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					         Gap Analysis

           Public Sector
       Accounting and Auditing

          A Diagnostic Tool
for Benchmarking National Standards to
        International Standards
       Assessment Framework
• Developed in 2006 by the Financial Management Unit of
  the World Bank South Asia Region as a new diagnostic
  tool to assess how well public sector accounting and
  auditing practices accord with the IFAC and INTOSAI
• It uses a set of self-assessment questionnaires focusing
  on identifying the gaps in the national standards
  implemented in each country.
• Tested and applied in the countries of South Asia.
  Subsequently modified and used in Azerbaijan and
  Colombia (in progress).
      Developing the Framework
• The Gap Analysis Framework is based on the ROSC (Report on
  Observance of Standards and Codes)-Accounting and Auditing
  Framework which summarizes the extent to which countries observe
  certain internationally recognized standards and codes in the private
  sector. The tool has been suitably modified to the public sector.
• The development of the Public Financial Management Performance
  Measurement Framework opened the way for a more detailed
  accounting and auditing diagnostic based on IFAC and INTOSAI,
  especially when the ISSAI were promulgated.
• Pilots were conducted in two countries – Bangladesh and Sri Lanka
  which helped refine the framework based on experience
• Later rolled out to the remaining countries in South Asia and reports
  have been completed and are available on the web. Work is in
  progress in India where the Government is doing a self assessment.
    PFM Framework accounting and
          auditing indicators
•   PI 10.   Public access to key fiscal information.
•   PI 22.   Timeliness of accounts reconciliation.
•   PI 23.   Information on resources received.
•   PI 24.   Quality of budget reports.
•   PI 25.   Quality of annual financial statements.
•   PI 26.   Nature and follow-up of external audit.
•   PI 28.   Legislative scrutiny of audit reports.
       Questionnaires on country
         accounting practices
• 1. The public sector accounting environment ― financial
  laws and standard-setting arrangements, educational
  requirements for accountants compared with IFAC IES,
  ethical requirements compared with the IFAC Code of
• 2. Public sector accounting practices for the general
  budget sector if using the cash basis of accounting ―
  compared with the requirements of the Cash Basis
• 3. Public sector accounting practices for the general
  budget sector if using the accrual basis of accounting ―
  compared with the requirements that govern IPSAS
  accrual reporting for the public sector.
Questionnaires on country auditing
• 4. Public sector auditing environment ―
  compared with the provisions of the INTOSAI
  Code of Ethics and the general standards in the
  INTOSAI Auditing Standards.
• 5. Public sector auditing practices ― compared
  with the field and reporting standards in the
  INTOSAI Auditing Standards and the ISSAI.
• 6. Accounting and auditing practices for state-
  owned enterprises ― compared with the
  requirements of the IFAC International Financial
  Reporting Standards (IFRS) and the ISSAI.
        Results for Accounting
•   All the South Asia countries, except Sri Lanka, will
    adopt the IPSAS Cash Standard within the next few
    years. Sri Lanka has adopted the accrual basis of
•   All the countries in South Asia have expressed a
    desire to move in the direction of accrual accounting in
    the long run.
•   Each country is to establish an accounting standards
    committee to issue guidelines on how the IPSAS are to
    be implemented within their country.
•   The IFAC Educational Standards are being considered
    as one of the criteria for staffing the accounting
    departments in the future.
            Results for Auditing
•   The SAIs will need to: (a) modify their audit methodology to be
    consistent with the international standards; (b) adopt the IFAC
    Educational Standards as the criteria to be followed for staffing;
    (c) adopt the more detailed ISSAI auditing standards; and (d)
    improve their laws to fully meet the independence standards set
    by INTOSAI.
•   Programs for change and self improvement need stronger staff
    expertise to meet the increasing demands for certification of
    annual government financial statements at national, departmental
    and provincial levels.
•   Most SAIs have little current capacity for handling environmental
    and forensic audit.
•   There was a general problem of obtaining adequate
    implementation of recommendations included in audit reports and
    the systems of oversight by the Public Accounts Committees
    (PACs) require strengthening.
•   Public reporting of audits needed to be much more timely and
    Bank Strengthening Programs
•    Used available model laws to develop suitable national
     audit laws.
•    Provided capacity building through integrated
     accounting and audit system improvement programs.
•    Proposed more rigorous staff appointment, training
     and advancement arrangements including adherence
     to IFAC Educational Standards for auditors.
•    Provided manuals and training for broader themes of
     audit (e.g., performance auditing).
•    Initiated support to PAC Secretariats in examining
     audit reports.
      Results in other South Asia
• Afghanistan – IPSAS cash basis accounts, SAI
  improvement program.
• Bangladesh – assisting a broad PFM reform program.
• Bhutan - SAI improvement program.
• Maldives – new financial audit methodology supporting a
  SAP implementation using IDEA and TeamMate.
• Nepal - SAI improvement program planned.
• Pakistan – A stand alone project (Project to Improve
  Financial Reporting and Auditing called PIFRA) is under
  implementation for treasury computerization and SAI
• Sri Lanka – IPSAS adopted and SAI improvement
  program planned.
        Gap Analysis Reports
• Gap Analysis Framework document and
  Country Reports [Afghanistan,
  Bangladesh, Maldives, Pakistan, Sri
  Lanka, Nepal, Bhutan] are available on the
  World Bank web-site.
• Report for Azerbaijan is also available
• The Framework is available for use by any
  country or institution

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