Audit

An audit is initiated based on:

an external suggestion to perform an audit that the Government, Chamber of Deputies or Senate of the Parliament of the Czech Republic and their bodies can make through a resolution -- the SAO Board decides whether to act on external suggestion.

an internal audit suggestion which is prepared by the appropriate department of the Audit Section of the SAO according to its area of responsibility; a suggestion may be also initiated by the SAO President, Vice-President, and Members. The basis for an internal suggestion is the SAO’s own risk analysis, monitoring of the respective area of public funding, a complaint from the public, an analysis of data from the public administration information system and other sources.

An audit suggestion is a document ranging from 5 to 15 pages. It summarises the subject and objectives of the audit, who will be audited (the auditees), the timing of the audit, the reason for the audit, information about the legal and economic position of the proposed auditees, information about previous identical or similar audits, the basic characteristics of the audited area, the audit hypotheses, and so on. Work on audit suggestions for the upcoming year begins in March, with the various SAO Board Members participating in them. A suggestion is not public.

An audit plan for the upcoming year is drawn up based on the suggestions. This plan is approved by the SAO Board, usually in October or November. Thus, auditees are aware several months in advance that the SAO is preparing to audit them. Depending on the workload of the SAO Board, the audit plan contains 30 to 40 audits. During the year, the SAO Board can add a new audit to the plan for the respective year; an absolute majority of SAO Board Members have to agree on this, however. The plan also contains basic information about each audit and it is public.

An audit comprises a preparatory phase, an execution phase, and an audit conclusion phase. An audit takes 10 months on average to complete, with 5 to 30 auditors taking part in it, depending on the number of auditees.

On average, six auditors, under the supervision of the audit team leader, take part in preparing an audit. It takes about 12 weeks.

An audit starts at a meeting of the SAO representatives and representatives of the auditee. At this meeting, the auditee is informed about the subject-matter, objective and course of the audit, and about auditee’s rights and obligations. At the same time, organisational matters are dealt with, such as the contact person that the auditors can turn to, especially with requests for documents and information, access cards for the auditors to allow them entry to the auditee’s premises, a room set up for the auditors, etc.

In the preparatory phase, auditors collect and analyse all available information regarding the area under audit. The result of the preparatory phase is the proposed audit programme.

The audit programme ranges from 30 to 50 pages. It is not public and is drawn up by the audit team leader. It mainly contains the subject-matter and objectives of the audit, the audited period, the scope of the audit, the audit procedure, the criteria for evaluating the results of the audit, a summary of the results of previous audits in the area, and the risks and factors that can affect the audit. The programme is subject to a comment procedure within the SAO and, once comments are addressed, it is approved by the SAO Member managing the audit in question.

On average, ten auditors take part in executing an audit, a process which takes 15 weeks to complete on average.

The audit briefing serves to acquaint all auditors taking part in the audit with the approved audit programme. Issues related to the audit and its methodology and organisation are also discussed.

This is the most important part of the audit. Auditors examine whether the audited activities comply with legal regulations, review the material and formal accuracy of these activities, and assess whether they are carried out economically, effectively and efficiently. The areas under audit are linked to the programme, specifically to the given audit procedure. The result of the execution phase of the audit is an objective, evidence-based assessment and evaluation of the ascertained facts, leading to the fulfilment of the subject-matter and objectives of the audit.

Each auditor is allocated a certain area and his/her progress is recorded in a worksheet.

An audit report is drawn up for each auditee from the documents and evidence collected. The report is a document ranging from tens to hundreds of pages. The law requires the SAO to keep the report confidential. The report contains a detailed description of the ascertained facts and an assessment of the discovered shortcomings which are based on the evidence collected. Such evidence was obtained by the auditors from the auditee as well as from other relevant sources. The audit team leader presents the audit report to the auditee for review. The auditee has at least five working days to review the report.

Should an auditee disagree with the content of the audit report, it can lodge objections to specific passages of the audit report with the leader of the audit team that conducted the audit at the auditee within at least five working days after receiving the audit report. The audit team leader then informs the auditee how the objections were dealt with. This information is provided in writing in the form of a decision on objections.

Should an auditee disagree with how the audit team leader dealt with his objections, it has 15 calendar days from the delivery of the decision on objections to lodge an appeal against such decision with the SAO Board. The SAO Board discusses and deals with the appeal when it meets. If there are reasons to warrant it, the Board will revoke the decision on objections; in the opposite case, it will reject the appeal and confirm the decision. It then informs the auditee about the results.

If auditors find evidence during an audit indicating that that a crime has been committed, the SAO has the legal obligation to file a criminal complaint with the law enforcement authorities. The authorities will examine the relevant facts; they, however, are not obliged to inform the SAO about the progress of the investigation as the SAO is not a party to the proceedings. If auditors find evidence indicating that the auditee has breached budgetary discipline, the SAO will inform the appropriate tax office about this fact. The tax office will then assess whether budgetary discipline has been in fact breached and, if so, will assess the amount to be refunded by the auditee and a penalty.

Two auditors are usually involved in drawing up the audit conclusion; it takes 12 weeks on average.

Based on the audit findings, the SAO Member managing the audit drafts the audit conclusion in cooperation with the audit team leader. The audit conclusion ranges from 5 to 40 pages and summarises, assesses, and generalises the information collected during the audit. The draft audit conclusion is subject to a comment procedure in which each department of the Audit Section and other SAO Board Members and the Legal Department comment on it. Their comments must be addressed by the Member managing the respective audit.

The draft audit conclusion that has passed through comment procedure is then discussed by the SAO Board which decides on its approval. An absolute majority of votes from the 17-member SAO Board -- comprising 15 SAO Members, the President, and the Vice-President -- is required for the audit conclusion to be approved. Unlike the audit report, the audit conclusion is public. The audit conclusion cannot be appealed. As the SAO is “an ascertaining body”, it cannot impose any penalties on auditees for found shortcomings.

Before it is published, the approved audit conclusion is proofread, undergoes graphic editing and other processes that are a part of its expedition. Once it is formally ready for publication, it is sent to the Prime Minister and to the Presidents of both Chambers of Parliament. Only then is the audit conclusion published on the SAO website and in the appropriate section of the SAO Bulletin. The SAO usually publishes audit conclusions on its website on Mondays at 7:00 a.m.

Auditee’s Opinion

The auditee or the responsible ministry draws up an opinion on the audit conclusion for discussion at a session of the Government. In the opinion, the auditee proposes measures for correcting the shortcomings ascertained by the SAO audit.

Comment Procedure on the Auditee’s Opinion

The auditee’s opinion on the audit conclusion is subject to a comment procedure which takes place both at the SAO and at the Ministry of Finance. If substantial comments appear during the comment procedure, they are addressed by the SAO Member who managed the audit and the responsible deputy at the respective ministry. If they are unable to resolve the comments, the SAO President and the respective minister meet in a second round to address them. If these two individuals are also unable to resolve the comments, the material is discussed at a session of the Government as an item of fundamental contradiction.

Discussion of the Audit Conclusion by the Government

SAO audit conclusions are discussed by the Government of the Czech Republic in the presence of the SAO President. The Government adopts resolutions on more than 85% of audit conclusions. These resolutions oblige the respective minister to adopt corrective measures in response to the shortcomings listed in the audit conclusion under discussion. The respective minister is usually obliged at the same time to inform the cabinet within a stipulated period of time about the impact of the implemented measures and whether the situation has improved.

Certain SAO audit conclusions are discussed by the Control Committee of the Chamber of Deputies of the Parliament of the Czech Republic; the audit conclusion can of course also be discussed by different committees of the Chamber of Deputies or Senate of the Parliament of the Czech Republic.

The selected SAO audit conclusions are predominantly dealt with by the Control Committee of the Chamber of Deputies of the Parliament of the Czech Republic, but they can also be dealt with by some other Czech parliamentary committee. A representative of the SAO and a representative of the auditee are always present when an audit conclusion is being discussed. The Control Committee or other committee of the Chamber of Deputies or Senate may adopt a resolution obliging the respective minister to inform the respective committee by a stipulated deadline about the corrective measures introduced, the impact of such measures, and whether the situation has improved.

As part of its monitoring activities, the SAO keeps track of the corrective measures that were adopted in connection with audit conclusions, the implementation of such measures and their effect.

After a period of time that allows for an assessment of the effects of the corrective measures introduced in connection with the audit conclusion, the SAO can include a follow-up audit in the audit plan. Its objective is to examine the effectiveness of the corrective measures, whether there has been an improvement in the audited area, or, conversely, whether the shortcomings stated earlier continue to exist, in what areas, and why.