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Practice Guide to Auditing Mining Revenues and Financial Assurances for Site Remediation

Drafting Audit Objectives

All performance audits need clearly stated objectives that are worded in a manner that allows auditors to conclude against them. Audit objectives should be realistic and achievable and give sufficient information to audited organizations about the focus of the audit.

An audit can have one or several objectives depending on its breadth. Office practice will also influence the number of objectives and whether or not sub-objectives are used. (Some audit offices never use sub-objectives.) Sub-objectives can be included in audit plans (for example, one for each line of enquiry), but auditors who decide to do so will still be expected to conclude on their main audit objective(s).

The objective of an audit that will look at the completeness of revenues from the extraction of minerals (and related questions) will depend on whether that is the sole focus of the audit. If the audit will broadly examine the development of the mining sector, including the collection of royalties or other fees, then a general objective will be appropriate. For example:

  • To determine whether the responsible organizations have taken steps to ensure that gold mining activities are developed in accordance with government policy and objectives.

This objective could be supported by sub-objectives related to the main areas included in the audit. One of these sub-objectives could pertain to the collection of royalties:

  • To determine whether the department has effective controls in place to ensure the completeness of royalties payable.

If an audit has a compliance focus, the same principles will apply. In this case, the broad objective could be:

  • To determine whether the department has managed mineral resources in compliance with the Mining Act and applicable regulations.

A sub-objective on revenues could be added to support the main objective:

  • To determine whether the control of gold production measurement performed by the responsible organization ensures the reliability and integrity of gold production data used to assess royalty payments.

If the audit is strictly about the collection of revenues from the extraction of minerals, then the audit objective can be narrower. For example:

  • To determine whether the government has designed and implemented control systems that provide assurance that it is collecting all mining royalties payable from producers.

Auditors could also decide that the four areas detailed in the previous section are adequate in their context and adopt an overall audit objective about the collection of revenues supported by a sub-objective for each of the areas:

  • the design of the revenue framework,
  • the processing of payments,
  • the internal review and auditing of payments, and
  • the measures adopted to increase the transparency of payments and to prevent and detect fraud.