RTI, MUIMBAI / Slide 1.2.

1
Environmental Auditing - Concepts
What is Enviromental Auditing

Is it differrent from any other
audits
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Why is EA Unique and Special?
Specialised subject.
Requires knowledge.
Environment is globally important.
Material social, economical, environmental
impacts in many areas.
Regulated globally and has global and
regional impacts.
Mutiple players and actors
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SAI Classification
Audits of Government monitoring of
compliance with environmental laws.
Audits of the performance of Government
environmental programmes.
Audits of the environmental impact of other
Government programmes.
Audits of environmental management systems.
Environmental assessment of proposed
environmental policies and programmes.
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Performance

Financial
Compliance
Planning

Executing

Reporting

Waste

Water

Air

Biological
Diversity

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ENVIRONMENTAL AUDITING
Methods
Regularity Audit-1) Financial Audit
2)Compliance Audit

Performance Audit
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Financial Audit
Cost from Environmental
Policies and obligations-
Pollution, abatement cost, cost
of decontamination of land, cost
of decontamination of water etc.
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Environmental cost included
in other cost of operation
Audit to probe Environmental issues and
ensure correctness of Environmental cost,
Liabilities, Assets.
Audit to ensure disclosure of Environment
liabilities, non compliance of obligations and
penalty etc
Concept of upfront cost, back end cost
Cost incurred for making environmentally
clean atmosphere before commencing the
operations upfront cost
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Contd
Such cost if incurred would be treated as
environmental cost to commence the business
Decontamination of the land for a new business,
cleaning of plants and machinery etc are upfront
costs
Cost to be considered for making the venture
environmentally clean before the business is
handed over to others is backend cost
Cost incurred to clean the rigs of oil companies
and the ships of shipping companies before it is
used for other purposes after it was uesd to
handle hazardous substances etc are backend
costs.
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Contd..
Environmental liabilities include the liabilities
arising out of fees and penalties levied by
regulators
Other liabilities as result of non conforming of
rules and regulations imposed by the
Govt/regulators etc.
Liabilities for rehabilitation of displaced persons
form a project site
Liabilities for cleaning of environment for fresh
air, fresh water and land etc.
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Assessment of Environmental
Impacts
Involves complex calculations
Involvement of experts necessay
SAI to adopt the figures and
procedures designed by experts for
reporting
SAI to assess the competence of
experts for assessment of impact
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Compliance Audit
From environment to sustainable development
1972 United Nations Conference on the Human
Environment (Stockholm)
1987 Report of the World Commission on
Environment and Development (Brundtland)
1992 United Nations Conference on Environment
and Development Rio Declaration
Agenda 21
Framework Convention on Climate Change
Convention on Biological Diversity
Guiding Principles on Forest
2002 World Summit on Sustainable Development
(WSSD)
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Other Treaties
Summits and declarations (Rio, Johannesburg)
Conventions and Protocols
Waste
Basel Convention on the Control of Tran boundary
Movements of Hazardous Wastes and Their Disposal
Biodiversity
Convention on Bologcal Dversty
Convention on Wetlands of International Importance
Especially as Waterfowl Habitat (Ramsar)
Convention on International Trade in Endangered
Species of Wild Fauna and Flora (CITES)
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Other Treaties (contd.)
Water
International Convention for the Prevention of
Pollution from Ships (MARPOL)
Air
Framework Convention on Climate Change
Convention on Long-range Transboundary Air
Pollution (LRTAP)
Vienna Convention on the Protection of the Ozone
Layer and the Montreal Protocol on Substances
That Deplete the Ozone Layer
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Compliance of Treaties
Government Policies and Directives
Direction setting / Intentions
Legal Tools
Domestic legislation, regulations, permits, licences, control
orders
Used to implement global treaties and to address national
issues
Can be at many levels - national, state, local
Can be used to control pollution, protect parks and
species, use of pesticides, manufacturing of
chemicals, trade, waste disposal and more!
Economic / Financial Tools
Taxes, subsidies, loans, user charges and fees
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Audit of Compliance
International Environmental Treaties are
ratified by individual Countries.
Individual Legislation for Environmental
issues in alignment with Treaties
SAI audits the legislation for compliance
Governments frame Environmental
Programmes for Environmental issues
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Audit of Legislation
SAI to compare the provisions of
legislation with reference to provisions in
the treaties
Inadequacy to be brought out
Environmental Programmes to be audited
for: Sufficiency of fulfillment of target,
Sufficiency of fund allocation, Sufficiency
of meeting the International Accords.
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Compliance audit (Contd.)
SAI to audit adequacy of monitoring of
provisions of law by law enforcing agencies
CPCB/SPCBs
SAI to ensure adequacy of information/ data
on environmental issues to be catered by the
enforcing authorities.
SAI to audit the activities of regulating
authorities in respect of governmental/ non-
governmental agencies carrying out
environmental protection work.
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Performance Audit
3 Ees concept Economy,
Efficiency and Effectiveness
Environmental Auditing is the 4
th
E
2 more EEs are the speciality of
performance auditEthics,Equity
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Performance Audit(Cond.)
Focuses on
Compliance of Environmental laws
Performance Audit of Environmental
programmes
Environmental impact of normal
programmes of Government
Environmental Management Systems
Evaluation of proposed Environmental
policies
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Performance Audit(Cond.)
Environmental issues being implemented
by Governmental agencies, NGOs etc
Audit of Regularity, bodies to ascertain
their roles in pollution control, abatement
etc.
Statistical sampling techniques to be used
for Audit of Environmental issues
concerning Hundreds, Thousands entities.
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Performance Audit (Cond.)
Compliance Mechanisms of
International obligations
Legislative compliance by enactments
Legislation of regulating pollution,
monitoring discharges. Identification of
Breaches.
Legislation for enforcement in case of
violation.
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Performance Audit(Cond.)
In case of data regarding compliance
available at scattered places:
Audit to concentrate on data base
created by Regulatory bodies
In case of absence of centralised data,
Regulatory bodies to compile and
submit as they have direct access to the
data in Non-Governmental sources
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Performance Audit(Cond.)
Absence of reliable data in Regulatory bodies
to form audit comments
SAI to rely on available data and comment on
indicating therein the insufficiency
Yet with the limited data, form opinion and
report so that audited entity can act upon for
control or abatement of Environmental Issues.
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Performance Audit(Cond.)
SAI to compare obligations under
International treaty and the sufficiency of
Governmental Programmes to address them.
SAI to audit and review the targets set vis--
vis achievement
SAI to report the shortfall to highlight
environmental threat to the country or
mankind
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Performance Audit (Cond.)
SAI to insist for responsibility
centres for accountability for implementation.
SAI to evaluate the program on 36E Es basis
Whether the program was carried out
economically
Whether the implementation was efficiently
done.
Whether the target group has got the benefit-
effectiveness
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Performance Audit (Cond.)
Auditing the Environmental impacts of
other Government programs
Any program implementation will have
environmental aspects/impacts.
Certain programs will have significant
impacts.
Impacts-positive, negative.
Programs to be evaluated for
environmental impacts.
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Performance Audit (Cond.)
SAI to review Program objectives
Measure the impacts
counter the impacts
Experts to be involved in assessing the
impacts and SAI to rely upon for
impacts of such assessment
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Performance Audit (Cond.)
SAI to review EIA (Environmental impact
assessment) carried out by Government
through specialised agencies
In its absence SAI to seek information
through some other source-NGOs,
Shareholders etc.
Executive Regulations to ensure compliance of
Environmental issues and Not SAI
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Performance Audit (Cond.)
SAI to audit measures which counter or
reduce environmental impacts ascertaining
whether:
measures have been put in place and are in
accordance with best practice or best
available technology not entailing excessive
cost (BATNEEC) and
have had the preventive effect intended and,
if not, what actions the Government has
taken instead.

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Performance Audit (Cond.)
EMS-Standards (ISO 14001) requires procedure
for impact assessment
SAI, in such cases to use data from EMS and
review the
Procedures
Training of staff involved
Frequency of testing the procedures for fool proof
system
Whether the audited entity can influence the
remote agencies such as suppliers, Contract
workers etc
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Auditing EMS
Assurance on Environmental friendly
quality in services assumes paramount
importentance
ISO certification (14001) worldwide has
been recognised as a Management tool
for such assurance

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Auditing EMS (Cond.)
EMS ensures that the entity:
has Environmental policy, planned for
assessing aspects and impacts of
environment, has set targets, has
responsibility centres, has plans for
training of staff, communicating the
requirements internally as well as
externally
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Auditing EMS (Cond.)
Is checking the systems for corrective
and preventive actions, identifying non-
compliance and Management is
reviewing periodically.
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Auditing EMS (Cond.)
SAI to ascertain whether the Government
is introducing EMS in its functions-
SAI to verify the need and effectiveness
Where large scale introduction of EMS is
not needed, piecemeal EMS audit to be
done to insure that there is continual
improvement in tune with Environmental
policy
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Auditing EMS (Cond.)
Governments policy to be audited to
compare the introduction with the
international obligations the country has
undertaken.
To demonstrate that the entity is trying
to make the environment clean and
documents needed are in place

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Auditing EMS (Cond.)
SAI may audit one or more elements across a
range of departments
SAI can develop significant
recommendations based on diverse
procedures/practices in various Departments
SAI can judge the materiality of audit based
on the Environmental impacts-some
department will have less impact and others
such as Industrial production process etc will
have more impact
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Auditing EMS (Cond.)
SAI to decide whether performance of Entities
with reference to set targets is to be audited
At best performance can be compared with
that obtaining elsewhere and with the
Governments commitments to international
agreements
SAI can audit performance and comment
shortfall.
Evaluating proposed policies and programs
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Auditing EMS (Cond.)
Generally SAIs exhibit reluctance to
comment on policies regarding
Environmental issues
At best SAI can present factual
statement rather than commenting on
policy suitability Non implementation
of policies can be highlighted
SAI can involve experts to work on cost
benefit analysis and secure consensus
when asked to do so by the Executive
for policy formulations