Overview of Key Audit Steps
This introduction provides a brief overview of key audit steps that auditors must complete when undertaking an audit of the mining sector. Many of these steps are discussed in more detail in the following sections of the Practice Guide.
In this Practice Guide, selection of audit topics is considered part of the overall performance audit process. Often, audit topic selection is done as part of an office’s strategic planning process. Strategic planning is usually led by senior executives and is informed by an audit office’s knowledge of business about its “audit universe” and analyses of materiality, significance, risks, and known problems. Other important considerations include the audit office’s mandate, the availability of skilled auditors and resources, and the auditability of potential audit topics. The audit selection process normally results in a list of planned audits to be carried out over time. (For more information on audit selection, see our Discussion Paper Approaches to Audit Selection and Multi-Year Planning.)
There are many compelling reasons why audit offices would include audits of the mining sector in their long-term plans, from concerns about environmental impacts to the significant economic role that this sector plays in many jurisdictions. For the purpose of this section of the Practice Guide, it is assumed that an executive decision has been made to audit the mining sector and to proceed with audit planning.
Determining the Audit Focus
As shown in Figure 7, after an audit topic has been selected, the planning phase begins. This phase involves acquiring knowledge of business, assessing risks, and conducting analysis in order to determine the audit focus and set the stage to prepare a detailed audit plan that will include the audit objective(s), criteria, evidence collection methods, and analytical techniques.
The first step in this audit planning process is to determine what exactly should be audited in the mining sector (that is, the audit focus). To make this decision, auditors will need to undertake two initial research and analysis tasks.
- Acquire knowledge of business by gathering and analyzing relevant information on the mining sector and on government responsibilities in regulating, monitoring, and overseeing the sector
- Identify and assess risk factors that could prevent the government from carrying out its responsibilities in this sector effectively and meeting its objectives.
At this stage, auditors can also review performance audits on the mining sector that have been previously published by their office or other jurisdictions, as well as the work that financial auditors have conducted as part of their audits of the Public Accounts. This may help audit teams to complete their list of potential issues to examine and to identify risk factors that they might not yet have considered.
While there are a number of potential audit issues to examine in the mining sector, the remainder of the Audit Methodology part focuses on auditing revenues from the extraction of minerals and on financial assurances for site remediation.
Detailed Audit Planning
Once it is decided that the audit will examine revenues from the extraction of minerals and/or of financial assurances for site remediation, auditors can begin detailed planning work to further define their audit focus and audit procedures.
Detailed planning involves deciding which programs and controls to audit. To make these decisions, auditors will need to complete three tasks:
- Acquire further knowledge of business, by gathering and analyzing relevant information on the different types of revenues or financial assurances that the government is collecting and managing, and on the systems and practices it uses to do so.
- Identify and assess risk factors that could prevent the government from collecting all the revenues it is entitled to or all the financial assurances it needs to ensure that decommissioned mines will be properly remediated.
- Consider the work done by financial auditors in assessing the design and implementation of the controls in place for revenues, environmental liabilities, and financial assurances.
Equipped with the required information, audit teams will be able to determine which revenue or financial assurance programs and controls to audit. Once these decisions are made, auditors will be able to:
- draft their audit objectives,
- select their audit criteria, and
- prepare plans with detailed audit procedures.
All these steps are covered in more detail in this section of the Practice Guide. Auditors working on a mining audit will find the information they need in the Auditing Revenues from the Extraction of Minerals and Auditing Financial Assurances for Site Remediation sections.
Finally, a short section on The Reporting Phase concludes this part of the Practice Guide.