Illustrative Terms of Reference for a Financial Statement Audit

Publication Date: 1998
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper

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Model terms of reference

Annex C of: CGAP External Audits of Microfinance Institutions: A Handbook

This paper provides model terms of reference for a financial statement audit. As per the paper, the terms of reference for an audit must contain information of the following:

• Introduction to the broad outlines of the contract and objectives;
• Background of the microfinance institution;
• Objective of the external audit, clearly defining the outputs required;
• Scope of the external audit, detailing the accounting standard to be utilized, issues requiring special attention etc.
• Financial statements and other information, detailing the requirements with which the statements must conform;
• Prior year audits when they are available or a clear mention in case they are not;
• Audit opinion;
• Management letter which should detail the requirements that the auditors need to fulfill;
• Agreed-upon procedures;
• Timing of the audit;
• Communications with the audit committee;
• Pre-proposal survey;
• Additional information and proposal structure describing the qualifications of the audit team and audit firm.