ROMANIA Reimbursable Advisory Services Agreement on Strengthening the Institutional Capacity of the Romanian Court of Accounts (P171014) Final Proposal for Updated Auditing Manuals covering Financial, Compliance and Performance Auditing Methodologies and Operational Guidelines June 2023 Project co-financed from European Social Fund through Operational Programme for Administrative Capacity 2014-2020 Disclaimer This report is a product of the staff of the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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This report was delivered in June 2023 under the Reimbursable Advisory Services Agreement on Strengthening the Institutional Capacity of the Romanian Court of Accounts (P171014), signed between the Romanian Court of Accounts (RCoA) and the International Bank for Reconstruction and Development on December 3, 2019. This report corresponds to Output No. 6 – Final proposal for updated auditing manuals covering financial, compliance and performance auditing methodologies and operational guidelines, under the above-mentioned agreement. ISSAI International Standards of Supreme Audit Institutions PMF Performance Management Framework POCA Operational Programme for Administrative Capacity RAS Reimbursable Advisory Services RCoA Romanian Court of Accounts REPA Regulation regarding the External Public Audit activities SAI Supreme Audit Institutions WB World Bank Contents Context and Process ......................................................................................................................................................... 5 Going Forward .................................................................................................................................................................. 5 Tables Table 1: Activities of the Reimbursable Advisory Services ................................................................................................ 5 Annexures Annexure 1 – Financial Audit Manual Annexure 2 – Compliance Audit Manual Annexure 3 – Performance Audit Manual 4 Context and Process The primary objective of the Bank’s technical assistance under the Reimbursable Advisory Services (RAS) Agreement is to support the Romanian Court of Accounts (RCoA) in strengthening its institutional and technical capacity to deliver high quality audit services. The Bank is supporting the Court in implementing wide ranging institutional reforms that comprise a review of its legislative framework, support for the adoption of modern auditing standards and methodologies, and provision of technical staff training. These initiatives are complemented by other capacity building activities coordinated by RCoA in areas such as organizational culture, change management, human resources, communication, and digitalization. Table 1 below summarizes the main activities of the Reimbursable Advisory Services: Table 1: Activities of the Reimbursable Advisory Services RAS Activities Component 1. Support to the elaboration of a draft institutional development strategy and implementation plan for RCoA a) Functional review applying the Supreme Audit Institutions Performance Measurement Framework (SAI PMF), including gap analysis and comparative analysis of good practices from another SAIs b) Facilitating the peer review process of RCoA c) Preparation of a medium-term institutional development strategy Component 2. Support in updating RCoA`s organizational framework and auditing methodologies a) Review of the existing legislation governing the organization and function of the RCoA and providing detailed recommendations for amending the legislation b) Updating audit standards for the RCoA c) Updating of auditing manuals covering financial, performance and compliance audit in line with the International Audit Standards for Supreme Audit Institutions Component 3. Training of RCoA`s auditing staff a) Professional training on the updated financial audit, compliance audit, and performance audit methodologies This report delivers on Activity c) under the Component 2 of the RAS Agreement. It provides the final proposal for updated manuals covering methodologies and operational guidelines for financial auditing (referred as financial audit manual in Annexure 1), compliance auditing (referred as compliance audit manual in Annexure 2) and performance auditing (referred as performance audit manual in Annexure 3). These manuals were developed in in a collegiate manner with the RCoA staff responsible for each audit area in accordance with the International Standards of Supreme Audit Institutions (ISSAI) and to ensure that they met the needs of the RCoA with respect to the newly issued Regulation regarding the External Public Audit activities (REPA) and other relevant internal regulations. The draft manuals were made available to the auditors during the face-to-face trainings that were conducted for about 900 auditors in financial auditing, 900 auditors in compliance auditing and 300 auditors in performance auditing; applied through pilot audits, and duly updated based on the inputs received during the trainings and experience gained through the pilots. The audit manuals have been approved by RCoA`s Plenum. Going Forward While these audit manuals have been duly evaluated in the face-to-face trainings and pilot audits, fully embedding the new audit methodologies in the RCoA audits would requires a focused approach to ensure a comprehensive and consistent application of these methodologies across the RCoA. Therefore, the RCoA’s plan to enhance the helpdesk function and provide timely guidance to the audit teams will promote and share good practices, which will help in consistent application of the new methodologies. Based on the initial experience of implementing the new methodologies in the first two to three years, it is also important that the RCoA updates the manuals, specifically adding more practical examples that could help auditors in enhancing quality of audits. For effective implementation of the manuals, it is also critical that the RCoA develops an internal pool of trainers on different manuals and these trainers provide further trainings to the RCoA auditors based on a need-based assessment at regular intervals as that will enhance auditors’ understanding of the key ISSAI requirements. 5 Competence makes a difference! Project selected under the Administrative Capacity Operational Program, co-financed by European Union from the European Social Fund 6