The State Audit Office (SAO) is established under a constitution by an Act of Parliament/Legislative body. The SAO's Head (Auditor General) is appointed to office by the Riigikogu (Estonian Parliament) on the proposal of the President of the Republic.
The authority of the Auditor General (AG) terminates:
The prescribed qualifications for appointment of the Auditor General are that he/she must be an Estonian citizen, of high moral character and fully proficient in the official language and whose age at the time of appointment does not exceed 65 years. He/she must have completed an academic higher education and know general principles of public administration and economics. AG is appointed for a fixed tenure of 5 years and can be reappointed.
A candidate for the position of AG shall pass a security check before being appointed as an AG, except if he/she has a valid access permit for access to state secrets classified as "top secret".
Various conditions of service of the head of the SAO are:
SAO's relationship with other branches of Government are:
Functional independence from the executive, legislative and judicial branches. SAO has financial independence. The Parliament approves the budget of the SAO as a part of the State Budget. Budget proposal is submitted via the Government. It is the responsibility of the Government to prepare the draft state budget and submit it to the Parliament. The budget process is regulated by the State Budget Act.
The SAO audits draft annual reports of constitutional institutions (e.g. the chancelleries of the Parliament and the President of the Republic, Chancellery, Supreme court) and the draft consolidated annual report of the state, submitted by the Ministry of Finance. The SAO prepares an audit report concerning a draft consolidated annual report of the state and it must contain an assessment of the accuracy of the consolidated report and the legality of the transactions. This report is appended to the consolidated annual report of the state, approved by the Government and submitted to the Parliament.
The AG presents annually to the Parliament an overview on the use and preservation of state assets. The SAO also prepares annual reports of its activities and submits them to the Parliament.
The SAO submits all its audit reports to the Select Committee of the Parliament on the Control of State Budget.
The activities of the SAO shall be audited annually by an auditor appointed by the Parliament on the proposal of the Finance Committee. The auditor has the same rights as the SAO in conducting audits (i. e. the right to conduct both financial and performance audits).
The SAO shall submit an annual report on its activities to the Parliament not later than within one month after the receipt of the auditor's opinion. The annual report shall include the opinion of the auditor appointed by the Parliament.
The annual report and other reports of the SAO shall be made available to the public. All audit reports are published on the SAO website www.riigikontroll.ee.
The main function of the SAO is to exercise economic control (audit).
In the course of an audit, the SAO may assess the following:
1) internal control, financial management, financial accounting and financial statements of the audited entity;
2) the legality of the economic activities, including economic transactions of the audited entity;
3) the performance of the audited entity with regard to its management, organisation and activities;
4) the reliability of the information technology systems of the audited entity.
The SAO shall assess performance on the basis of the functions assigned to the audited entities by legislation, the objectives set by national programmes and development plans, the principle of sound administration, and the following criteria:
1) economy, i.e. minimising the costs incurred in achieving the aims of the audited entity;
2) efficiency, i.e. the relationship between the results and the expenses made to achieve them;
3) effectiveness, i.e. the actual impact of an activity compared to the intended impact.
The SAO shall not assess political goals.
The SAO audits the following bodies and persons:
1) the Chancellery of the Parliament, the Office of the President of the Republic, the courts, the Bank of Estonia, the State Chancellery and the Chancellery of the Legal Chancellor;
2) the ministries and other government agencies and the state agencies administered thereby;
3) legal persons in public law;
4) foundations founded by the state or a legal person in public law;
5) non-profit associations whose members include the state or a legal person in public law;
6) companies where the state or legal persons in public law jointly or separately exercise dominant influence through a majority holding or in any other manner, and the subsidiaries of such companies;
7) companies who have obtained loans from the state or whose loans or other contractual obligations are secured by the state;
8) other persons performing administrative duties in public law, in so far as they use and preserve state assets.
The SAO shall exercise economic control over local governments in so far as they use immovable and movable property of the state transferred into their possession, allocations for specific purposes and subsidies granted from the state budget, and funds allocated for the performance of state functions.
The SAO audits the use and preservation of state assets transferred into the possession of third persons. In the case of persons receiving state subsidies or allocations for specific purposes, the SAO has the right to perform procedural acts in order to ascertain the validity of circumstances which are the basis for the receipt of the subsidy or allocation and the legality of the use of such subsidy or allocation.
The SAO audits use of the funds of the European Union allocated through the state or the local governments and performance of obligations to the European Union assumed in connection with such funds. With regard to the end users of the funds of the European Union and persons who have obligations to the European Union, the SAO has the right to perform procedural acts in order to ascertain the validity of the circumstances which were the basis for the receipt of such funds and the legality of the use of the funds and the performance of the obligations.
The SAO has the right to access all information necessary for the performance of its duties, including information classified by the State Secrets Act. All audited entities are required to submit information necessary for the SAO and permit making of copies and transcripts of and extracts from documents.
With good reason, the SAO has the right to confiscate documents and seal files and storage spaces of documents, money and tangible assets (§ 43 of the SAO Act) The AG or an official authorised by him/her has the right to receive information and documents necessary for verifying circumstances relating to the use and preservation of state and local government assets and the assets of other legal persons in public law from persons other than the audited entities for examination and making of copies, and to receive information, certified statements and copies of documents concerning financial and other operations from banks and other credit institutions.
The SAO has the right to receive information relating to the entities audited by the SAO and working papers and other documents for examination from auditors entered in the list of auditors maintained by the Board of Auditors and from the internal auditors of the audited entities.
At the request of the SAO state agencies and local governments shall assist the SAO in obtaining information necessary for auditing.
At the request of the SAO an audited entity is required to provide written or oral explanations concerning issues specified by the SAO within a reasonable term.
Persons authorised by the SAO may enter the territory and facilities of an audited entity, verify the existence of cash, securities and other assets and, if necessary, take inventory and conduct audit measurement tests. An audited entity shall grant unconditional and immediate access to all things and areas which are in its possession and relevant to the audit.
The SAO shall give notice of the cases of obstruction of its activities to the Finance Committee of the Parliament.
The SAO Act prescribes financial audit, regularity audit, performance audit and EDP audit as the scope of SAO audits. Law and regulations of AG are based on INTOSAI Auditing Standards, other international standards and best practice of other SAIs.
The SAO's audits are conducted by 3 audit departments: Financial Audit Department, Department of Audit of Operational Risks and Performance Audit Department.
Audit of: state subsidies, licences, permits; public procurement; administration of state assets; ad hoc.
Department uses the Dutch manual of auditing abuse and improper use. Audits are mainly focused on internal controls, management of risks. Steps are similar to the performance audit's ones: audit planning; proposal to AG to conduct audit; fieldwork; report and discussion of findings with auditee; draft audit report; discussion of comments of auditee; final report.
The SAO uses methodologies (manuals) of Dutch, Swedish etc SAIs. Steps: preliminary study; audit proposal; discussion with AG; audit plan; fieldwork, testing; discussion of findings with auditee; draft audit report that includes observations, assessments and proposals; discussion with auditee; final report; assessment of audit (AG, head of department, audit team).
Before being signed, an audit report shall be presented for examination to the relevant minister and other persons whom the assessments or recommendations contained in the report concern. A person to whom a report is presented shall submit his/her written opinion concerning the recommendations regarding him/her to the SAO and notify the SAO within a reasonable period of time specified by the SAO of the measures implemented. After examination of the opinions of the above-mentioned persons the SAO may make amendments to the audit report.
The SAI does not discharge judicial functions.
The SAO is not required to follow specific standards, practices and guidelines in conducting auditing and reporting by law. Audits are conducted in accordance with the generally accepted rules and practices of the professional activities of auditors. According to § 15 of the SAO Act AG establishes the rules of procedure of the SAO, audit guidelines and other rules necessary for the activities of the SAO. INTOSAI, IFAC and other international standards, European implementing guidelines for the INTOSAI auditing standards, some audit manuals of different SAIs are the basis of AG regulations.
The SAO can consult and/or collaborate with other countries/SAIs and international organisations on matters relating to audit according to § 13 of the SAO Act. The SAO has close co-operation relations with the SAIs of the Baltic and Nordic countries, Central and Eastern European countries, UK and the European Court of Auditors.
The SAO can involve experts to solve issues requiring special knowledge.
The SAO is constituted as an audit office with monocratic status i.e. with an AG as a head. The structural units are 3 audit departments and small support services (public relations, ICT, methodology, planning and reporting, personnel, international relations, accounting, chancellery).
The SAO can expend resources budgeted independently. The AG ensures the timely preparation and submission of the draft budget and annual report of the SAO pursuant to the procedure provided by law.
The SAO has full independence in forming its work plan (the SAO Act § 37). Mandatory audit duties shall not be assigned to the SAO.
The SAO co-operates with the Government of the Republic, Ministry of Finance in order to improve the internal control and internal audit of government agencies and state agencies administered by government agencies.