THE ASSESSMENT OF FINDING IN PERFORMED FUNCTIONAL AUDITS – LATVIA’S EXPIERENCE

Abstract

Functional audits at the state administration of Latvia have been performed since 1999. Wider resonance they gained starting from 2007 when all state administration institutions were ordered to perform them regularly. The author of the research has analysed 22 functional audit reports, and 6 of them were related to business sector. The article’s scientific problem is that, actually, there are no publications on functional audit performance and audit findings at the state administration.
Novelty – besides scientific value the article also has practical meaning. The facts stated in the article give assessment on possible benefits and at the same time warn about vain hopes revealing what should not be expected from such audits.
Objects – the author has analysed 6 business sector reports and 16 internal audit reports of structural units submitted by ministries of the Republic of Latvia.
Aim – to study audit statements and proposals and to evaluate the quality of their recommendations.
Tasks – firstly, to evaluate external auditors achievement against interior auditors achievement. Secondly, to give general indications to the management of institutions on what they can expect and gain from such audits.
Research methods – functional and performance audits are basically the same, and they are usually performed by the Supreme Audit Institution (SAI) where there are best specialists in this field. That is why besides scientific publications the author also has used SAI standards, including INTOSAI.
Research restrictions – the author was not able to give direct references to specific institutions and audit reports because such were the conditions in order to receive the information. The author basically used qualitative data analysis because the audit reports were radically different.
Result – although functional audits are related to evaluation of functions, the range of issues exceeded it. Function evaluation based on documents was accentuated in function analysis, and it was significantly beneficial only in some specific cases. Additionally, institution’s interior control system, necessary improvements in processes, strategy and resultative indicators were analysed and evaluated. It showed that an institution itself should perform elementary improvements in its work before inviting auditors. The achievement of internal auditors and business auditors was different. On average the achievement of business auditors was more qualitative but also more expensive. The achievement of internal auditors can be divided in two parts – the ones who just generally compared the documents, which were not very beneficial, and the others who could serve as a perfect model on how functional audits should be performed because they had revealed the main problem issues.