Multiple Framework-Contract in the field of external audit of programs and projects of external aid
Description
CC AUDIT 2006/S 1-000094 Annex I Framework-Contract covering independent audits of external aid programmes and projects funded by the European Commission from the European Development Fund (EDF)° and the general budget of the European Communities (EC budget) Global Terms of Reference Lot 1 : financial audits and systems audits 1 Introduction EuropeAid Co-operation Office is in charge of the implementation of 1Commission ’s external aid instruments, funded from the general budget of the European Communities or the European Development Fund, in an efficient and effective way, ensuring a high quality and rapidity level for the implementing of the projects, contributing therefore to the visibility of the European community aid. EuropeAid Co-operation Office is responsible for all phases of the project cycle which ensure the operational translation and the realisation of the objectives defined by the programming adopted by the Commission (identification, instruction, preparation of financial decisions, implementation, monitoring and evaluation) maximising the quality, pertinence, effectiveness, efficiency, impact, durability and appropriation by beneficiaries of all the actions. The main activity areas of external aid are: - Relations with oriental Europe, Caucasus and Central Asia; - Relations with the Middle East and South Mediterranean; - Relations with Asia; - s with Latin America; - Relations with Sub-Saharan Africa, Caribbean, Pacific and ...
Informations
| Publié par | Essa |
| Nombre de lectures | 119 |
| Langue | English |
Extrait
CC AUDIT 2006/S 1-000094
Annex I
Framework-Contract covering independent audits of external aid programmes and projects funded by the European Commission from the European Development Fund (EDF)° and the general budget of the European Communities (EC budget) Global Terms of Reference Lot 1 : financial audits and systems audits 1 Introduction EuropeAid Co-operation Office is in charge of the implementation of Commission 1 ’s external aid instruments, funded from the general budget of the European Communities or the European Development Fund, in an efficient and effective way, ensuring a high quality and rapidity level for the implementing of the projects, contributing therefore to the visibility of the European community aid. EuropeAid Co-operation Office is responsible for all phases of the project cycle which ensure the operational translation and the realisation of the objectives defined by the programming adopted by the Commission (identification, instruction, preparation of financial decisions, implementation, monitoring and evaluation) maximising the quality, pertinence, effectiveness, efficiency, impact, durability and appropriation by beneficiaries of all the actions. The main activity areas of external aid are: - Relations with oriental Europe, Caucasus and Central Asia; - Relations with the Middle East and South Mediterranean; - Relations with Asia; - Relations with Latin America; - Relations with Sub-Saharan Africa, Caribbean, Pacific and Indian Ocean; - Thematic aid programmes. 2 Objective The purpose of these terms of reference is to explain the general context of the assignments and to provide overall guiding principles for the lot 1 of the contract.
1 Excepting pre-adhesion instrument, cooperation with occidental Balkans, humanitarian activities, macro-financial aid, CFSP and rapid reaction mechanism
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In the interest of transparency and independence and in order to strengthen its supervisory and audit capability, the Commission intends to conclude the framework contract (lot 1) with a maximum of four professional firms for the purpose of auditing external aid programmes and projects financed from the EC Budget and the EDF. The framework contract enables the Commission to lay down, in advance, the terms and conditions to carry out the types of services as described in point 3 below for programmes and projects financed from the EC Budget and the EDF over a given period of time. The framework contract is used for the financing of audits launched on the initiative of the Commission. The general modalities of the framework contract are described at 7 below. Further details on objectives, scope, assignment process and other terms and conditions of a specific audit assignment will be set out in specific terms of reference to a request for services, which will be established for each assignment. 3 Scope The Commission wishes to be able to perform several types of audits of external aid programmes and projects financed from the EC Budget or the EDF within the framework of its external aid policy in the activity areas as described at 1 above. For this purpose the Commission requires the types of services as described below in point 3.1. 3.1 Lot 1: Financial Audits and systems audits
3.1.1 Financial Audits Background and Context Financial audits of external aid operations are not the same as audits of financial statements. The objective of an audit of financial statements is to enable the Auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework. The phrases used to express the Auditor’s opinion are ‘give a true and fair view’ or ‘present fairly, in all material respects’, which are equivalent terms (International Standard on Auditing (‘ISA’) 200 ‘Objective and General Principles Governing an Audit of Financial Statements’ promulgated by the International Federation of Accountants (‘IFAC’)). Financial audits of external aid operations usually have characteristics which are the same as or similar to full-scope audits of financial statements but they are fundamentally different as to their objectives and scope. Financial audits of external aid operations can be usefully classified as ‘Special Purpose Audit Engagements’ governed by ISA 800 ‘The Auditor’s Report on Special Purpose Audit Engagements’. The main principles of Special Purpose Audits (as set out in the general considerations in paragraphs 3 to 8 of ISA 800) equally apply to financial audits of external aid operations. Moreover, ISA 800 specifically addresses special purpose audit engagements where the Auditor is required to express an opinion as to an entity’s compliance with contractual agreements and where the Auditor’s report should state whether, in the Auditor’s opinion, the entity has complied with the particular provisions of an agreement.
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Compliance with provisions in contracts and agreements is an essential feature of all audits of external aid operations. Objective and Scope The objective of a financial audit of an external aid operation is to enable the Auditor to express an opinion whether: the funds have been used in accordance with the applicable legislation and the terms and • conditions of contracts and agreements; and • the funds have been used for their intended purpose. Compliance is the ability to reasonably ensure conformity and adherence to the applicable legislation and rules. Compliance with requirements concerning the legality and regularity (as set out in Regulations and Agreements, Financing Agreements and contractual terms and conditions) of the project’s activities, procedures ( e.g. procurement procedures) and finances (revenue and expenditure) is essential. Consequently, it is critical for the Auditor to identify and understand: • the information and in particular the financial information to be audited; and • The legislation, rules and criteria against which this information is to be audited. Compliance may cover one or more of the following aspects: - Compliance with financial and accounting terms and conditions of external aid contracts. - Compliance with procedural terms and conditions of external aid contracts ( e.g. procurement). - Compliance with systems requirements for internal and management control systems. Tests and procedures of the internal control system are an integrated part of a Financial audit. However, the systems assessment is not an audit objective and the Auditor is not required to express an opinion on the effectiveness of the internal control system. The assessment serves for the Auditor to determine to which extent he can rely on the system in order to plan and adapt the nature, extent and timing of substantive testing with the ultimate objective of expressing an opinion on the financial statements. Where the Auditor carries out a financial audit of an external aid operation he assess the internal control system in order to plan and adapt the nature, extent and timing of substantive testing with the ultimate objective of expressing an opinion on the use of funds. Alternatively, EuropeAid may request the Auditor to carry out a systems audit, in conjunction with a financial audit, and also express an opinion on the effectiveness of the internal control system. - Compliance with technical requirements specified in external aid contracts ( e.g. road construction according to contractually agreed technical standards and specifications). Financial audits may include an assessment of compliance with technical standards and specifications. Depending on the nature and complexity of the project, the Auditor may have to refer to specific technical expertise ( e.g. road construction). When there are particular technical matters forming part of the engagement that are outside the Auditor’s expertise, the Auditor should consider using the work of an expert. These ‘technical’ audits are usually an integrated part of financial audits. The Auditor’s Report on a Financial Audit The Commission may request the Auditor to report in a prescribed format but the report on a financial audit should include certain basic elements, ordinarily in the following lay out:
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(a) Title; (b) Addressee; (c) Opening or introductory paragraph (i) Identification of the financial information audited and period covered; and (ii) A statement of the responsibility of the entity’s management and the responsibility of the Auditor (d) A scope paragraph (describing the nature of the audit) (i) The reference to the relevant International Auditing Standard ( i.e. ISA 800); and (ii) A description of the work the Auditor performed and a reference to the Terms of Reference for the audit engagement (e) An opinion paragraph containing an expression of opinion on the financial information; - In a reasonable assurance engagement, the conclusion should be expressed in the positive form. For example: ‘ In our opinion, the project funds have been used, in all material respects, for their intended purposes and in accordance with the terms and conditions of the contract’ . In a limited assurance engagement, the conclusion should be expressed in the negative form. -For example: ‘ Based on our work described in this report, nothing has come to our attention that causes us to believe that the project funds have not been used, in all material respects, for their intended purposes and not in accordance with the terms and conditions of the contract ’. (f) Date of the report; (g) Auditor’s address; and (h) Auditor’s signature. The Auditor may, as a result of the audit tests and procedures, find significant weaknesses in the entity’s internal control system. Such findings may or may not affect the Auditor’s opinion but the Auditor should report them either as part of the report or in a separate memorandum. The Auditor may, as a result of the audit tests and procedures, find indications or evidence of fraud or irregularities. Such findings may or may not affect the Auditor’s opinion but the Auditor should immediately report them in a separate memorandum. This is necessary as the issues may have to be urgently and adequately addressed by a separate investigation. 3.1.2 Systems Audits Background and Context Systems audits can be useful before a project is started, at the early stages of project implementation or at mid-term. They cease to be useful when the implementation of a project draws to an end because the results and recommendations can no longer be applied. Moreover, in case of actions implemented by decentralised management and under specified conditions, the Commission has to carry out prior assessments and subsequent regular checks of management systems set up by beneficiary countries. In practice this is the responsibility of the Delegations in full co-ordination with Headquarters if deemed necessary with the assistance from an external Auditor 2 . Such assessments and checks can relate to the management structure put in place for a project/programme and/or to the whole country. The Commission may thus refer to system audits to assess management systems set up in beneficiary countries. Objective and Scope
2 Instruction note of the Director-General of 6 August 2004 (N° 27140) on operational implications of Article 164 of the Financial Regulation applicable to the General Budget. (+ Article 232 of the Implementing Rules).
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For the purpose of audits of external operations the term system should primarily be seen in relation to an entity’s internal control system which covers inter alia the organisational/management structure, information, accounting and reporting systems, processes and procedures. The objective of an assessment of the internal control system can be: (i) to assess the design and effectiveness of the internal control system in order to determine the nature, extent and timing of tests of control and of substantive tests with a view to express an opinion on the financial information subject of the audit (usually audit of financial statements); o r (ii) to express an opinion on the effectiveness of the internal control system. This can either be done in conjunction with a financial audit or as an independent systems audit engagement. In both cases the Auditor is requested to express an opinion on the effectiveness of the internal control system. The objective of a systems audit of an external aid operation is to enable the Auditor to express an opinion whether internal control is effective, in all material respects, based on ‘XYZ’ criteria. Compliance with appropriate criteria is essential so it is critical for the Auditor to have: • An identification and description of the subject to be audited i.e. the entity’s internal control system as well as the period of time to which the audit relates; and • An identification of the criteria against which the internal control system should be assessed. Where the Auditor is requested to carry out a systems audit and to express an opinion on the effectiveness of the internal control system, the engagement should be carried out in accordance with International Standard on Assurance Engagements (‘ISAE’) 3000: ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. The Auditor’s Report on a Systems Audit The Commission may request the Auditor to report in a prescribed format but the report on a systems audit should include certain basic elements, ordinarily in the following lay out: (a) A title that clearly indicates that the report is an independent assurance report; (b) An addressee; (c) An identification of the subject of the assurance engagement ( i.e. an entity’s internal control system). (d) Identification of the criteria (e) Where appropriate, a description of any significant, inherent limitation associated with the audit of the subject against the criteria; (f) When the criteria used to audit the subject are available only to specific intended users, or are relevant only to a specific purpose, a statement restricting the use of the assurance report to those intended users or that purpose; (g) A statement to identify the responsible party and to describe the responsible party’s and the Auditor’s responsibilities; (h) A statement that the engagement was performed in accordance with ISAE 3000; (i) A summary of the work performed and a reference to the Terms of Reference for the audit engagement; (j) The Auditor’s conclusion; - In a reasonable assurance engagement, the conclusion should be expressed in the positive form. For example: ‘ In our opinion, internal control is effective, in all material respects, based on XYZ criteria’ . - In a limited assurance engagement, the conclusion should be expressed in the negative form. For example: ‘ Based on our work described in this report, nothing has come to our attention that causes us to believe that internal control is not effective, in all material respects, based on XYZ criteria’ . (k) The assurance report date;
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(l) Auditor’s address; and (m) Auditor’s signature. The Auditor may, as a result of the audit tests and procedures, find significant weaknesses in the entity’s internal control system or find indications or evidence of fraud or irregularities. In this case he should act as explained in Section 3.1.1 under ‘The Auditors Report on a Financial Audit’ . The Auditors’ Report on Specified Procedures regarding a System As an alternative to audit and assurance engagements which aim to provide assurance, the Commission may request the Auditor to carry out specified or agreed-upon procedures with regard to an entity’s internal control system.
3.1.3 Systems Audits in conjunction with a Financial Audit Where the Auditor is requested to carry out a systems audit in conjunction with a financial audit, the audit engagement should be carried out in accordance with the principles that apply to both financial audits (Section 3.1.1) and systems audits (Section 3.1.2). Thus, the Auditor will be requested to issue a report that contains two opinions, one on the financial audit and another one on the systems audit.
3.1.4 Agreed-upon Procedures Engagements Context and Background As an alternative to audit and assurance engagements which aim to provide assurance, the Commission may request the Auditor to carry out specified or agreed-upon procedures. IFAC International Standard on Related Services (ISRS) 4400 deals with ‘Engagements to perform agreed-upon procedures regarding financial information’. The objective of an agreed-upon procedures engagement is for the Auditor to carry out procedures of an audit nature to which the Auditor and the entity and any appropriate third parties have agreed and to report on factual findings. As the Auditor simply provides a report of the factual findings of agreed-upon procedures, no assurance is expressed. Instead, users of the report assess for themselves the procedures and findings reported by the Auditor and draw their own conclusions from the Auditor’s work. The report is restricted to those parties that have agreed to the procedures to be performed since others, unaware of the reasons for the procedures, may misinterpret the results. Agreed-upon procedures may be a useful alternative for audits in cases where a traditional audit is not possible or not meaningful (for example: due to scope limitations the cost of an audit opinion is disproportionate to the expected result). The Auditors’ Report on Specified Procedures regarding Financial Information ISRS deals with agreed-upon procedures regarding financial information. EuropeAid can apply this type of engagement for example, in expenditure verifications concerning grant and service contracts. In these cases beneficiaries are required to submit to the Contracting Authority a verification report produced by an external auditor in support of their payment requests. The Authorising Officer of the Commission requires this report as he makes the payment of expenditure requested by the beneficiary conditional on the factual findings of this report.
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The Auditors’ Report on Specified Procedures regarding a System Agreed-upon procedures may also be useful in situations where an opinion on the effectiveness of the internal control structure is not desirable or where it is difficult or impossible for the Auditor to carry out an audit with a view to expressing an opinion on the effectiveness of the internal control system. There may also be cases where the cost of a systems audit is disproportionate with the benefit. It may be useful to request an Auditor to carry out specified procedures to examine the design of an entity’s internal control system based on the principles of an Agreed-Upon Procedure and to report on that examination by means of a report of factual findings. This report would constitute an appropriate basis for the Authorising Officer to support a decision as to whether the beneficiary or applicant fulfils relevant conditions for obtaining funding. ISRS 4400 is written in the context of agreed-upon procedures performed on financial information but its principles could well be applied to performing agreed-upon procedures on a system of internal control. In such a case terms of reference should describe that the engagement should be performed in accordance with the principles in ISRS 4400, adapted as considered necessary in the context of agreed-upon procedures performed on a system of internal control. In the latter case, it may be necessary to describe how the principles were adapted. Example: It may not be possible or useful to assess the operational effectiveness of an internal control system or the management set up at a very early stage of project implementation or even before a project has started. However, it could be useful to assess, whether an internal control system or the management set up for a project or programme is adequate in terms of its design rather than assessing whether an existing system is effective and operating as intended. In such a case the Auditor may be requested to carry out procedures to examine the design of a system. That would not constitute an audit or assurance engagement but the principles of an Agreed-Upon procedures engagement may be applied. 4 Audit Standards and Ethics Standards Good audit practice for auditing public funds such as those provided by the Commission can be found in international and national audit standards. Audits of programmes and projects should be conducted in accordance with international auditing standards promulgated by either the International Organisation of Supreme Audit Institutions (INTOSAI) or the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC). The national Supreme Audit Institution (SAI) may follow national or international audit standards. The INTOSAI has issued international audit standards, which focus on the public sector. The IFAC through its IAPC has issued International Standards on Auditing (ISAs) which were initially prepared for the private sector but now a ‘Public Sector Perspective (PSP) issued by the Public Sector Committee of IFAC is set out at the end of each ISA. Where no PSP is added the ISA is applicable in all material respects to the public sector.
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Where national auditing standards are in all material respects consistent with either INTOSAI or ISA they may be used. Ethics Auditors are expected to apply and uphold the following guiding principles: Integrity . Auditors must perform their work in an honest, diligent and responsible way. They should observe the law and make disclosures expected by the law and the profession. They should not knowingly be party to any illegal activity, or engage in acts that are discreditable to their profession or organisation; Objectivity . Auditors should have an unbiased mental attitude that requires them to perform assignments in such a manner that they have an honest belief in their work product and that no significant quality compromises are made. Objectivity requires auditors not to subordinate their judgement on audit matters to that of others. Confidentiality . Auditors should be prudent in the use and protection of information acquired in the course of their duties. They must ensure that information obtained in the course of audits is kept confidential and handled with discretion. In no circumstances may contractors use or divulge such information to gain an immediate or potential commercial advantage, nor may they transmit it to unauthorised persons or companies. Competence . Auditors should apply the knowledge, skills, and experience needed in the performance of their duties. 5 Audit process The audit assignment can be structured around four stages: • Planning and preparation; • Execution; • Reporting and Communication; • Follow-up. For each stage the responsibilities of the auditor and the Commission are briefly described below. For each assignment the Commission nominates an Audit Task Manager who will be responsible for co-ordination. The Audit Task Manager will be the auditor’s main point of contact in the Commission or where applicable in a Delegation. 5.1 Planning and Preparation The auditor plans the assignment in accordance with international auditing standards and the policies of the firm concerned. Planning issues include amongst others: objectives, scope, risk assessment, a preliminary survey to understand the context and activities, resource allocation and developing work programmes.
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The Commission will inform its Delegation, the beneficiary, and, where appropriate the competent authorities of the recipient country that an audit is planned. The Commission informs, as a rule in advance the authorities of the beneficiary country, which are required to provide any information and documents, which may be requested and to take all measures to facilitate the task of the auditors. The Contractor will organize the execution of the mission and shall keep regular contact with the audit task manager and the Delegation of the Commission in the beneficiary country. Usually, Commission officials will organise a briefing in Brussels or at the Commission Delegation to hand over relevant documentation and explain the nature and scope of the audit to the auditor. 5.2 Execution The auditor should, in accordance with international auditing standards and the policies of the firm concerned, identify, analyse, evaluate and record sufficient information to achieve the objectives of the assignment. Assignments should be properly supervised. The Auditor should record and document relevant information in files and working papers to support the findings, recommendations and conclusions. These documents must be kept for a period of 5 years after the final payment of the service rendered in such a way as to allow them to be consulted by the Commission in the offices of the Auditor. More specifically the requirements during the execution of the audit are: • During the audit the team leader will inform the competent national authorities of the recipient country or the auditee of the findings and ask for their comments. This should be documented. • Where the team leader believes that certain findings should be immediately reported to the relevant Commission departments, the latter will decide whether the competent national authorities or the recipient should be informed of their substance. • The team leader must notify the Commission immediately of any attempt by the recipient to restrict the scope of the audit, any lack of co-operation on the part of the recipient and any suspicion of fraud or irregularity. • Commission officials may take part in audit missions. They may also decide to take over responsibility for conducting the audit. • The Commission reserves the right to request, at any moment and stating its reasons, the replacement of one or more experts. Save in the event of failings attributable to the expert(s) whose replacement is requested, the Commission will assume any resulting additional costs and adjust the deadlines accordingly; the Commission will be the sole judge of the reasons invoked.
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• At the end of the fieldwork a closing meeting will be organised. The participants at this meeting will be designated according to the findings of the audit. The presence of a representative of the auditee as well as the Auditor is mandatory. Other participants may also be invited. The Commission will be invited to attend. 5.3 Reporting and Communication The auditor should communicate the results of the assignment in accordance with international auditing standards and the policies of the firm concerned. The Commission will indicate in the specific terms of reference for an assignment to the auditor what the auditor is expected to state or to issue an opinion and when and how this should be delivered. The Commission may specify a reporting format and structure to be provided for a specific assignment. Without prejudice to what is agreed in specific terms of reference, generally speaking, the reporting requirements are: • The ‘report’ or ‘audit report’. The purpose of the report is to describe the assignment and its objectives, the scope and the work carried out. The report should include a conclusion (where agreed in the form of an opinion) as well as a list of the audit findings and where applicable recommendations (e.g. under the form of a matrix of corrective measures or a proposal for amounts to be recovered). • The report should present the facts and an evaluation of these in a clear and objective manner and should be limited to the key issues. They should be well structured and easy to follow. Particular attention will be paid to the findings, results and conclusions of the audit, to the Auditor’s recommendations and to the beneficiary’s comments. The list of findings serves to facilitate the follow-up to be made by the Commission. • Each report should be submitted in both a paper version and an electronic version. The report should be drawn up in Word for Windows format and all tables should be in Excel for Windows format. As a general rule, reports should be drawn up in English and French. • The aide mémoire: At the end of the fieldwork, the Auditor will submit to the “ Commission a summarised report outlining the main findings and recommendations. This report will also contain the beneficiary’s point of view. It will be used as a key document during the closing meeting and for drawing up of the audit report. • The ‘draft report’ shall be transmitted to the Commission within 30 working days after the end of the fieldwork. The Commission will then have 30 working days to inform the Auditor of its observations and comments. The Auditor should present a final report within 10 working days of receipt of the Commission’s comments and observations. The person authorised to certify accounts in the country where the Auditor’s Head Office is based should sign the report.
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• The ‘complementary letter’: the objective of the complementary letter is to inform the Commission on findings of particular interest to the Commission which can also cover issues which are not subject of the audit report. • A debriefing meeting will be organised, when necessary, on reception of the draft report by the Commission, between the team leader and the Commission officials. The Head of the Commission Delegation or a representative will attend that meeting, as necessary, thereof. • The ‘final report’: the Auditor should present a final report within 10 working days of receipt of the Commission’s report approval. The person authorised to certify accounts in the country where the Auditor’s Head office is based should sign the reports. • The ‘6 months review’: the contractor will prepare, each 6 months, a summary of the main audit findings. The ‘annual review’: at the end of each calendar year the Contractor will • prepare a summary, by country and programme or as instructed by the Commission, of the main findings and recommendations of all assignments carried out. 5.4 Follow-up The Commission takes responsibility for the follow-up of audit findings and recommendations. If and where needed the Commission may consult the auditor or request the auditor’s assistance to monitor the progress made on certain issues. 6 Qualifications and Experience required The qualifications and experience required from the experts will depend on the audit assignment ordered by the Commission. Depending on the nature and scope of the audit specific qualifications and experience may be required or desired. Generally speaking there are four categories of experts: • Category 1 Audit partner Highly qualified experts possessing relevant university qualifications and assuming or having assumed important responsibilities in their area of specialisation. They must have at least 12 years of professional experience in their area of specialization and to be authorized to certify the accounts by the law of the country in which the contractor has its registered place of business. Their knowledge of the recipient countries of Community development aid will also be taken into account. • Category 2 Audit manager Qualified experts possessing relevant university qualifications and a good knowledge of the sector(s) concerned. They must have at least six years' professional experience, including experience of leading a multidisciplinary audit team.
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