The National Audit Office of Denmark

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The National Audit Office of Denmark
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A new audit approach

• The European Parliament comments in connection
  with the discharge procedure
• The National Audit Office of Denmark a new
  audit approach

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Discharge 2003 - comments (1)

• Shared management between the Commission and the
  Member States concerns 80 of EUs expenditure
• Delegation risk
• The Member States and beneficiaries do not always
  give equal attention to the spending of European
  funds as to the spending of national funds
• The heterogeneous quality of Member States
  control standards
• The notable absence of involvement of most
  national institutions in seeking assurance that
  European funds are being used regularly and
  legally for the intended purposes
• The European Parliament suggest
• That the Member States Finance Ministers make a
  Declaration of Assurance regarding the legality
  and regularity of the underlying transactions

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Discharge 2003 comments (2)

• The Parliament fails to understand how the ECA
  (for the past 10 years) have given a negative
  Statement of Assurance (DAS) on payment
  appropriations whilst at the same time giving a
  de facto clean opinion on the Commissions
  general accounts
• The European Parliament acknowledges that the ECA
  has shown a degree of awareness of the criticisms
  raised and has attempted to reform the DAS
  methodology by widening the basis for its
  evaluation by including
• an assessment of the supervisory systems and
  controls
• substantive transaction testing
• review of the annual activity reports and
  declarations of the Directors-General
• evaluation of relevant results of other auditors

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Discharge 2003 comments (3)

• The European Parliament would like increased
  co-operation between the ECA and the SAIs

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Discharge 2004 comments (1)

• The European Parliament notes with satisfaction
  that the ECA for the first time has issued a
  positive statement on expenditure under the
  Integrated Administrative and Control System
  (IACS) and that it considers this system, when
  effectively implemented, to be a strong
  instrument in reducing risk of irregular
  expenditure
• The Parliament notes the fact that, with regard
  to structural measures, the ECA found further
  shortcomings in the management and control
  systems and calls specifically on the Member
  States to undertake improvements with the
  assistance of the ISAs and the relevant
  independent authorities

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Discharge 2004 comments (2)

• The European Parliament believes that the SAIs
  could audit the internal control systems set up
  by the national administration as well the
  regularity and legality of the underlying
  transactions effected in their own country
• The European Parliament calls on national audit
  bodies to assume responsibility in controlling
  the local use of EU funds, in order that all
  consideration to establish national audit bodies
  of the Court of Auditors are made redundant

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Discharge 2004 comments (3)

• The European Parliament calls on the Member
  States to ensure that the SAIs publish an annual
  audit report on EU funds spent
• The European Parliament suggests a review of the
  DAS system be undertaken by the ECA in order to
  establish specific statements of assurance for
  individual Directorates-General within the
  Commission within an overall statement of
  assurance

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Auditors auditing EU funds (1)

• Auditors auditing EAGGF-funds in Denmark
• NAOD
• The Internal Audit Unit in the paying agency
• Ernst Young (2004) Certifying Body
• The European Commission
• The European Court of Auditors

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Auditors auditing EU funds (2)

• Auditors auditing structural funds in Denmark
• NAOD
• Controllers in the Danish Social and Regional
  Fund
• Private auditors (the beneficiaries accounts)
• The European Commission
• The European Court of Auditors

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Section 9 Agreement

• The Internal Audit Unit has been made on the
  basis of an agreement between the minister of
  Food, Agriculture and Fisheries and the Auditor
  General
• The agreement may be categorised into three main
  areas
• Organization and authority
• Audit tasks
• Co-operation with the NAOD

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Organization and authority

• The Internal Audit Unit shall be placed
  organisationally as an independent unit under the
  manager of the directorate
• The Internal Audit Unit is responsible for the
  overall internal audit effort in the directorate
• The Internal Audit Unit shall be capable and
  competent so that it at any time may solve the
  tasks in a satisfactory way
• Staff in the Internal Audit Unit may not
  participate in work, which is incompatible with
  carrying out audit tasks
• The Internal Audit Unit shall have access to all
  information, which is considered of importance
  for the performance of the tasks of the Internal
  Audit Unit

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Audit tasks

• The Internal Audit Unit shall carry out its work
  in accordance with the principles of good
  auditing practice and internationally recognised
  auditing standards
• Dividing the Audit tasks (Audit split)

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Audit split

• Split between Internal Audit and NAOD

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Co-operation with NAOD

• Meetings are held every second month
• The Internal Audit Unit presents its audit plans
  to the NAOD and keeps the NAOD informed of any
  changes
• The Internal Audit Unit keeps the NAOD informed
  of the carried out audit
• The reports ect. from the Internal Audit Unit is
  forwarded to the NAOD
• After each accounting year, the Internal Audit
  Unit makes a statement and a report of the
  carried out audit

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NAOD new audit approach (1)

• The NAOD plans and conducts the audit of EU funds
  on the basis of the same materiality and risk
  considerations, which are applied to the audit of
  government funds
• The NAOD and the Internal Audit Unit in the
  paying agency co-operates in conducting the audit
  of EAGGF funds
• The NAOD and the controllers in the Danish
  Social- and Regional Fund co-operates in
  conducting the audit of EU structural funds

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NAOD new audit approach (2)

• The NAOD expressed an opinion on the audit of EU
  funds in Denmark in the annual report on the
  audit of the state accounts for 2004
• The NAOD still works on developing a statement of
  assurance about the EU funds in Denmark
• The statement of assurance will include an
  opinion about Reliability of the accounts and
  about Legality and regularity of the underlying
  transactions

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NAOD new audit approach (3)

• Example of future statement of assurance
• Reliability of the accounts
• In the NAODs opinion, the accounts of the EU
  funds were drawn up in accordance with the Danish
  accounting principles, rules and methods. The
  accounts faithfully reflect the revenue and
  expenditure of the EU funds for the year and
  their financial position at the year-end.
• Legality and regularity of the underlying
  transactions
• On the basis of its audit results, the NAOD is
  of the opinion that transactions underlying the
  consolidated accounts of the EU funds, taken as a
  whole, are legal and regular. For common
  agricultural policy (CAP) expenditure it is the
  NAODs opinion that the integrated administration
  and control system (IACS) in Denmark is properly
  applied and functions according to the
  intentions.