<strong>ISSAI</strong> 1250practice note 250Overall <strong>Consideration</strong>sP4. The objectives <strong>of</strong> a f<strong>in</strong><strong>an</strong>cial audit <strong>in</strong> the public sector are <strong>of</strong>ten broader th<strong>an</strong> express<strong>in</strong>g <strong>an</strong>op<strong>in</strong>ion whether the f<strong>in</strong><strong>an</strong>cial statements have been prepared, <strong>in</strong> all material respects, <strong>in</strong> accord<strong>an</strong>cewith the applicable f<strong>in</strong><strong>an</strong>cial report<strong>in</strong>g framework (i.e. the scope <strong>of</strong> the ISAs) as noted <strong>in</strong>paragraph A6 <strong>of</strong> the ISA. The audit m<strong><strong>an</strong>d</strong>ate, or obligations for public sector entities, aris<strong>in</strong>g fromlegislation, regulation, m<strong>in</strong>isterial directives, government policy requirements, or resolutions <strong>of</strong>the legislature may result <strong>in</strong> additional objectives. These additional objectives may <strong>in</strong>clude audit<strong><strong>an</strong>d</strong> report<strong>in</strong>g responsibilities relat<strong>in</strong>g to report<strong>in</strong>g whether public sector auditors found noncompli<strong>an</strong>cewith authorities <strong>in</strong>clud<strong>in</strong>g budget <strong><strong>an</strong>d</strong> accountability. However, even where there areno such additional objectives, there may be general public expectations <strong>in</strong> regard to public sectorauditors’ report<strong>in</strong>g <strong>of</strong> non-compli<strong>an</strong>ce with authorities. Therefore, public sector auditors keepsuch expectations <strong>in</strong> m<strong>in</strong>d, <strong><strong>an</strong>d</strong> are alert to <strong>in</strong>st<strong>an</strong>ces <strong>of</strong> non-compli<strong>an</strong>ce.P5. In the public sector, consideration <strong>of</strong> compli<strong>an</strong>ce with laws <strong><strong>an</strong>d</strong> regulations <strong>of</strong>ten has a broaderscope th<strong>an</strong> that set out <strong>in</strong> the ISA. This broader scope may, for example, <strong>in</strong>clude additionalresponsibilities for express<strong>in</strong>g a separate op<strong>in</strong>ion as to the entity’s compli<strong>an</strong>ce with laws <strong><strong>an</strong>d</strong>regulations. These additional responsibilities, <strong><strong>an</strong>d</strong> related audit <strong><strong>an</strong>d</strong> report<strong>in</strong>g objectives, are dealtwith <strong>in</strong> the INTOSAI Compli<strong>an</strong>ce <strong>Audit</strong> Guidel<strong>in</strong>es (<strong>ISSAI</strong> 4000 2 <strong><strong>an</strong>d</strong> 4200 3 ). Public sectorauditors with such additional responsibilities consider <strong>ISSAI</strong>s 4000 <strong><strong>an</strong>d</strong> 4200.P6. As noted <strong>in</strong> paragraph 2 <strong>of</strong> the ISA, the effect <strong>of</strong> laws <strong><strong>an</strong>d</strong> regulations on the f<strong>in</strong><strong>an</strong>cial statementsvaries considerably. In the public sector there may, for <strong>in</strong>st<strong>an</strong>ce, be specific laws <strong><strong>an</strong>d</strong> regulationson how to distribute gr<strong>an</strong>ts <strong><strong>an</strong>d</strong> subsidies from <strong>an</strong> agency that will have a direct impact on thef<strong>in</strong><strong>an</strong>cial statements. The f<strong>in</strong><strong>an</strong>cial report<strong>in</strong>g framework may <strong>of</strong>ten also <strong>in</strong>clude <strong>in</strong>formation suchas a budget report, appropriation report, or perform<strong>an</strong>ce report. When the f<strong>in</strong><strong>an</strong>cial report<strong>in</strong>gframework <strong>in</strong>cludes such <strong>in</strong>formation, public sector auditors may need to consider specific laws<strong><strong>an</strong>d</strong> regulations that may have a direct or <strong>in</strong>direct effect on such <strong>in</strong>formation.P7. When public sector auditors have a broader m<strong><strong>an</strong>d</strong>ate as noted <strong>in</strong> paragraph A6 <strong>of</strong> the ISA <strong><strong>an</strong>d</strong>paragraph P4 above, public sector auditors take care to ensure that where matters come to theirattention <strong>in</strong> respect <strong>of</strong> such additional responsibilities, these f<strong>in</strong>d<strong>in</strong>gs are considered under theframework <strong>of</strong> the ISA to assess their potential impact on the f<strong>in</strong><strong>an</strong>cial statements <strong><strong>an</strong>d</strong> the auditor’sreport thereon.The <strong>Audit</strong>or’s <strong>Consideration</strong> <strong>of</strong> Compli<strong>an</strong>ce with <strong>Laws</strong> <strong><strong>an</strong>d</strong> <strong>Regulations</strong>P8. When consider<strong>in</strong>g the requirements <strong>in</strong> paragraph 15 <strong>of</strong> the ISA, public sector auditors may alsotake <strong>in</strong>to account f<strong>in</strong>d<strong>in</strong>gs related to non-compli<strong>an</strong>ce with laws <strong><strong>an</strong>d</strong> regulations from other types<strong>of</strong> audit activities undertaken by the public sector audit org<strong>an</strong>ization such as perform<strong>an</strong>ce audits.2 <strong>ISSAI</strong> 4000, “General Introduction to Guidel<strong>in</strong>es on Compli<strong>an</strong>ce <strong>Audit</strong>.”3 <strong>ISSAI</strong> 4200, “Compli<strong>an</strong>ce <strong>Audit</strong> Guidel<strong>in</strong>es Related to <strong>Audit</strong> <strong>of</strong> F<strong>in</strong><strong>an</strong>cial Statements.”286 <strong>Consideration</strong> <strong>of</strong> <strong>Laws</strong> <strong><strong>an</strong>d</strong> <strong>Regulations</strong> <strong>in</strong> <strong>an</strong> <strong>Audit</strong> <strong>of</strong> F<strong>in</strong><strong>an</strong>cial Statements
<strong>ISSAI</strong> 1250practice note 250Report<strong>in</strong>g <strong>of</strong> Identified or Suspected Non-Compli<strong>an</strong>ceP9. In addition to the requirement to report to those charged with govern<strong>an</strong>ce as stated <strong>in</strong> paragraph22 <strong>of</strong> the ISA, some public sector auditors communicate all identified <strong>in</strong>st<strong>an</strong>ces <strong>of</strong> non-compli<strong>an</strong>cewith laws <strong><strong>an</strong>d</strong> regulations, even those that are clearly <strong>in</strong>consequential. Some public sectoraudit org<strong>an</strong>izations c<strong>an</strong>, accord<strong>in</strong>g to the audit m<strong><strong>an</strong>d</strong>ate, order the entity to correct <strong>an</strong>y <strong>in</strong>st<strong>an</strong>ces<strong>of</strong> non-compli<strong>an</strong>ce with laws <strong><strong>an</strong>d</strong> regulations. In such cases, especially where there is <strong>an</strong> element<strong>of</strong> subjectivity <strong>in</strong> <strong>in</strong>terpret<strong>in</strong>g laws <strong><strong>an</strong>d</strong> regulations, public sector auditors consider whetherexercis<strong>in</strong>g this authority may impair their <strong>in</strong>dependence <strong><strong>an</strong>d</strong>, if so, take appropriate action toavoid such impairment.P10. When consider<strong>in</strong>g the requirement <strong>of</strong> paragraph 28 <strong>of</strong> the ISA public sector auditors may alsodeterm<strong>in</strong>e whether such responsibilities <strong>in</strong>clude report<strong>in</strong>g separately to the legislature <strong><strong>an</strong>d</strong>/orother relev<strong>an</strong>t authorities such as prosecutors, the police <strong><strong>an</strong>d</strong> (if relev<strong>an</strong>t to legislation) affectedthird parties.<strong>Consideration</strong> <strong>of</strong> <strong>Laws</strong> <strong><strong>an</strong>d</strong> <strong>Regulations</strong> <strong>in</strong> <strong>an</strong> <strong>Audit</strong> <strong>of</strong> F<strong>in</strong><strong>an</strong>cial Statements 287
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