for various stages of audit process could be
prescribed to set standards of audit quality and effectiveness.
 Perceived usefulness of audit by the auditee organizations
 as reflected in their level of compliance and implementation
of recommendations,
 Improvement in the overall accountability mechanism and
transparency have generally been considered as the
parameters of assessing audit quality and effectiveness by
SAIs.
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Role of Headquarters vis-a-vis Field Offices
 Role of Headquarters vis-a-vis Field Offices:
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There is need to firmly chalk out the responsibility of Headquarters visa-vis field offices in processing and finalising of audit reports.
The accountability at each level needs to be delineated so that quality
controls are firmly established.
The responsibility of checking of facts and figures should be squarely
placed in the domain of the field offices.
The Headquarters’ role would be that of providing higher quality
assurance in terms of the broad thrust and direction of audit, of audit
meeting the objectives set out and in overall improvement of audit
quality.
Suggestions for enhancement of quality
Quality Assurance procedures- Post Audit Quality Reviews
 The quality control assessment procedures should include
post-audit reviews of a selected sample of completed audits
and the associated working papers, performed by individuals
and/or groups who are independent of the audits under
review.
 Review Teams should have broader application across the SAI.
 The results of the sample of Post Audit Quality reviews that is
representative of SAI’s work along with recommendations for
improvement, need to be presented to the top management or
to an audit collegium specifically constituted
Suggestions for enhancement of quality
Institutionalising the space for innovation in audit:
 Audit procedures, while inculcating a sense of discipline and
professionalism need not curb the initiative and good judgement
of the auditor in adapting to particular circumstances.
 An innovative mind and spirit should be cultivated and nurtured
to enhance quality of our audit products and processes.
 Towards this end, there is need allow space for innovation and
flair in audit, without, of course, in any way lowering the rigour to
follow the control procedures as laid down in our Manuals and
Guidelines.
Take away
 Reduce the number of reports.
 Improve the relevance of Audit Reports
 Improve readability.
 Shift from fault finding to assurance.
 Involve experts during the course of Audit.
 Draft Audit Report to be peer reviewed by persons not associated with the
Audit.
 With Audit areas getting more and more complex build in specialisation.
 All philosophers have interpreted the world. The task however is to
change it.