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11.02.2005

On adoption of the Standard of the Accounting Chamber
"Procedure of preparation and holding of audits
and execution of their results"

Resolution of the Board of the Accounting Chamber
№ 28-6 from December 27, 2004

Registered in the Ministry of Justice of Ukraine under
№ 115/10395 on January 28, 2005

According to articles 6,7,9,16,29 of the Law of Ukraine "On the Accounting Chamber" the Board of the Accounting Chamber have considered the Standard of the Accounting Chamber "Procedure of preparation and holding of audits and execution of their results" and RESOLVES:

1. To approve the Standard of the Accounting Chamber "Procedure of preparation and holding of audits and execution of their results" (attached).

2. Chief controllers-directors of departments, experts of the Accounting Chamber conducting control activity shall abide strictly the requirements of this Standard.

3. Mr. V. Pylypenko, Chief Controller-Director of Financial and Budget Legislation Department shall provide for registration of the Standard of the Accounting Chamber "Procedure of preparation and holding of audits and execution of their results" in the Ministry of Justice of Ukraine according to the Decree of the President of Ukraine No. 493 from October 3, 1992, "On State Registration of Regulatory Acts of Ministries and Other State Authorities".

4. To recognize the Resolution of the Accounting Chamber of Ukraine No. 25-1 from December 3, 1999, "On Consideration of Instruction on Procedure of Audits, Revisions by the Accounting Chamber" registered in the Ministry of Justice of Ukraine under No. 891/4184 from December 21, 1999, as one that lost its force.

5. Control over fulfilling of this resolution shall be imposed on Mr. V.L.Pershyn, First Deputy Chairman of the Accounting Chamber.

 

Chairman of the Accounting Chamber

 

Mr. V.K.Symonenko

Secretary of the Accounting Chamber

Mr. B.F. Khropatyi

 

 

 


 

Standard of the Accounting Chamber
"Procedure of preparation and holding of audits
and execution of their results"

1. GENARAL PROVISIONS

1.1. This Standard was developed in accordance with the Law of Ukraine "On the Accounting Chamber", Budget Code of Ukraine, other regulatory acts regulating relations in the sphere of control over the state funds use.

The Standard sets rules and procedures of the audits held by the Accounting Chamber taking into consideration audit standards of INTOSAI (International Organization of Supreme Auditing Institutions).

1.2. The Accounting Chamber shall hold external control in the form of revision, audit (hereinafter referred to as "the audit") that is of the types of activity of the Accounting Chamber.

The audit is the establishment and analysis of the facts in the process of execution of the State Budget of Ukraine and their appraisal from the point of view of legitimacy, effectiveness and appropriateness.

Depending upon the place the audits can be cameral and circuit.

Cameral audit is the audit held by the Accounting Chamber on the basis of the reports and other documents without coming to the site.

Circuit audit is the audit held on the site of the audited object.

Depending upon the fullness of the audit it can be comprehensive or selective.

Depending upon the tasks of the audit it can be complex or subject including control.

The audits can be ordinary and extraordinary.

1.3. The purpose of the audit shall be to determine the situation in the use of the State Budget of Ukraine, state earmarked funds, currency and loan resources, other state funds connected with the State Budget of Ukraine and its appraisal from the point of view of legitimacy, effectiveness and appropriateness as well as appraisal of the internal control of the audited object, making proposals to eliminate violations of the standing legislation of Ukraine.

1.4. Subject of the audit shall be the procedure of the use of the State Budget of Ukraine, state earmarked funds, currency and loan resources, other state funds connected with the State Budget of Ukraine, their movement, regulatory and legal acts, instructions and other documents concerning the activity of the budget process participants.

1.5. Objects of the audit of the Accounting Chamber shall be:

Executive Office of Verkhovna Rada of Ukraine, Administration of the President of Ukraine, State Administration, Secretariat of the Cabinet of Ministers of Ukraine, executive office of the National Security and Defense Council of Ukraine, Secretariat of the Authorized Representative of Verkhovna Rada of Ukraine on Human Rights, National Bank of Ukraine, authorized banks and other financial institutions servicing funds of the State Budget of Ukraine, executive offices of Constitutional, Supreme and Supreme Economic courts of Ukraine, other court institutions, central authorities, executive office of the Prosecutor´s General Office of Ukraine, other law enforcement and control bodies of Ukraine, Supreme Council of Justice of Ukraine, Central Elections Committee, local state administrations and local self-government authorities regarding their use of the State Budget of Ukraine and other budget institutions - administrators of the State Budget of Ukraine of all levels, other legal entities regardless of the form of ownership in case of their obtaining the funds of the State Budget of Ukraine, state secured loans; public organizations, political parties and others regarding their use of the funds of the State Budget of Ukraine and state earmarked funds, other objects regarding their use of the funds of the State Budget of Ukraine.

1.6. Subjects of the audit shall be officials of the Accounting Chamber, persons engaged by the Accounting Chamber to the audit as specialists or experts.

1.7. Officials of the Accounting Chamber and persons engaged to the audit shall have the right:

  • to obtain all necessary information on the audited objects from the senior institutions and organizations, banks, other institutions and organizations connected with the activity of the audited object;
  • to have unlimited access to any premises and storage places of the audited objects unless other is stipulated by the laws of Ukraine;
  • to obtain original documents or copies, other materials, electronic media data, extracts from these documents from the officials of the audited object;
  • to get familiar with secret documents and limited access documents if there is state secret permission and other documents;
  • to demand the audited object officials to eliminate immediately detected violations and to notify in due time;
  • to get explanations from the audited object officials, other institutions, organizations, enterprises connected with the activity of the audited object;
  • to draw up protocols of administrative violation in case of necessity.

1.8. The Accounting Chamber employees shall be obliged during the audit:

  • to follow the principles of legitimacy, comprehensiveness, objectiveness, authenticity and justifiability during the audit;
  • to accept at any stage of the audit applications, remarks, explanations on the audited object from the audited object officials and verify the issues stated in theses appeals which shall be included in the verification deeds;
  • not to make public materials of the audit on the audited object before the Board of the Accounting Chamber considers them;
  • to notify the law enforcement bodies on the facts proving the committed violation.

1.9. The audited object officials shall have the right:

  • to demand the order for the audit from the auditing subject;
  • to submit applications, remarks, explanations on the audited object and on the audit results.

1.10. The audited object officials shall be obliged;

  • to facilitate proper work of the auditing subjects, not to put barriers to them, to provide them with working places and necessary technical means;
  • to present necessary documents, explanations concerning audit;
  • to take urgent measures to eliminate the detected violations, to reimburse the damage and to bring persons guilty of violations to justice.

Non-fulfillment of legitimate demands of the auditing subjects or putting the barriers to their actions result into criminal, administrative or disciplinary liability.

1.11. The Accounting Chamber member responsible for the audit shall define the items requiring special knowledge and submit proposals, therefore, on contractual engagement of specialists and experts at any stage of the audit.

1.12. Decisions on engagement of specialists and experts to the audit shall be made by the Chairman of the Accounting Chamber or his deputies upon the proposal of the Accounting Chamber member responsible for the audit.

1.13. Essence of the work of the specialists and experts, issues to be audited by them and deadline for them to present the results shall be defined by the leader of control team of the auditing subject and stipulated in the contract.


2. PREPARATION TO THE AUDIT

2.1. Grounds for the audit

2.1.1. The Accounting Chamber shall conduct ordinary and extraordinary audits.

Ordinary audits shall be conducted on the basis of the annual and interim working plans of the Accounting Chamber and its Board, annual and interim working plans of the departments and other authorized structural divisions.

Extraordinary audits shall be included to the working plan and conducted upon the decision of the Accounting Chamber Board in cases stipulated by the Law of Ukraine "On the Accounting Chamber".

2.1.2. The audit shall be conducted in line with the program. Draft program shall be elaborated by the department or other structural division of the Accounting Chamber under the headship of the Accounting Chamber member responsible for the audit on the basis of the approved working plans of the Accounting Chamber, its Board and decisions of the Accounting Chamber Board on the extraordinary audits.

The audit program shall be signed by the Accounting Chamber member responsible for the audit and approved by the Chairman of the Accounting Chamber, First Deputy Chairman or Deputy Chairman and if necessary by the Board of the Accounting Chamber.

2.2. Preliminary examination of audited objects and subject

2.2.1. Before the audit program is elaborated the Accounting Chamber member responsible for the audit shall organize preliminary examination of the audited objects and subject on the following points:

1) subject of the audit;

2) list of objects subjected to the audit;

3) fields of activity of each audited object;

4) sources of information;

5) terms of the audit;

6) membership of the control team of the auditing subject;

7) other issues.

2.2.2. The following points shall be analyzed during the preliminary examination of the audited objects and subject of the audit:

1) regulatory and legal acts concerning subject of the audit;

2) data of budget allocations and actual expenditures of the State Budget of Ukraine concerning audited object and subject of the audit;

3) financial and statistic reporting made up by the audited object;

4) structure of the audited object;

5) fulfillment of the budget programs and other powers by the audited object regarding use of the budget funds;

6) materials of the previous audits held by the Accounting Chamber on the audited points and results of the audits held by other control bodies;

7) mass media materials.

If necessary consultations may be held with independent institutions, organizations and specialists to reveal the achievements in the audited sphere and possibilities of their application to improve the activity of the audited objects.

Respective inquiries on information concerning the audited object and subject of the audit during the preliminary examination shall be signed by the Accounting Chamber member responsible for the audit.

2.2.3. The following points shall be examined during preliminary examination within the subject of the audit:

1) extent to what the activity of the audited object meets the requirements of the standing legislation of Ukraine. Situation in development and adoption of documents necessary to hold this activity effectively;

2) division of functions, powers and responsibility at each level of management of the audited object;

3) system of reporting and monitoring of the audited object´s activity to obtain objective and authentic information on its performance results;

4) procedures and measures to preserve financial and material resources etc.

2.3. Requirements to the audit program

2.3.1. In the follow-up to the preliminary examination the Accounting Chamber member responsible for the audit shall make up the audit program.

2.3.2. The audit program shall define in particular:

1) purpose of the audit;

2) subject of the audit;

3) list of particular issues to be audited and setting the volume of the audit;

4) audited object;

5) terms of the audit and deeds and report on its results;

6) regular labour costs;

7) membership of the control team of the auditing subject.

If the purpose of the audit is to define effectiveness of the funds use the audit program shall include criteria of appraisal of the state funds use effectiveness.

If during the audit the necessity arises to supplement or shorten the audit program all appropriate amendments shall be introduced in line with procedure of the program adoption. Term of the audit can be altered by the Accounting Chamber member responsible for the audit.

2.3.3. Effectiveness as economic category can be defined through the following elements:

1) productivity is the ratio of the output, provided services and other performance results of the administrator or recipient of the funds of the State Budget of Ukraine to the material, financial and labour resources;

2) efficiency is the extent of corresponding the actual performance results of the administrator or recipient of the budget funds to the planned results;

3) economy is the achievement of the planned results by the administrator or recipient of the budget funds at the expense of the minimum budget funds used or achievement of the best result at the expense of the predetermined amount of budget funds.

In the follow-up to the audit appraisal of effectiveness of the budget funds use can be made on the basis of appraisal of both all those elements and each element separately or just one of them.

Criteria of effectiveness except for those defined by the passports of budget programs can be also set by the standards and justified by the internal documents of the audited object, standards of work quality and control which can serve as the basis for comparative analysis and appraisal of the status of realization of tasks, functions, separate fields of activity, financial transactions by the audited objects, i.e. achieved results.

Leader of the control team of the auditing subject by elaboration of the draft program of the audit shall discuss, if necessary, with the official of the audited object, criteria to be applied to appraise effectiveness of their performance regarding their use of state funds.


3. PROCEDURE OF THE AUDIT

3.1. The audit shall be held referring to the instruction signed by the Accounting Chamber member responsible for it. The instruction shall include purpose and subject of the audit, term, membership of the control team of the auditing subject.

Leader of the control team of the auditing subject shall present the instruction before the audit to the authorized official of the audited object.

3.2. The audited object officials shall be obliged to ensure proper including technical conditions for the activities of the auditors, quality and full fulfillment of their tasks.

3.3. The audit shall include application of:

1) analysis of methods of the labour organization by the audited object;

2) analysis of the performance results of the audited object;

3) analysis of concrete facts and situations detected at the audited object;

4) analysis of all available data;

5) revision of documents.

The mentioned approaches shall be applied to detect violations and drawbacks of the budget funds management procedures, to ensure their elimination, to analyse their reasons and conditions of such violations.

3.4. If the audited object official puts barriers to the auditing subject the leader of control team of the auditing subject shall make up the protocol on administrative violation and notify immediately the Accounting Chamber member responsible for the audit.

Protocol on administrative violation shall be signed by the Chairman of the Accounting Chamber or his deputies and filed to the court.

3.5. The auditing subject during the audit shall compile the evidence to justify the conclusions made in the follow-up to the audit according to the purpose of the audit and criteria of effectiveness appraisal of the budget funds use.

Evidence is compiled and documented information used by the auditing subject to justify the audit results.

Evidence shall be sufficient and authentic.

3.6. Depending upon the content evidence can be material and documentary.

Material evidence shall be submitted as photos, schemes, maps, charts etc.

Documentary evidence can be on paper or electronic media. They can be both internal, obtained at the audited object, and external, obtained outside.

Internal documentary evidence shall be obtained on the basis of available financial records at the audited object, copies of incoming and outcoming documents, instructions, plans, reports on performance results, regulations and occupational instructions, other documents concerning the subject of the audit.

External documentary evidence shall be obtained on the basis of the documents prepared by senior and other bodies that are directly connected with the activity of the audited object. These can be letters, memos, agreements (contracts), reports on the audit results, documents from the third parties etc.

3.7. All the copies and extracts of documents, other materials concerning the subject of the audit obtained by the control team members of the auditing subject shall be certified properly. If necessary, copies, extracts of documents and other materials shall be certified by the authorized official of the audited object with his signature and seal.

The auditing subject shall have the right to obtain applications, remarks, explanations on the subject of the audit from authorized and other persons of the audited object at any stage of the audit.

If the facts of violations, counterfeits, abuses and other violations are detected the auditors shall be obliged to request explanations on the circumstances, motives, reasons and conditions of such violations from authorized and other persons of the audited object.

Explanations obtained from authorized and other persons of the audited object concerning the subject of the audit shall be included to the deeds of audit.

The auditors if necessary shall revise documents, items, other property. Revision is the form of detection and fixing of facts meaningful for the subject of the audit.

In case of revision of documents, items, other property, the auditor shall make up deeds including:

Date and place of deeds making up;

Name and position of the auditor;

Name and position of the person, present by revision;

Subject of revision;

Facts and data revealed in the revision;

Signature of the person participating in revision;

Signature of the auditor.

Deeds of revision shall be included in the deeds of the audit.

Written explanations to these deeds shall be executed by the questioned person and certified with the signature of the questioned person and questioning official.

Activity of the auditing subject shall be fixed in the working documents. The auditing subject shall keep working documents only based on the information got during the audit. Working documents are kept in free form and stored with the audit materials.

3.8. Leader of the control team of the auditing subject shall control the whole work of its members. Such control shall be held throughout the whole audit and give an opportunity to get reassured that:

- all appraisals and conclusions are confirmed by sufficient and authentic evidence;

- all the detected violations and drawbacks are properly confirmed with documents; or corrected; or notified to the audited object officials.


4. EXECUTION OF THE AUDIT RESULTS

4.1. In the follow-up to the audit the deeds shall be made up including ground, purpose, subject, audited object/objects, period of the audit, membership of the control team of the auditing subject and actual situation revealed at the object supported with evidence.

The deeds shall reflect results of the audit of all points included in the audit program, all the facts of violations of the standing legislation and list of detected drawbacks, information on documents and other materials which the mentioned facts are based on, names and positions of persons involved in the committed violation, caused damages and their explanations.

Result of the audit shall be presented in objective, authentic, grounded, clear way including comprehensive description of detected facts and data. Including any presumptions and non-confirmed data on management and financial performance of the audited object in the deeds is not allowed.

Deeds of the audit shall be executed in three copies and signed by the authorized officials of the audited object and by all members of the control team of the auditing subject. Leader of the control team of the auditing subject shall sign each page of deeds and bear personal responsibility for objectiveness and grounds of deeds of the audit. Other members of the control team of the auditing subject shall bear responsibility for the work conducted by them.

One copy of deeds of the audit shall be given for signing to the authorized official of the audited object.

If the authorized official of the audited object disagrees with the facts presented in the deeds, their grounds and evidence he shall submit well grounded written reservations on the points he disagrees with to the leader of control team not later than within five working days. Mentioned reservations shall be considered during five working days after they are received. Results of the considerations shall be presented in the separate certificate and signed by the leader of control team of the auditing subject. Reservations and certificate on the results of their consideration shall be supplemented to the deeds of the audit and be its integral part. If the deadline for reservations submission is broken the reservations shall not be considered.

If the authorized official refuses to sign deeds of the audit it shall be fixed in deeds of the audit and certified with the signature of the leader of control team of the auditing subject.

4.2. Appraisal of the audit results shall be presented in the Report to be considered by the Board of the Accounting Chamber.

The Report shall be signed and presented at the meeting of the Accounting Chamber Board by the Accounting Chamber member responsible for the audit.

The Report shall inter alia contain brief description of facts and appraisal of their conformity with the standing legislation of Ukraine, criteria of effectiveness of the budget funds use and appraisal of the detected facts in line with these criteria, appraisal of managerial decisions, situation with internal control, budget planning; volume, characteristics and qualification of the budget violations and ineffective use of the budget funds; causes of violations and drawbacks, potential problems, conclusions and proposals.

Conclusions and proposals of the Report shall be guided by the facts established by the audit.

Before the Board of the Accounting Chamber considers draft Report at its meeting it shall be discussed with the authorized official of the audited object. The authorized official of the audited object shall submit within three working days supported explanations on the draft Report. If necessary, they can be properly appraised in the Report.

Formation of the preliminary conclusions and proposals in the draft Report on the audit results, appraisal and qualification of the detected facts shall be prerogative and belong to the competence of the leader and members of control team of the auditing subject and member of the Accounting Chamber responsible for the audit. Qualifying shall involve department for financial and budget legislation. Final conclusions and recommendations of the Report shall belong to the exclusive competence of the Board of the Accounting Chamber.

4.3. Preparation of the draft Report by the results of the audit shall be held in accordance and within the term envisaged by the program of the audit and pass the following stages:

1) control team members of the auditing subject shall form preliminary draft Report to be considered by the Accounting Chamber member responsible for the audit;

2) If necessary control team members of the auditing subject shall finalize draft Report taking into account reservations of the Accounting Chamber member responsible for the audit. After being finalized draft Report shall be submitted by the control tem leader of the accounting subject to the Accounting Chamber member responsible for the audit;

3) By the results of consideration and finalizing by the Accounting Chamber member responsible for the audit, his discussions with the authorized official of the audited object, final version of the draft Report shall be prepared and signed and submitted to the First Deputy or Deputy of the Accounting Chamber Chairman (according to division of functions between them) to prepare report on conformity of the Report with the approved program of the audit;

4) after Deputies Chairman of the Accounting Chamber and Expert Board consider draft Report it shall be submitted to the Board of the Accounting Chamber for consideration and approval.

4.4. Report by the results of the audit shall be comprehensive, accurate, objective, persuasive and clear.

The Report shall contain sufficient materials and evidence to justify the results of the audit.

Conclusions of the audit results shall meet its end purpose and proposals shall be logical consequence of the conclusions.

The Report shall not contain any exaggerations and excessive underscoring of the detected flaws and violations. If necessary, opinion of the audited object shall be presented along with flaws and violations.

The Report shall emphasize primarily concrete proposals on improvement of the audited object performance.

4.5. Conclusion of the Report consideration after it is approved by the Accounting Chamber Board shall be submitted to the audited object. The latter shall notify the Accounting Chamber about the results of consideration and measures taken by the audited object.

If the Accounting Chamber Board decides so, results of the Report consideration shall be notified to Verkhovna Rada of Ukraine and/or its committees, and if necessary, the President of Ukraine, Cabinet of Ministers of Ukraine, Ministry of Finance of Ukraine, other central authorities.

If the audit detects facts of inappropriate use of the budget funds, other violations implying criminal or administrative liability, materials of the audit by the decision of the Accounting Chamber Board shall be filed to the Prosecutor´s General Office of Ukraine, other law enforcement bodies or to the court in line with the procedure set by the law.

4.6. Results of the audits shall be made public through:

  • reports and speeches in Verkhovna Rada of Ukraine, its committees, Cabinet of Ministers of Ukraine;
  • participation in parliamentary hearings and Days of the Government;
  • publishing of the Report or its portions;
  • issuing and dissemination of information and reference compilations, bulletins (special bulletins);
  • press conferences, briefings, interviews;
  • publishing and highlighting of the statements of the Accounting Chamber members or other executives of the Accounting Chamber in mass media;
  • thematic TV and radio programs devoted to the Accounting Chamber;
  • Internet web page;
  • Mass media announcements about materials of the audit considered by the Accounting Chamber Board.

5. AUDIT OF THE EXECUTION OF PROPOSALS MADE IN THE FOLLOW-UP TO THE AUDIT (AUDIT AS CONTROL)

5.1. Audit as control shall be made:

1) to facilitate execution of proposals of the Accounting Chamber, encouragement of the detected flaw elimination, enhancing of effectiveness of Reports on the audit results;

2) to facilitate Verkhovna Rada of Ukraine, Cabinet of Ministers of Ukraine, other state bodies in consideration and taking of measures ensuring enhanced effectiveness of the state financial resources use;

3) to define efficiency of control activity of the Accounting Chamber;

4) to analyze comprehensiveness and effectiveness of influence made by the proposals of the Accounting Chamber on the audited object activity.

Audit as control shall be conducted in line with the rules and procedures stipulated by this Standard.

During such audit attention shall be focused on elimination of previously detected flaws by the audited object.

5.2. Audit as control shall be conducted namely in the following forms:

1) obtaining of current information on the realization of recommendations by the audited objects sent in the follow-up to the audit;

2) special audit of the results of the recommendations realization made on the basis of the documents obtained from the audited object and through the audit of selected recommendations directly at the audited object. Such control audits shall be conducted not before six months and not later than after one year after recommendations are received;

3) repeated audit at the audited object following the whole program. Basis for such audit shall be audit of recommendations and examination of the whole activities of the audited object within the period following the previous audit. Such control audits shall be held as a rule when subject of the previous audit was socially crucial, widely known spheres of the state financial resources use having high risk level. Their regularity shall be not more than once in two years.

5.3. Appraisal of the results of the measures taken by the audited objects according to recommendations of the Accounting Chamber in the follow-up to the audits can have quality characteristics or be measured by quantity criteria of enhanced effectiveness of the state funds use which by their character are consequence of the audit.

Such consequence can be enhanced effectiveness and economizing of the state financial resources, improved quality of state bodies performance, improved budget funds management etc.

Audit as control at the object shall result in deeds and Report made up in line with general rules set by the Standard according to subparagraphs 2, 3 of paragraph 5.2 of Chapter 5 of the Standard.

Audited object shall be familiar with the results of the audit as control and have an opportunity to make their reservations in written form.

Report of the audit results shall be as a rule considered by the Accounting Chamber Board.

 

Chief Controller - Director of Department
for Financial
and Budget Legislation


V.Pylypenko

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