1. About the ILO
2. Topics
3. Regions
4. Meetings and events
5. Publications
6. Research
7. Labour standards
8. Statistics and databases

SEVENTH ITEM ON THE AGENDA

Other financial and general questions

Amendments to the Financial Regulations:
Additional terms of reference governing external audit

1.  The Financial Regulations of organizations in the United Nations system contain an appendix entitled "Additional terms of reference governing external audit", which, in paragraph 5, sets out the elements that should be included in the audit opinion.

2.  The Chairman of the United Nations Panel of External Auditors addressed a letter on 15 January 1997 to the United Nations Secretary-General, in his capacity as Chairman of the Administrative Committee on Coordination (ACC), to convey a suggested revision throughout the United Nations system to the wording of the audit opinion which is reflected in the additional terms of reference governing external audit in the respective Financial Regulations of the organizations.

3.  The revised text is intended to reflect the requirements of the International Federation of Accountants' (IFAC) International Standard on Auditing No. 13, which covers the auditor's report on the financial statements. These requirements add four new elements to the existing form of the audit opinion:

• reference to the Director-General's responsibility for the financial statements and to the external auditor's responsibility for expressing an opinion on those statements;
• an explanation of the auditing standards followed and of what the audit includes;
• two separate opinions, one covering the fair presentation of the financial statements and the second covering compliance with the Financial Regulations and legislative authority; and
• a cross-reference to the external auditor's long-form report where appropriate.

The proposed revised text respects the substance of the additional terms of reference of the Financial Regulations governing the audit of the United Nations organizations.

4.  At its 78th Session in August 1997, the Consultative Committee on Administrative Questions (Financial and Budgetary) (CCAQ(FB)), on behalf of the ACC, reviewed the Panel's proposed revision of the additional terms of reference governing external audit. CCAQ(FB) members accepted the proposed text and stated that they would be taking steps, as appropriate, to initiate any necessary changes to their financial regulations to effect the revision. In October 1997 the Under-Secretary-General for Management of the United Nations conveyed this position of the CCAQ(FB) to the Chairman of the United Nations Panel of Auditors.

5.  The Programme Financial and Administrative Committee may therefore wish to recommend to the Governing Body that it approve the amendments to the Financial Regulations set out in the Appendix to this paper and submit the following draft resolution for adoption by the Conference at its next session:

The General Conference of the International Labour Organization:

Decides to amend the additional terms of reference governing external audit as set out in the appendix to the Financial Regulations by replacing paragraph 5 of that appendix by the following text:

"5.  The external auditor shall express and sign an opinion on the financial statements of the Organization. The opinion shall include the following basic elements:

1. the identification of the financial statements audited;
2. a reference to the responsibility of the entity's management and the responsibility of the auditor;
3. a reference to the audit standards followed;
4. a description of the work performed;
5. an expression of opinion on the financial statements as to whether:
   • the financial statements present fairly the financial position as at the end of the period and the results of the operations for the period;
   • the financial statements were prepared in accordance with the stated accounting policies; and
   • the accounting policies were applied on a basis consistent with that of the preceding financial period.
6. an expression of opinion on the compliance of transactions with the Financial Regulations and legislative authority;
7. the date of the opinion;
8. the external auditor's name and position; and
9. should it be necessary, a reference to the report of the external auditor on the financial statements."

Geneva, 11 February 1998.

Point for decision: Paragraph 5.

Amendments to the appendix to the Financial Regulations
of the International Labour Organization
(Additions are shown in bold type; deletions are indicated by square brackets)

Additional terms of reference governing external audit

...

[5.  The external auditor shall express and sign an opinion in the following terms: "I have examined the financial statements numbered ... to ... and relevant schedules of the Organisation for the financial period ended 31 December .... My examination included a general review of the accounting procedures and such tests of the accounting records and other supporting evidence as I considered necessary in the circumstances." The external auditor's opinion shall state, as appropriate, whether:

1. the financial statements present fairly the financial position as at the end of the period and the results of the operations for the period;
2. the financial statements were prepared in accordance with the stated accounting principles;
3. the accounting principles were applied on a basis consistent with that of the preceding financial period;
4. transactions were in accordance with the Financial Regulations and legislative authority.]

5.  The external auditor shall express and sign an opinion on the financial statements of the Organization. The opinion shall include the following basic elements:

1. the identification of the financial statements audited;
2. a reference to the responsibility of the entity's management and the responsibility of the auditor;
3. a reference to the audit standards followed;
4. a description of the work performed;
5. an expression of opinion on the financial statements as to whether:
   • the financial statements present fairly the financial position as at the end of the period and the results of the operations for the period;
   • the financial statements were prepared in accordance with the stated accounting policies; and
   • the accounting policies were applied on a basis consistent with that of the preceding financial period.

6. an expression of opinion on the compliance of transactions with the Financial Regulations and legislative authority;
7. the date of the opinion;
8. the external auditor's name and position; and
9. should it be necessary, a reference to the report of the External Auditor on the financial statements.