RFQ-AFG-009366 for Provision of Annual statutory audit At Danish Refugee Council

1 | P a g e
Term of Reference (ToR)
OBJECTIVE:
Danish Refugee Council-Afghanistan (DRC-AFG) wish to engage the services of an external auditor of international reputation for conducting the annual audit of its financial statements and some of the projects in accordance with the statutory requirements, International Reporting Standards on Auditing (ISA). DRC-AFG invites the audit firm to submit technical and financial proposals for this purpose. The objective of the audit is to enable the auditors to express an opinion on the financial position and performance of the year 2021 & 2022 and on donor financial reports send by DRC-AFG.
SCOPE OF AUDITS:
The audit will be conducted in accordance with ISA as published by the International Auditing and Assurance Standards Board of the International Federation of Accountants (IFAC) and Generally Accepted Government Auditing Standards (GAGAS) as a whole and along with relevant donor’s guidelines. Besides, the audit will also be based on instructions for the programme accounting and in compliance with DRC-AFG Operation Handbooks.
To ensure that audit objectives are met at organizational/program/units/geographical level, special attention should be paid to the following:

1. Assessment of the adequacy of internal controls over funds received by DRC-AFG and subsequently utilized by the different organizational units.
2. Assessment of the adequacy of the system of internal control over procurement of supplies equipment and services, hereunder verify whether DRC procedures and guidelines regarding procurement are followed.
3. Verification of income and expenditure and the control of fixed assets at all levels are specified hereunder (but not limited to).
   a. Check and/or verify the vouchers and other relevant documents.
   b. Evaluate the evidence i.e., vouchers and receipts to determine reliability and authenticity of these.
   c. Assess the usage of the assets by going through the various records.
   d. Check and control that DRC-AFG complies with local laws and regulations, e.g., deduction of any imposed taxes on delivers from suppliers and that any withheld amounts are remitted to the relevant authorities on time.
4. During the year, physical count of assets should be carried out including cash checks, confirmation and reconciliation of bank accounts, direct confirmation of selected accounts receivables and observation and verification of physical inventories and fixed assets where applicable. Random inspection of accounting records including detailed examination of vouchers will be part of the audit.
   2 | P a g e
5. Audit of DRC-AFG payroll system to ensure salaries paid to employees are according to the rules and contracts and whether the relevant statutory deductions are made from the staff earnings are remitted to the relevant authorities on time.
   REPORTING & DELIVERABLES:
   Reports on any audit carried out must be submitted to the DRC-AFG within 5 working days after the audit has been performed. Draft audit reports along with financial statements should be submitted withing 05 days of completion of the audit executions/detailed examination. Final audit reports shall be issued within a week upon receipt of comments from DRC-AFG.
   The reporting in connection with audit of project accounts shall consist of audited accounts according to relevant donor guidelines and statutory requirements.
   A management letter highlighting issues revealed during the audit and related to the scope of audit. The management letter shall be sent to management for comments and comments shall be included in the final management letter as per above time schedule.
   TIME FRAME:
   The annual audit for financial year 2021 has to be started on 01 of Mar-2023 and will be completed 15 Apr-2023 And the annual audit for the financial year 2022 has to be started on 16 Apr 2023 and completed 18 May 2023.
   For more details, please refer to Annex 1 Time Frame.
   PROVISION OF INFROMATION BY DRC-AFG:
   For the purpose of project audits, DRC-AFG will provide donor format financial reports for the contract period. Furthermore, auditor will be provided with a draft financial statement for the project consisting of:
   • Statement of income and expenditure
   • Note to the financial statement if needed.
   The auditors will be given access to all supporting documents, correspondence and any other documents deemed necessary for the purpose of audit.
   DELIVERABLES:
   The auditor will issue an audited financial statement for DRC-AFG and an audit opinion on DRC-AFG overall financial statements for the year ended December 31, 2021 and 2022; plus / or project wise
   3 | P a g e
   audited financial reports (specific projects only). In addition to the audit opinion, the auditor will prepare a “management letter,” in which the auditor will:
6. Give comments and observations on the accounting records, systems, and controls that were examined during the course of the audit.
7. Identify specific deficiencies and areas of weakness in systems and controls and make recommendation for their improvement.
8. Report on the lack of compliance of each financial covenant in the relevant financing agreement.
9. Communicate matters that have come to their attention during the audit which might have a significant impact on the operations of the organization.
10. Include management’s comments in the final management letter.
    LOCATION OF AUDIT:
    The audit will be carried out at the DRC-AFG country office, Kabul, Afghanistan.
    PROPOSAL STRUCTURE AND OTHER INFORMATION FOR BIDDERS:
    Information should be provided in two sections listed below:
    TECHNICAL (max. 10 pages):
    1.1 Understanding of the work: (30%)
    • Demonstrate understanding of the work in audit and guidelines of donors.
    • Information regarding
    • Firm’s legal status and membership with professional firms of auditing.
    • Number of partners and types of services provided
    • Humanitarian sector auditing experience.
    • List of main clients in humanitarian.
    • Previous experience with NGO’s and donors especially DANIDA, SIDA, UN Agencies,
      US Donors, EC and ECHO.
      1.2 Methodology: (20%)
    • Internal procedures (tools and techniques) to ensure the quality of the deliverables, accuracy
      of the figures, audit trail, unambiguity of the finding and the conclusions is included under the
      criterion.
    • Describe how audit firm procedures and methods adheres to ISA, GAGAS and local auditing
      standards and documentation of the whole process.
      1.3 Work Plan: (20%)
    • Indicating the main types of quality checks that will be performed.
      4 | P a g e
    • Measures taken in order to avoid discontinuity of services.
      1.4 Human Resources: (30%)
    • The justification of the allocation of human resources by indicating the number of man-days and profiles proposed by the contractor for each phase of the assignment.
    • Concerning the profiles, the experts must have received sufficient and adequate training in the fields.
    • Understanding of the engagement context and the financial system of NGOs in Afghanistan.
      The figures in brackets indicate the maximum score that can be attributed to each individual criterion.
      FINANCIAL:
      A separate cost proposal specifying separate fee for audit along with any other cost required for agreed upon procedures, boarding and lodging and traveling of audit team.
      ASSIGNMENT:
      Contract period will be for 04 months starting 01 Mar 2023.