STANDARD TERMS OF REFERENCE FOR AUDIT
TERMS OF REFERENCE FOR AUDIT
of Nationally Executed Projects
Background
UNDP receives funds from donors, for which it is accountable, and allocates these funds to programme countries in support of sustainable human development programmes. National execution is an arrangement whereby UNDP entrusts these resources to national government authorities to undertake and manage UNDP-supported projects. The national government authority responsible for the overall management of the project is called the executing agent.
Governments are responsible for the management, including audits, of all UNDP resources of nationally executed projects, and they are accountable to UNDP for the entirety of UNDP resources under their management.
The objective for the audit of the nationally executed project(s) is to audit financial statements, which are referred to as Combined Delivery Reports.
The list of projects identified for auditing of 2006 expenditures is as follows:
1) Improving Energy Efficiency of the Heat and Hot Water Supply System in Turkmenistan, TUK01G35; Atlas ID: 00015013
2) Information Sharing in Turkmenistan for Sustainable Human Development (InfoTuk II); Atlas ID: 00043908
3) Support to Pension System Development, Atlas ID 00044866
4) Improvement of Protected Areas System in Turkmenistan, Atlas ID: 00015015
5) HIV/AIDS Prevention, Atlas ID: 00050892
6) Assistance in the improvement of the State insurance system of Turkmenistan, Atlas ID: 00015019
7) National Capacity Building Needs Self Assessment, Atlas ID: 00036814
Project Management
(1): Improving Energy Efficiency of the Heat and Hot Water Supply System in Turkmenistan: The implementing partner for the project is the Research Institute of methodology and municipal services development under Cabinet of Ministers of Turkmenistan.
National Project Coordinator –Kerim Saparov, Deputy Director, (993 12) 39 08 47
Project Manager –Arslan Zomov, (993 12) 39 08 47
Project Assistant – Gulbahar Tachkulieva
The Main Project Objective is to remove the existing barriers to the improvement of the heat and hot water supply system in Turkmenistan. More specifically the project will assist in implementation of a pilot project in Turkmenabad to introduce new technologies and approaches to heat and hot water supply, preparation of feasibility studies and master plans for nine participating municipalities: Ashgabat, Mary, Turkmenbasy Dashoguz, Turkmenabad, Balkanabad, Khazar, Kuhneurgench and Bairamaly. These studies will provide a basis for the long term development of the heat and hot water services according to sustainable development principles; and to assist the Government in the establishment of a supportive institutional and financial framework for energy efficiency investments.
Project Status and Expenditure in 2006. The project was in its fifth year of implementation in 2006. The major 2006 outputs include: (i) all the participating municipalities have approved local master-plans aiming at restructuring the institutional arrangements and improving the overall heating management in each municipality; (ii) a guidebook on project management and funding mobilization and guidelines for legislative changes to support investments have been prepared, printed and distributed; (iii) the National Heating Sector Development Strategy has been drafted incorporating a detailed analysis of the sector and recommendations for major areas of sector development with the ultimate goal to reduce gas emissions to the air, contributing to the country’s obligation on climate change; (iv) The National Heating Sector Development Strategy was submitted to the Cabinet of Ministers of Turkmenistan for approval. The project expenditures for 2006 were $221,080. Major categories include international and local consultancies, administration, printing of materials, equipment, missions and monitoring. The source of funding is GEF[1].
(2) Information Sharing in Turkmenistan for Sustainable Human Development (InfoTuk); The implementing partner for the project is Ministry of Education of Turkmenistan.
National Project Coordinator – Ms. Marina Hamraeva, Executive Head of International Cooperation Department, Ministry of Education, (993 12) 35 48 06
Manager – Ms. Gulshirin Annadurdyeva, (993 12) 39 57 43
The Main Project Objective is to play a key role in strengthening the capacity to use information and communication technology (ICT) at the national and local levels as means of increasing access to information and opportunities in education, science and technology in Turkmenistan. The project immediate objectives are: a) continuation of support in primary and special education on ICT using, which has been conducted within the previous phase of InfoTuk project for local specialists, teachers, students, state employees and other persons interested; b) establishment of 20 Computer and Networking Training Centers (CNTCs) in schools; and c) increasing number of users of Turkmen Research and Education Network (TuREN).
Project Status and Expenditure in 2006. The project was started in April 2005. Creation of computer training centres in 10 secondary schools and equipped with modern computers, licensed software and audio-visual tools expanded access to and gave opportunity to learn and use ICT for educational purpose to nearly nine thousand schoolchildren and teachers. The creation was accompanied by and awareness raising, capacity building and computer literacy workshops for more than 1,700 teachers, schoolchildren and general public. Though legal and operational constraints resolved only in December 2006 prevented provision of Internet access to schools all necessary documentation permitting Internet connectivity to schools was received. The project expenditures for 2006 were $235,597. Major categories include equipment, training, monitoring and administration. The source of funding is UNDP.
(3) Support to Pension System Development, The implementing partner for the project is Ministry of Social Welfare of Turkmenistan.
National Project Coordinator – Mrs. Bibitach Vekilova, Minister of Social Welfare of Turkmenistan,
Project Manager – Ms. Nurjemal Jalilova, (993 12) 39 65 91
The Main Project Objective is to support the government of Turkmenistan in designing strategy for further development of the pension system and developing national capacity in pension system planning and management. It will also advocate use of advanced information and communication technologies for an increased efficiency of the pension system management through developing an integrated social insurance information system.
Project Status and Expenditure in 2006. The project activities were mainly focused on (i) creating an enabling legal, regulatory and institutional framework through international and local expertise; (ii) raising public awareness of the new pension system through publication of brochures and awareness seminars; (iii) enhancing capacity of the Ministry of Social Welfare in pension system management through developing the integrated information management system, upgrading existing computer equipment and training ministerial staff in pension system analysis and forecasting and policy formulation. The project expenditures for 2006 were $205,138. Major categories include international and local consultancies, computer software and hardware equipment, study tours, and administration. The source of funding is UNDP.
(4) Improvement of Protected Areas System in Turkmenistan: The implementing partner for the project is Ministry of Nature Protection of Turkmenistan.
National Project Coordinator – Mr. Makhtumkuli Akmuradov, Minister of Nature Protection of Turkmenistan,
Project Manager – Mr. Tahir Ovlakuliev, (993 12) 35 25 77
Project Assistant – Ms. Viktoria Kim, (993 12) 35 25 77
The Main Project Objective is to support the government of Turkmenistan in long term sustainable development by ensuring the long term maintenance and conservation of key ecosystems in the country. The project was also aimed at providing a support to the initial implementation of Protected Areas development plan, institutional strengthening and developing a National Protected Areas Plan and Information Management System.
Project Status and Expenditure in 2006. The project activities were mainly focused on (i) creating a database for controlling and monitoring the protected areas system, which can serve as an information base for the perspective national environmental information management and monitoring system; (ii) developing three management plans for three pilot nature reserves as part of the institutional improvement for the protected areas system, with an environmental and economic study and a business plan prepared for creating the first national park in the country as well as pilot advocacy and education efforts in the area. The project expenditures for 2006 were $144,661. Major categories include local consultancies, computer software and technical support, study tours, and administration. The source of funding is UNDP.
(5) HIV/AIDS Prevention: The implementing partner for the project are Ministry of Health and Medical Industry of Turkmenistan, National AIDS Prevention Centre, Women’s Union and Ministry of Interior of Turkmenistan.
National Project Coordinator – Mr. Muhammed Muhammedov, Director of the National AIDS Prevention Centre, (993 12) 34 56 37.
Project Assistant – Ms. Gulistan Begniyazova, (993 12) 34 52 18.
The Main Project Objective is to support the government of Turkmenistan in implementation of the national programme on HIV/AIDS/STIs prevention 2005-2010 jointly with other UN agencies to ensure that HIV/AIDS prevention initiatives are implemented in a coordinated and comprehensive manner.
Project Status and Expenditure in 2006. The project activities were mainly focused on (i) establishing the Information Training Centre with Internet access at the National AIDS Prevention Centre to increase access of specialists to information and improved under- and postgraduate training; (ii) conduction of information communication activities among young people and at-risk groups in the military units and rehabilitation centres for alcohol and drug users; (iii) capacity building of national specialists of the National AIDS Prevention Centre through support to participation in on job laboratory training aboard and study-tour to Russian Federation AIDS Centre. The project expenditures for 2006 were $124,303. Major categories include local consultancies, computer software and technical support, study tours, and administration. The main sources of funding are UNDP and Government of Turkmenistan.
(6) Assistance in the improvement of the State insurance system of Turkmenistan: The implementing partner for the project is State Insurance Organization of Turkmenistan.
National Project Coordinator – Mr. Kurban Kurbanov, Deputy Director of the State Insurance Organization of Turkmenistan
Project Assistant – Ms. Aigul Esenova, (993 12) 22 19 40
The Main Project Objective is to support the government of Turkmenistan in strengthening its capacity to improve the efficiency of the State Insurance Organization functioning and management.
Project Status and Expenditure in 2006. The project activities were mainly focused on: i) strengthening the legal and regulatory framework of the insurance sector; ii) upgrading the institutional capacity of the insurance organization; iii) development of Management Information System (MIS) database; and iv) insurance promotion. The project expenditures for 2006 were $50,621. Major categories include international and local consultancies, computer software and hardware equipment, training programmes, and administration. The source of funding is UNDP.
(7) National Capacity Building Needs Self Assessment: The implementing partner for the project is Ministry of Nature Protection of Turkmenistan.
National Project Coordinator – Mr. Makhtumkuli Akmuradov, Minister of Nature Protection of Turkmenistan,
Project Manager – Ms. Karyyeva Ogulsona, (993 12) 39 85 92
Project Assistant – Ms. Sultanova Anna, (993 12) 39 85 92
The Main Project Objective is to support the government of Turkmenistan in determining the priority capacity development needs of Turkmenistan in order for it to effectively meet its commitments to global environmental management, specifically in the areas of biodiversity, climate change and combating desertification. The project was to assess capacity related issues and constraints within each of these thematic areas and identifies those that are common to each or a number of the conventions and are thus a priority. It will do this on the basis of existing capacity assessments if they are available and are adequate.
Project Status and Expenditure in 2006. The project activities were mainly focused on (i) developing and finalising a Cross Cutting Report through holding a number of round-tables and consultations with the support of international expert, leaders of the groups and national experts; (ii) contributing towards global environmental management goals within context of the three focal conventions trough producing and publication of thematic reports. The project expenditures for 2006 were $70,258. Major categories include local consultancies, computer software and technical support, study tours, and administration. The source of funding is GEF[2].
Consultations with Concerned Parties
Prior to the start of audit work the auditors will be required to consult with the UNDP country office and the implementing partner for each project. Further upon completion of the draft audit report and management letter, the auditor will be required to meet with the UNDP country office and the National Project Coordinators to debrief them on its major findings from the audit and its recommendations for future improvements as well as to seek their feedback thereon.
Description of Financial Reports to be audited
Description of the Combined Delivery Report and Supporting Schedules
The report to be audited is referred to as the Combined Delivery Report (CDR). This report is prepared by UNDP, using an in-house accounting software package called ATLAS. As described in more detail below, the CDR combines expenditures from three disbursement sources for a calendar year. The three disbursement sources include:
1. Implementing Partner (either Government or NGO):
UNDP procedures require that where funds are advanced to the executing agency the agency must submit to the UNDP country office, on a quarterly basis, a financial report including (1) the status of the advance (2) a list of the disbursements made since the previous financial report, and (3) a request for a new advance. The UNDP country office enters the disbursements in ATLAS through the year as the financial reports are received. These implementing partner disbursements are recorded in the Government expenditure column in the CDR.
2. UNDP (country office, headquarters and other country offices):
Disbursements made by UNDP from its own bank accounts are entered in ATLAS by the UNDP country office. These UNDP disbursements are recorded in the UNDP expenditure columns in the CDR. These disbursements may be classified as either direct payments or UNDP support services. This distinction, while very important for audit purposes, is not apparent from the CDR and can only be provided by the UNDP country office as a supporting schedule. A brief description of each category is provided below.
a) Direct Payments: This is where the executing agency is responsible for the expenditure but requested UNDP to effect payment to the vendor/consultant on its behalf. The executing agency is accountable for the disbursement and maintains all supporting documentation. UNDP simply effects payments on the basis of properly authorized requests and gives the executing agency a copy of the related disbursement voucher as evidence that payment was made.
b) UNDP Support Services: This is where the executing agency requests UNDP to provide support services to the project such as procurement of goods and services, travel and payments. UNDP is fully responsible and accountable for these expenditures and, accordingly, maintains all supporting documentation for the disbursement.
At the end of the year, after receiving the fourth quarter financial report from the implementing partner and the year-end expenditure report from the UN agency, UNDP prepares the CDR and submits it to the implementing partner for signature. UNDP will provide the auditor with the signed CDR together with the following supporting documentation.
1. The quarterly financial reports submitted by the executing agency.
2. A list of the direct payments processed by UNDP at the request of the executing agency.
3. A list of the disbursements made by UNDP as part of support services provided to the executing agency.
The signed CDR and supporting documentation for the year 2006 will be ready by 26 March 2006.
Audit Scope
The scope of the audit is:
• Seven projects, namely:
1. TUK01G35, (ATLAS ID 00015013), Improving Energy Efficiency of the Heat and Hot Water Supply System in Turkmenistan; implementing partner – Research Institute on methodology and municipal services development under Cabinet of Ministers of Turkmenistan,
2. Project’s Atlas ID: 00043908, Information Sharing in Turkmenistan for Sustainable Human Development (InfoTuk II); implementing partner – Ministry of Education of Turkmenistan.
3. Project’s Atlas ID: 00044866, Support to Pension System Development; implementing partner – Ministry of Social Welfare of Turkmenistan.
4. Project’s Atlas ID: 00015015, Improvement of Protected Areas System in Turkmenistan; implementing partner – Ministry of Nature Protection of Turkmenistan.
5. Project’s Atlas ID: 00050892, HIV/AIDS Prevention; implementing partners - Ministry of Health and Medical Industry of Turkmenistan, National AIDS Prevention Centre, Women’s Union and Ministry of Interior of Turkmenistan.
6. Project’s Atlas ID: 00015019, Assistance in the improvement of the State insurance system of Turkmenistan Support to Pension System Development; implementing partner – State Insurance Organization.
7. Project’s Atlas ID: 00036814, National Capacity Building Needs Self Assessment; implementing partner – Ministry of Nature Protection of Turkmenistan.
• The audit should be carried out in accordance with either ISA or INTOSAI;
• The audit period is 1 January to 31 December of the year 2006;
• The scope of the audit is limited to the implementing partner expenditures which include (1) all disbursements listed in the quarterly financial reports submitted by the implementing partner and (2) the direct payments processed by UNDP at the request of the implementing partner.
• Verification of mathematical accuracy of the CDR to ensure that the expenditures described in the supporting documentation (the quarterly financial reports, the list of direct payments processed by UNDP at the request of the government, the list of disbursements made by UNDP as part of support services, and the UN agency expenditure statement) are reconciled to the expenditures by disbursing source, in the CDR.
• A statement in the audit report regarding the CDR expenditures, which were excluded from the scope of the audit because they were made by UNDP as part of support services and the total expenditures, which excluded because they were made by a UN agency.
• A statement in the audit report if the audit was not in conformity with any of the above, indicating the alternative standards or procedures followed.
• An opinion as to the overall financial situation of the project for the period 1 January to 31 December 2006 and will certify:
1. The Statement of Expenditure (CDR) for the period from 1 January to 31 December 2006;
2. The cash position reported by the projects as at 31 December 2006; and
3. The status of assets and equipment held by the project as at 31 December 2006.
The Audit Report
The audit report (refer to Annex 2 for a sample of Audit Report) should include at least the following:
• The special purpose of the report and its intended use.
• The audit standards that were applied (INTOSAI standards, ISA or national standards that comply with one of these in all material respect).
• The period covered by the opinion.
• The scope restriction for those expenditures that are the responsibility of UNDP (as part of support services) or a UN agency.
• Report in very clear terms the financial effect of qualifications in order to provide to the users of these financial statements the potential amount of funds not spent appropriately and quantifying the actual financial impact for the certifications required. The auditors should quantify only financial related issues and not control issues and indicate the underlying cause for the financial issues being qualified
• Whether the Statement of Expenditure (CDR) for the period from 1 January to 31 December 2006 is adequately and fairly presented. The disbursements made are in accordance with the purpose for which funds have been allocated to the project;
• Whether the Statement of Assets and Equipment is fairly and adequately presented as at 31 December 2006; and
• Whether the Statement of Cash Position reported by the project is fairly and adequately presented as at 31 December 2006.
Submission of the draft reports to UNDP is due by 10 April and the signed audit report is due by 20 April.
Management Letter
The auditor will submit a management letter at the completion of the audit. The management letter should include at least the following topics/issues:
• A general review of project progress and timeliness in relation to progress milestones and the planned completion date, both of which should be stated in the project document or the Annual Work Plan (AWP). This is not intended to address whether there has been compliance with specific covenants relating to specific performance criteria or outputs. However general compliance with broad covenants such as implementing the project with economy and efficiency might be commented upon but not with the legal force of an audit opinion.
• An assessment of the project's internal control system with equal emphasis on (i) the effectiveness of the system in providing the project management with useful and timely information for the proper management of the project and (ii) the general effectiveness of the internal control system in protecting the assets and resources of the project.
• A description of any specific internal control weaknesses noted in the financial management of the project and the audit procedures followed to address or compensate for the weaknesses. Recommendations to resolve/eliminate the internal control weaknesses noted should be included.
The management letter should also include the following:
• The categorization of audit findings by risk severity: High, Medium, or Low. Definitions of these categories are given in Annex 5;
• The classification of possible causes of the audit findings. Definitions of these causes are given in Annex 6;
• Comments as to whether recommendations made in the management letter for the previous audit were implemented or, if not, the implementation status;
• Management comments/response (project management and/or UNDP, as applicable).
Review of Project Progress
The general review of project progress should include the following:
• Review annual and quarterly work plans, quarterly financial reports, and requests for direct payments and assess in terms of their timeliness and their compliance with the project document and/or Annual Work Plan (AWP) and the UNDP Programming Manual (6.5.3 and 6.5.4) and the upcoming UNDP User Guide on Results Management.
• Review the Annual Project Reports prepared by the implementing partner and assess in terms of compliance with UNDP guidelines and whether the implementing partner met its responsibilities for monitoring described in the project document and/or AWP.
• Review whether the decisions and/or recommendations of the above activities have been followed through by the implementing partner.
• Review the pace of project progress and comment on the causes for delays.
• Comment on whether implementation services of the UN Agency(s) were provided in line with project document or AWP.
Assessment of Internal Control
The auditor is expected conduct a general assessment of internal controls according to established internal control standards including:
• Review expenditures made by the implementing partner and assess whether they are in accordance with the project document, AWP and budgets; and are in compliance with the UNDP Programming Manual (6.4)[3].
• Review the process for procurement/contracting activities and assess whether it was transparent and competitive.
• Review the use, control and disposal of non-expendable equipment and assess whether it is in compliance with the UNDP Programming Manual (6.4.5); and also whether the equipment procured met the identified needs and whether its use was in line with intended purposes. Review the process for recruiting project personnel and consultants and assess whether it was transparent and competitive.
• Review the implementing partner accounting records and assess their adequacy for maintaining accurate and complete records of receipts and disbursements of cash; and for supporting the preparation of the quarterly financial report.
• Review the records of requests for direct payments and ensure that they were signed by authorized government officials.
Recommendations and Improvement
Recommendations should be directed to a specific entity so there is no confusion regarding who is responsible for implementation. The response of the entity should be included in the management letter, immediately following the recommendation.
Also, the auditor may wish to comment on “good practices” (if any) that were developed by the implementing partner that should be shared with other project personnel.
Available Facilities and Right Access
The auditor will have full and complete access at any time to all records and documents (including books of account, legal agreements, minutes of committee meetings, bank records, invoices and contracts etc.) and all employees of the entity. The auditor will have a right of access to banks, consultants, contractors and other persons or firms engaged by the project management.
Annex 1: Audit Services Required
The scope of audit services shall cover the overall management of the project’s implementation, monitoring and supervision. The audit work should include the review of work plans, progress reports, project resources, project budgets, project expenditure, project delivery, recruitment, operational and financial closing of projects (if applicable) and disposal or transfer of assets. To this effect, the scope of the audit shall cover the following areas as they are performed at the level of the project:
Human resources
The audit work shall cover the competitiveness, transparency and effectiveness of the recruitment and hiring of personnel and include performance appraisal, attendance control, calculation of salaries and entitlements, payroll preparation and payment, and management of personnel records.
Finance
The audit work shall cover the adequacy of the accounting and financial operations and reporting systems. These include budget control, cash management, certification and approving authority, receipt of funds, disbursement of funds, recording of all financial transactions in expenditure reports, records maintenance and control.
Procurement
The audit work shall cover the competitiveness, transparency and effectiveness of the procurement activities of the project in order to ensure that the equipment and services purchased meet the requirement of either the government (or NGO) or UNDP and include the following:
• As applicable, delegations of authorities, procurement thresholds, call for bids and proposals, evaluation of bids and proposals and approval/signature of contracts and purchase orders;
• Receiving and inspection procedures to determine the conformity of equipment with the agreed specifications and, when applicable, the use of independent experts to inspect the delivery of highly technical and expensive equipment
• Evaluation of the procedures established to mitigate the risk of purchasing equipment that do not meet specifications or is later proven to be defective;
• Management and control over the variation orders.
The audit work in the area of procurement shall also cover the use of consulting firms and the adequacy of procedures to obtain fully qualified and experienced personnel and assessment of their work before final payment is made.
Asset Management
The audit work shall cover equipment (typically vehicles and office equipment) purchased for use of the project. The procedures for receipt, storage, and disposal shall also be reviewed.
Cash Management
The audit work shall cover all cash funds held by the project and review procedures for safeguarding of cash.
General Administration
The audit work shall cover travel activities, vehicle management, shipping services, office premises and lease management, office communications, and records maintenance.
Information System
The audit work shall cover the information and communication systems and the control and security of equipment and data.
Scope Limitation
The above scope shall cover those transactions performed at the level of the project. Transactions/actions that are performed by the UNDP office at the request and on behalf of the project are not to be included in the audit scope.
Annex 2: Qualifications of the Auditor
The auditor must be completely impartial and independent from all aspects of management or financial interests in the entity being audited. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, be employed by, serve as director for, or have any financial or close business relationships with any senior participant in the management of the entity.
The auditor should be experienced in applying either ISA or INTOSAI audit standards, whichever is applicable for the audit. The auditor must employ adequate staff with appropriate professional qualifications and suitable experience with ISA or INTOSAI standards, including minimum three years experience in auditing the accounts of entities comparable in size and complexity to the entity being audited. Experience in auditing of UNDP supported projects is an asset.
Curriculum vitae (CVs) should be provided to the client by the principal of the firm of auditors who would be responsible for signing the opinion, together with the CVs of managers, supervisors and key personnel proposed as part of the audit team. CVs should include details on audits carried out by the applicable staff, including ongoing assignments indicating capability and capacity to undertake the audit.
Annex 3: Sample Audit Report
Auditor's report to:
The National Project Coordinator and
The Resident Representative
a) Certification of Statement of Expenditure
We have audited the accompanying Statement of Expenditure (“the statement”) of the UNDP project number _________ [Atlas project #] for the period 1 January 2006 to 31 December 2006. The statement is the responsibility of the management of the project. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with International Standards of Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the statement of expenditure presents fairly, in all material respects the expenditure of [insert amount in US$] incurred by the project for the period 1 January 2006 to 31 December 2006 in accordance with UNDP accounting requirements.
b) Certification of Statement of Assets and Equipment
We have audited the accompanying Statement of Assets and Equipment (“the statement”) of the UNDP project number _________ [Atlas project #] as at 31 December 2006. The statement is the responsibility of the management of the project. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with International Standards of Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and equipment presents fairly, in all material respects the inventory balance of the project amounting to [insert amount in US$] as at 31 December 2006 in accordance with UNDP requirements.
c) Certification of Statement of Cash Position
We have audited the accompanying Statement of Cash Position (“the statement”) of the UNDP project number _________ [Atlas project #] as at 31 December 2006. The statement is the responsibility of the management of the project. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with International Standards of Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the statement of cash position presents fairly, in all material respects the cash balance of the project amounting to [insert amount in US$] as at 31 December 2006 in accordance with UNDP requirements.
This report is intended solely for the information and use of UNDP and the Government of Turkmenistan (or NGO).
Date: AUDITOR'S SIGNATURE
ADDRESS
|Note: Audit opinions must be one of the following: (a) qualified, (b), unqualified, (c) adverse, or (d) disclaimer. If |
|the audit opinion is other than “unqualified” the audit report must describe both the nature and amount of the possible |
|effects on the financial statements. A definition of audit opinions is provided in Annex 4. |
Annex 4: Definition of Audit Opinions
Unqualified (Clean) Opinion
An unqualified opinion should be expressed when the auditor concludes that the financial statements give a true and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Modified Unqualified or Emphasis of Matter paragraph
In certain circumstances, an auditor’s report may be modified by adding an emphasis of matter paragraph to highlight a matter affecting the financial statements, which is included in a note to the financial statements that more extensively discusses the matter. The emphasis of matter paragraph would ordinarily refer to the fact that the auditor’s opinion is not qualified in this respect, by adding a paragraph to highlight a material matter regarding an ongoing concern or problem or a significant uncertainty. An uncertainty is a matter whose outcome depends on future actions or events not under the direct control of the entity but that may affect the financial statements.
Qualified Opinion
A qualified opinion should be expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion. A qualified opinion should be expressed as being ‘except for’ the effects of the matter to which the qualification relates.
Disclaimer of opinion
A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is unable to express an opinion on the financial statements.
Adverse
An adverse opinion should be expressed when the effect of a disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.
Annex 5: Categorization of Audit Findings by Risk Severity
|High |Action that is considered imperative to ensure that UNDP is not exposed to high risks (i.e. failure to take action |
| |could result in major consequences and issues). |
|Medium |Action that is considered necessary to avoid exposure to significant risks (i.e. failure to take action could result |
| |in significant consequences). |
|Low |Action that is considered desirable and should result in enhanced control or better value for money. |
| | |
Annex 6: Classification of possible causes of Audit Findings
|Compliance |Failure to comply with prescribed UNDP regulations, rules and procedures |
|Guidelines |Absence of written procedures to guide staff in the performance of their functions |
|Guidance |Inadequate or lack of supervision by supervisors |
|Human error |Mistakes committed by staff entrusted to perform assigned functions |
|Resources |Lack of or inadequate resources (funds, skills, staff, etc.) to carry out an activity or function |
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[1] Global Environment Facility
[2] Global Environment Facility.
[3] The UNDP Programming Manual will be provided by UNDP Country Office.
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