External Auditor

Objectives and scope of the audit

Audit the ADRA Lebanon’s financial report as submitted to the project donors and express an audit opinion in accordance with ISA 800/805 on whether the financial report of ADRA Lebanon’s intervention, is in accordance with the ADRA Lebanon’s accounting records and the donor’s requirements for financial reporting (as stipulated in the agreement).

Examine, assess and report on compliance with the terms and conditions of the agreement and applicable laws and regulations regarding accounting and taxes.

The auditor shall determine if supporting documentation relating to the reported expenditure is available. The size of the test sample shall be based on the auditor’s risk analysis and should be stated in the report. The auditor shall report the number of funds for which financial reporting does not meet the required standards.

If ADRA Lebanon channels funds to other organizations, the auditor shall examine if ADRA Lebanon has followed these audit requirements in the next step and has satisfactory routines/resources for acting on received audit reports from these organizations.

The reporting

Audit Report

The reporting shall contain details regarding the audit methodology used and the scope of the audit.

The reporting shall contain an assurance that the audit was performed in accordance with international standards (ISA 800/805) and by a qualified auditor.

The reporting shall contain an audit opinion in accordance with ISA 800/805 on whether the financial report of ADRA Lebanon’s intervention, is in accordance with ADRA Lebanon’s accounting records and the donor’s requirements for financial reporting

The reporting shall contain the number of the intervention and the responsible auditor’s signature and title (not just the audit firm).

Management Letter

The auditor shall submit a Management Letter, which shall contain the audit findings (based on the financial report, not the entire organization). It shall state which measures that have been taken as a result of previous audits and whether measures taken have been to adequately deal with reported shortcomings.

The auditor shall make recommendations to address any weaknesses identified. The recommendations should be presented in order of priority.

The auditor's memorandum shall state which audit the auditor has done and which examination method has been used.

Report of factual findings

The auditor shall also submit a Report of factual findings (ISRS 4400) based on the agreed-upon procedures engagement below. If the auditor finds that the information in the Report of factual findings includes the information that would have been in the Management Letter, the Management Letter is not required. In this case, it shall be stated in the Report of factual findings that no Management Letter is issued for this reason.

Agreed-upon procedures engagement:

• Examine whether the salary costs debited to the project are regularly entered in the books throughout the year in a systematic way, and whether the salary costs can be verified with sufficient verifications. This includes salary allocation of agency shared personnel.
• Examine that the financial report includes a comparison between approved budget and actual costs for each aggregated budget line for the period under audit.
• The auditor shall, based on materiality and risk, review whether the reported costs have sufficient verifications.
• Examine whether ADRA Lebanon follows the national laws concerning taxes, and that social-security contributions are paid.
• Examine whether ADRA Lebanon has followed the procurement rules according to the agreement, including appendices.
• Examine that previous year’s closing balance equals the balance brought forward.
• If ADRA Lebanon uses modified cash basis as accounting principle, the auditor shall report on whether the chosen accounting principle is acceptable for the prepared financial report.
• If ADRA Lebanon has channeled funds to another organization the auditor shall follow up on the following:
  • Does ADRA Lebanon have signed agreements with their partners to whom they have channeled funds to?
  • Are the audit instructions in the agreements with partners in line with the agreement between ADRA Lebanon and the donor?
  • Are the instructions for handling of exchange rate differences in the agreements with partners in line with the agreement between ADRA Lebanon and the donor?
• Review whether there is an unbroken chain of auditor-audited financial statements according to the requirements as stipulated in the agreement between ADRA Lebanon and the donor for funds disbursed the previous year. The review shall include whether ADRA Lebanon makes documented assessments of the audited financial reports submitted to ADRA Lebanon and whether these reports are followed up by ADRA Lebanon. The review shall include verification of contributions equivalent of a minimum of X% of the total of disbursed funds as well as X% of the number of contributions. The review shall also include any observations from auditors that ADRA Germany/Australia should be informed about.

The reporting shall not exceed 20 pages, be written in English, and be presented to ADRA Lebanon in 3 copies and in digital format for onward transmission to the donor.