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ARTICLES

'Independence', is an auditing Principle required for any auditor whether an individual professional, a corporate body or a Supreme Audit Institution. This Principle, together with other important elements, are considered essential requirements to enable Auditors establish, with sufficient confidence, their audit opinion based on professional values of neutrality and objectivity, free from prejudice, whims, favouritism or any personal interests.

The concept of Independence and its application is deservedly receiving continued academic research to further explore its essence, value and practical implications. A recent Paper on the subject discussed in detail how three types of 'impairment' could possibly affect the performance of an auditor specifically the 'Personal', 'External' and 'organizational' impairments. Solutions are also provided to avoid such impairments to Independence. However, the ideal pattern set out in the paper may or may not be practical to emulate depending on the cultural/social or political environment and special conditions at each Supreme Audit Institution. Most important is that the auditor should feel free, whether it be a 'de facto' or 'Appearance' freedom.

Should it eventually materialize that Auditors are unable to maintain independence, that will render them incapable to exercise an objective and impartial judgement. As we know, one of the core values of independence is that the auditor's opinion, judgement and recommendations should ultimately gain the confidence and respect of a knowledgeable third party.

'Independence' simply implies total freedom from any restrictions that might adversely affect the auditing process, especially the collection of audit supportive evidence as well as other crucial data & information that should render the auditor reasonably convinced that the financial statements are comprehensive, accurate and fairly reflect the financial position of the institution at hand.

Furthermore, 'independence' should free the auditor from any restrictions which might influence his ability to freely express and disclose his professional & impartial opinion on the outcome of the audit process, in full conformity with internationally accepted standards.

The necessity for freedom whether it be in 'Fact' or 'Appearance’ or both, is valuably required to relieve the auditors of all foreseeable barriers to act.

While fully recognizing the magnitude of independence as an essential auditing principle, it would not, never-the-less, be conducive enough to the success of the audit task if it is destined to exist in isolation from other equally important elements. It must be supplemented by technical competence, individual skills as well as professional due care.

In the absence of 'independence', it would not be possible to fully achieve other auditing standards. Consequently, no assurance can be made that creditable & impartial audit opinion can be attained.

This will ultimately weaken the confidence in the auditor's opinion & reports and damages its credibility. Therefore Independence is an essential goal, Supreme Audit Institutions must strive to achieve and preserve.

Independence of SAIs and their professional auditing staff has been of paramount importance as stipulated by laws and regulations of SAIs' respective countries, though at varying degrees of emphasis, as might be dictated by the unique political, economic and cultural environment of each country. SAIs Independence has always been an issue of prime concern for INTOSAI, recurrently reviewed at most conferences and board meetings of this International Organization. The 'Lima' Declaration issued by the INTOSAI pursuant to the (IX) INCOSAI held in Lima in 1977 highlighted some important aspects of 'Independence' that ought to be integrated in SAIs’ charters. The Lima Declaration has outlined as well, some other principles to ascertain auditors' independence as a prerequisite for proper fulfillment of their professional duties and obligations.

In the countless statements released by the INTOSAI, the latter as a strong proponent of the Independence Principle, has constantly propagated the idea of Independence body since they are entrusted with the task of watching over the deployment of Public Funds at the disposal of government agencies. SAIs should also supply information and report any inadequacies or shortcomings detected in the implementation and performance of government programs and projects, to the highest authorities.

With regard to the executive branch, SAIs are expected to fully co-operate, as well, by providing technical advice and consultation on how best to utilize public funds and avoid any waste, abuse or embezzlement of such resources as well as providing appropriate solutions to rectify errors, discrepancies or anomalies.

In practice, an 'Institutionalized Independence' can be identified by the presence of several features of which we could cite the following:

1. The presence of a suitable and effective legal or constitutional framework that specifies the duties and authorities of the SAI as well as the availability of implementing tools thereof.
    
2. The independence of the President of SAI in terms of appointment, termination of his service and legal immunity.
    
3. The availability of a clear mandate and full freedom to manage and discharge of the SAI's functions and responsibilities.
    
4. Unconditional and unrestricted access to all necessary information, Accounting records and data.
    
5. The exercise of rational in determining the timing and scope of audit.
    
6. The practice of full freedom to determine the form and content of the audit reports.
    
7. The presence of managerial and financial autonomy together with the availability of adequate financial, human and technical resources.

The financial control in The Kingdom of Saudi Arabia began as early as 1926 when the Kingdom started to lay down the basic legislative and administrative foundations. In the same year, the Basic Law of Governance approved the establishment of a 'Bureau of Accounts' composed of a President and three members to be directly appointed by His Majesty the King. The regulations demanded the 'Bureau of Accounts' to conduct inspections on all revenues and expenditures of government departments.

In 1954, the first Act of the Council of Ministers was issued in which Article (19) stated that the state's control of accounts should be considered one of the Council's departments. At a later stage, the department's name was changed to 'The General Auditing Bureau', and endowed with appropriate authorities and duties to audit the entire accounts of the state and validate the revenue and expenditure entries.

In 1971 a Royal Decree was issued for the adoption of the present statute of the General Auditing Bureau. The scope of the Bureau's Post-Audit duties have subsequently expanded to include the new auditing trend, namely "The Performance Audit" as well as the traditional Compliance Audit to cover all revenues and expenditures of the state. An integral part of these duties is to watch over all movable and fixed assets as well as to oversee the proper deployment and protection of such resources. The Bureau's auditing jurisprudence encompasses all ministries, public corporations and companies in which the State has a share of no less than 20%.

The Bureau's statute has repeatedly underscored the Principle of Independence in discharging the financial control in the Kingdom of Saudi Arabia.

For this purpose, Article (1) of the statute stated that the 'General Auditing Bureau (GAB) is an independent body that reports directly to the King, The Prime Minister. Article (3) provides that "The President is to be appointed by virtue of a Royal order. He shall not be pensioned off or discharged of his responsibilities except by Royal Order. Furthermore, he will enjoy all the merits of Ministers as to the monthly salary, pension salary etc."

Again, this Principle is highlighted in Article (4) which stipulates that "A Vice President of the GAB is appointed by virtue of a Royal Order on grade fifteen”. This should be taken as a strong indication to the great degree of independence exercised by the General Auditing Bureau as the 15-graders are usually appointed by the Council of Ministers, under the Civil Service Act.

The independence of the GAB is also manifestly demonstrated in the fact that the GAB's charter makes it mandatory upon all authorities subject to GAB's audit to make available all accounting records, financial statements and relevant documents, and any information that allow the GAB to discharge its responsibilities and fulfill its mandate. They should as well provide all facilities needed by the GAB's representatives, and inspectors in the conduct of their work. Auditees concerned are obliged to respond to whatever observations or comments the GAB may have to make within a period of one month from notification date.

In order to ensure full independence and protect the integrity of the auditing staff, the charter stated that the President of the GAB, the Vice-President or any other staff may not during the term of their office be involved in any other governmental or non-governmental activity with or without pay, to avoid any external influence on them. It further demanded that the President or the Vice-President may not purchase any of the state's assets, lease or sell any of their property to the state. Once again, the aim is to enhance the principle of independence, thus guarding the auditing staff against exertion of any possible influence.

To avoid the risk of compromising their Independence, neither the President of the Supreme Audit Institution nor the Vice-President or staff, should hold a position in a Board or have financial interest in the audited entity let alone to participate in the management of the entity itself.

With regard to the reporting mechanism, Article (20) provides that GAB shall submit an Annual Report for each fiscal year, not later than the last day of the ninth month of the following fiscal year. Additionally, this article authorized the President of GAB to submit any other general or special reports during the fiscal year, relating to a particular issue or case.

The Annual Report thereafter has to be submitted to the Shura Council (The Saudi Parliament) for examination and detailed discussion in the presence of the concerned high officials from the General Auditing Bureau, called upon for interpellation purposes. This report, together with the recommendations and resolutions of the Shura Council are then forwarded to HM, The King, the Prime Minister for consideration and appropriate action.