1. Toward a New Role Identification for State Audit Systems in National Development
    

2. State Audit Systems for Economic Development
    

3. State Audit Systems and Social Development
    

4. State Auditing in Public Enterprises
    

5. State Audit and Computerised Financial Systems
    

6. Public Auditing in Social Science Disciplines

SEOUL RECOMMENDATIONS
STATEMENT OF GUIDELINES FOR THE SUPPORTIVE ROLE OF STATE AUDIT SYSTEMS IN NATIONAL DEVELOPMENT

The background and country papers on various sub-themes under the main-theme of the Supportive Role of State Audit Systems in National Development, discussions in the Manila workshop-cum-seminar, and the deliberations at the First International Seminar here in Seoul show the following:
 

1. The State Audit System in each country is determined by constitutional and legal mandate as well as national acceptability and operates within the framework of the political and administrative systems.

2. The State Audit System makes a positive contribution to national development through audits of legality, compliance and propriety of expenditure on development programmes; such audits assist in the orderly management of governmental tasks and prevent the waste of national resources for socio-economic development.

3. While continuing efforts to strengthen financial audits, Supreme Audit Institutions must progressively conduct audits aimed at evaluating the efficiency and effectiveness of development programmes, where appropriate. They must also correlate investments made by the government in different areas of development with the results of such expenditure.

4. Strategies to introduce reforms and innovations in this direction have to be taken step by step on a selective, experimental basis.

5. Supreme Audit Institutions must develop this function in a way that their efforts are in harmony with those of planners and administrators and thereby promote national development. This calls for an appreciation of each other's role.

6. The role of the State Audit System must be development-oriented and positive; equal emphasis must be placed in auditing reports on the accountability and on improving the planning, programming, implementation and delivery processes.

THEREFORE, in the light of the above considerations, the Second Assembly of the Asian Organisation of Supreme Audit Institutions recommends the following General Guidelines:
 

1. The State Audit System should endeavour to develop information, evaluation and reporting systems within the departments/agencies/public enterprises as part of the accountability process.

2. The objectives as well as the norms by which development programmes and investments are to be judged need to be clearly laid down by the planning and sanctioning authorities so that a meaningful audit can take place.

3. Examination of the effectiveness of development programmes may be conducted by Supreme Audit Institutions wherever allowed under their mandate. In other cases, state audit may examine the systems for evaluating the development programmes within the concerned departments, including the efficiency with which these are operated.

4. State audit is not a substitute for the accountability of the executive and legislature with respect to national development; and this accountability should not be impaired through the auditing process.

5. As a considerable proportion of expenditures on development is incurred by the state via financial assistance to local bodies and authorities as well as voluntary organisations, these expenditure should also be audited by the Supreme Audit Institution.

6. Selection and formulation of policies and strategies of development and specific programmes to achieve national objectives are the functions of planning and other agencies. In view of the institutional and legal mandate of state audit, the concept of state audit as an independent, objective and ex-post-facto activity and the respective division of roles in national development, state audit should not interfere with questions of policy making and strategy. Rather state audit should focus on evaluating the utilisation of resources and the achievement of objectives, granted that such evaluations may at times reflect on questions of policies and the selection of strategies.

7. Many development programmes tend to loose their efficiency and even relevance with the lapse of time. State audit can help prevent waste and result in the more efficient application of limited resources by sanctioning only such programmes as are needed and remain relevant and efficient.

8. There is a need to bring about greater efficiency and efficacy in the infrastructure administrations and in developing cost consciousness among the administering agencies. State audit can help improve the administration of services and institutions including their accounting, costing and internal control systems.

9. A pre-requirement for measuring the results of development programmes is reliable and accurate performance data. State audit should, therefore, be concerned with making sure such data is available, comprehensive of high quality and reliable.

10. When auditing development programmes, state audit should, in addition to examining the performance, analyse the results of low performance, and take note of administrative problems. Otherwise, state audit will become isolated and regarded as an unnecessary obstacle in the development process.

11. As the value and effectiveness of state audit ultimately depends on the consideration given to and the use which is made of its findings by the legislature, planners and administrators, Supreme Audit Institutions should work to enhance their credibility by increasing the relevance and validity of their evaluation, especially when similar evaluations are conducted by other agencies.

12. Among the Supreme Audit Institutions there should be a greater sharing of experiences and techniques related to the audit of development programmes; specific regional, inter-regional, international projects should be set up to promote auditing and evaluation techniques in different areas of development.

The following specific guidelines of sub-themes are further recommended:

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SUB-THEME I:
TOWARD A NEW ROLE IDENTIFICATION FOR STATE AUDIT SYSTEM IN NATIONAL DEVELOPMENT
 

1.1     As the basis for determining the role of the SAS in any country is specified by law, efforts to make the SAS more supportive of national development may necessitate reexamination and revision of the law on state audit in a country. Changes in organisational structure, audit directions and techniques cannot be implemented without corresponding changes in the legal framework.

1.2     A SAS cannot operate in isolation, but has to have the support of and linkage with other systems such as economic, social, and politico-administrative systems. Therefore, the SAS should assist in fostering a cooperative and understanding environment among these systems.

1.3     For audits to achieve the most effective results, audit reports must be objective, responsive and accurate, and must be submitted at the proper time to the right parties.

1.4     If the state audit system is not responsive to the shifting requirements of developmental stages, it may be regarded as obstructive by programme agencies, resulting in internal stagnation and alienation from planners and implementers. This may damage the image of the SAS as it pursues national development.

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SUB-THEME II:
AUDIT SYSTEM FOR ECONOMIC DEVELOPMENT
 

2.1     Some pre-requisites for the role of the SAS is adequate planning, budgeting, and accounting systems suitable to the specific stage of economic development, therefore, the Supreme Audit Institutions should make constructive contributions towards making these systems more development-oriented.

2.2     Where the Supreme Audit Institutions lack the expertise to conduct the audits of efficiency and effectiveness of development programmes, they may seek the services of outside consultants including firms of chartered accountants, wherever regulations permit.

2.3     Internal control and internal audit systems in the organisations responsible for national development should be developed and strengthened so that management/operational audits can be taken up, to the extent that the efficiency and effectiveness of the internal audit system is established for such evaluations, the state audit can rely on it and cooperative auditing can be developed.

2.4     The SAS should gradually cover all levels of management as well as various sectors of national development, and gradually move from the transaction and activity levels towards a stage of delivery of services and their impact. State audit should not only examine the inputs or intermediate outputs, but also the final outputs of development programmes.

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SUB-THEME III:
STATE AUDIT SYSTEMS AND SOCIAL DEVELOPMENT
 

3.1     As economic and social development in a country is an integrated process and as governments are making increasingly large investments to improve the quality of life of the people, state audit must examine social changes and improvements in the quality of life brought about as a result of social development.

3.2     In auditing expenditures on social development, state audit may be guided by the nationally accepted social and other relevant indicators in the process of selecting sectors for audit and evaluating of results.

3.3     Since social change and social improvement are slow processes and may be due to various factors including interaction of different programmes and sectors, the evaluation of programme results in the area of social development presents certain special problems. Apart from the quantitative improvement, such appraisals are concerned with the qualitative aspects which are difficult to measure. Such problems may be identified by undertaking pilot projects in each country which are designed to find solutions and develop techniques.

3.4     For the meaningful audit of social development programmes, it is important to recognise that accountability provides the base for social audit.

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SUB-THEME IV:
STATE AUDITING IN PUBLIC ENTERPRISES
 

4.1     In extending audit coverage the SAI encounters difficulty where the charters of public enterprises do not clearly define their objectives and more so, where proper institutional arrangements for the public enterprises do not exist. The SAI should adopt a pragmatic and rational approach when extending audit and/or review coverage to such public enterprises.

4.2     The progression from conventional audit to performance audit and/or review of public enterprises should be done in stages. Only those areas where the SAI can discharge its duties competently and persuasively should be selected for performance review. Areas which are common to almost all kinds of public enterprises such as store management, and inventory control, transportation, etc. could perhaps be taken up in the earlier stages of development of the SAI.

4.3     In the course of performance audit and review of public enterprises, it is worthwhile for the SAIs to sort out areas of agreement through dialogue/discussion at the various administrative levels of public enterprises, and then incorporate the final results of the audit reports for consideration by the select committee of the legislature and/or the head of the executive branch of the government.

4.4     In countries in which the number of public enterprises is very large, it may be advantageous for the SAI to develop organisational specialisation by setting up separate audit units for the audit of enterprises in the different sectors of industry.

4.5     The SAI should encourage better utilisation of accounting standards and policies developed by the appropriate authorities, covering such aspects as asset valuation and accounts classification.

4.6     Recognition of the need for a multi-disciplinary staff in the SAI is imperative. It is recommended that the SAIs work towards recruiting personnel on a contract basis for short periods or on a permanent basis in consonance with audit assignments.

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SUB-THEME V:
STATE AUDIT AND COMPUTERISED FINANCIAL SYSTEMS
 

5.1     With the growth of the public budget and the diversification of state activities, the public sector in many countries has computerised its financial system. State auditors are required to perform audit on the installation and operation of computer systems and to develop new auditing techniques. Accordingly, Supreme Audit Institutions may establish specialised units for the audit of computer systems, prepare EDP manuals and procedures, and develop new audit techniques using generalised audit software packages.

5.2     Although public sector expenditure and activities have increased tremendously, the Supreme Audit Institutions have not grown proportionately. Some Supreme Audit Institutions are developing their own computer capability; and some audit institutions are acquiring computers or terminals in order to systematically collect and arrange auditing information for effective utilisation. Before introducing such a capability, a cost effectiveness analysis must be conducted. More importantly, however, a Supreme Audit Institutions must make sufficient preparation including the rationalisation and standardisation of audit work.

5.3     To meet the challenge of computerised financial systems, training of auditing personnel is an urgent need of Supreme Audit Institutions. This training may include not only fundamental knowledge of both related to hardware and software and auditing techniques using computers, but also such advanced techniques as systems analysis, systems design, and programming.

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SUB-THEME VI:
PUBLIC AUDITING IN SOCIAL SCIENCE DISCIPLINE
 

6.1     In recognition of the perceived gap between the requirements of audit functions for national development and the present capability of staff personnel, each member country has to develop and strengthen its own training programmes. The SAI may seek bilateral, regional and multilateral cooperation for developing and strengthening these programmes.

6.2     In addition to the country training programmes, regional training needs to be further developed and for this, all the available alternatives like the present practice of rotating seminars, the establishment and utilisation of sub-regional, regional or interregional training workshops and exchanges of experts should be examined by the ASOSAI.

6.3     The idea of a regional training center needs to be examined further from all angles in light of considering that the UN's plan to examine the feasibility of an International Center for Public Accounting and Auditing for developing countries.

6.4     To facilitate the learning process, the ASOSAI may promote programmes for the development of appropriate training materials, such as case studies based on actual situations and the practices of different countries and audio-visual aids. In the meantime, a "clearing house" unit could be established to help facilitate utilisation of those materials.

6.5     Training programmes should be broad-based so as to include other sectors of governmental activity, and thus to produce a multi-disciplinary staff.

6.6     Steps should also be taken to increase incentives for SAI personnel for the purpose of recruiting more qualified personnel and retaining the most competent auditors.

6.7     An audit training study group should be constituted to identify the priorities as well as feasibilities of training programmes.