Audit of operational risks

The aim of auditing operational risks is to evaluate the efficacy of control systems implemented in state agencies to minimise the risks involved in the lawful use of funds for their prescribed purposes. Unlike the more traditional financial management audit, an audit of operational risks not only aims to verify whether or not a control system guarantees the legality of transactions but also establishes if such a system ensures the purposefulness of the transactions or, in other words, whether or not the purpose of law has been followed. In addition to the above, the economy and efficacy of activities is often evaluated, pointing out any misgivings and violations detected. Thus, the audit of operational risks unites the principles of financial audits and performance audits, beginning from the setting of objectives for a given benefit, activity licence or public procurement and ending in evaluation of a particular activity or expenditure.

Based on its working experience and knowledge of activities which tend to be more prone to risks, the State Audit Office pays close attention to the area of state benefits, activity licences and public procurements.

Upon auditing benefits and grants, the State Audit Office seeks to answer the following questions:

  • whether the aim, target and terms of a grant are regulated in a clear and unambiguous manner;
  • how an applicant’s right to receive a benefit is verified;
  • what action is taken if an applicant or an official is found to be in breach of terms;
  • whether information concerning the terms and conditions of payment of a benefit and recipients thereof is accessible by the public;
  • whether the internal control system enables, at a later date, to verify the legality and sufficiency of the activity of the authority which paid the benefit.

Upon auditing the area of activity licences, the following shall be determined:

  • to what extent the objectives and cases of issue of the licence are regulated;
  • whether the requirements set for the applicant are sufficient in order to guarantee achievement of the goals set for application of the licence;
  • whether applicants for the licence and licence holders have been treated equally by the officials;
  • what is the probability of operation without licence and what is being done in order to manage such risk?

For a public procurement audit, the following four principles of evaluation apply:

  • the economical merit of the procurement: the object of procurement(work, service) must fill the needs of the buyer, the price of the object must be equal to or lower than its market price at the time of the procurement, and the object must be delivered to the buyer at the time determined thereby;
  • objective treatment of tenderers: uniform information must be provided to everyone on the wishes and acts of the buyer , the buyer must not present unreasonable demands to the tenderers;
  • transparency of the procurement: the acts and decisions of the buyer must be understandable to the tenderers and reasoned by the buyer;
  • verifiability of the procurement: procurement proceedings must be documented in order to guarantee their traceability.

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