Purpose

Increases the reliability of financial systems and reports

The role of internal audit is to provide independent assurance that an organization’s risk management, governance and internal control processes are operating effectively. They offer recommendations to help improve the systems and processes where necessary.

An external audit adds credibility and reliability to financial reports by giving stakeholders an independent opinion of the financial statements for a given period.

UNDP’s support

In Indonesia, UNDP was asked to provide finance management technical assistance to the Ministry of Health as well as a CSO. Included in the support provided was assistance to the entities to expedite the preparation of information for the external audit and ensure the prior year audit recommendations were thoroughly addressed.

UNDP’s offer

UNDP has assisted health programmes to improve audit and assurance in Africa, Eastern Europe and Central Asia and the Caribbean.

  • through developing internal audit tools and terms of reference and strengthening audit committees, UNDP has improved the transparency of audit and assurance systems
  • UNDP has developed and implemented terms of reference for both external and internal audit work within health systems

Key resources

What is an audit?

An audit may be defined as an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with the relevant applicable financial reporting framework. Ideally, an audit should be conducted in line with International Standards on Auditing (ISAs) to enable the auditor to give their audit opinion.

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An unmodified audit opinion, is often referred to as an unqualified opinion or clean opinion. This is where the audit report states that the financial statements “present fairly in all material respects” or “give and true and fair view”.

A qualified opinion in the audit report is given where the auditor believes there is a material misstatement or is unable to obtain sufficient evidence on a particular matter or matters in a specific area.

UNDP is able to bring global experience tailored to the country context

  • an internal audit person or department should report direct to a senior government official or chief executive officer of a CSO, in order to be sufficiently independent of the health system
  • an internal audit department considers systems and processes within and outside the finance department. In addition to compliance with established policies and procedures they consider wider issues such as
    • organisation reputation
    • opportunities for growth
    • risk management
  • the external audit is usually an annual audit conducted by either the supreme audit authority in the country (for government ministries, institutions and departments) or independent audit firms
  • the external audit report often contains a management letter, which identifies specific control weaknesses with recommendations for improvement
  • UNDP can work with management to establish a plan to address the weaknesses and support successful implementation of timely actions

Suggested capacity development indicators

UNDP uses clear indicators to monitor improvements in audit and assurance systems

  • an internal audit person / department is in place
  • the internal audit department reports to a senior authority outside the finance function
  • the internal audit department regularly issues internal audit reports
  • the internal audit department reviews management responses and actions taken
  • terms of reference for the external auditors are available
  • an external audit report is available for the last financial year
  • an approved plan is in place for management actions to address audit recommendations
  • senior management monitor implementation of the external audit recommendations

Key resources

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