Introduction External audits of publicly financed projects are central to fiscal accountability, transparency, and public trust. In many countries across Central and West Asia, financial audits of externally financed projects have traditionally been conducted by private firms due to limited institutional capacity within Supreme Audit Institutions (SAIs) to perform full-scope audits in accordance with international auditing standards. Recent reforms in Uzbekistan demonstrate how an SAI can transition toward risk-based, assurance-oriented financial audits aligned with international standards. This experience provides a practical model for strengthening country systems and expanding the role of SAIs in overseeing projects supported by international financial institutions (IFI). From Mandate to Modernization: Strengthening Uzbekistan’s SAI The Chamber of Accounts (COA) is the Supreme Audit Institution of Uzbekistan. It reports to Parliament and the President and is mandated to conduct external state audits and oversee the lawful, efficient, and transparent use of public resources. In recent years, the COA has significantly expanded its mandate and institutional capacity. Between 2021 and 2025, it strengthened its independence, joined the International Organization of Supreme Audit Institutions (INTOSAI) and the Asian Organization of Supreme Audit Institutions (ASOSAI), and introduced financial, compliance, and performance audit functions. It also established a framework for cooperation with international financial institutions. These reforms enhanced the COA’s alignment with international standards and positioned it to undertake more complex responsibilities, including financial audits of externally financed investment projects. Piloting ISSAI-Compliant Project Financial Audits In 2025, the Chamber of Accounts conducted its first financial audit of project financial statements for an internationally financed operation—the Rural Roads Resilience Sector Project (Loan 4426-UZB). The audit formed part of a pilot collaboration between the COA and the Asian Development Bank (ADB)[1], designed to test the practical application of the International Standards of Supreme Audit Institutions (ISSAIs) by COA for conducting audit of project financial statements prepared following the International Public Sector Accounting Standards (IPSAS) within a live project environment. The pilot[2] aimed to assess the COA’s readiness to conduct project financial audits in accordance with international standards and donor-specific requirements. It provided hands-on experience supported by structured technical assistance, including: Targeted training on ISSAIs, IPSAS, and ADB’s project audit requirements. On-the-job mentoring introducing risk registers, structured audit programs, and IPSAS-based financial statement templates. Guidance from an international public sector audit specialist with expertise in ISSAI-compliant financial audits. Beyond completing the audit engagement, the pilot served as a diagnostic exercise to identify institutional capacity gaps, refine methodologies, and inform future strategies for engaging the national SAI in project financial statement audits of IFI-financed operations. Results, Institutional Gaps, and Reform Measures The pilot audit concluded with acceptable audit deliverables but revealed institutional gaps typical of SAIs transitioning from compliance-oriented oversight to risk-based financial auditing. Auditors initially emphasized procedural compliance rather than risk-based planning and substantive testing grounded in professional judgment, with limited experience exercising discretion beyond checklist-driven verification. Project management teams also raised concerns regarding audit scope, communication processes, and reporting timelines. Constraints in audit software, documentation systems, and supervisory capacity affected efficiency and quality assurance. Several lessons emerged. Transitioning to assurance-based auditing requires institution-wide change management, not solely technical training. Structured capacity development, combining formal instruction with mentored fieldwork, accelerates adoption of risk-based methodologies. Clear communication protocols strengthen transparency and stakeholder trust. Investments in modern audit software, experienced audit managers, and peer collaboration improve audit quality and consistency. The pilot paved way for broader institutional reforms. Presidential Decree No. UP-252 (2025), effective 1 January 2026, expanded the COA’s authority to conduct financial audits of IFI-financed projects, undertake joint and parallel audits with foreign SAIs, and monitor externally financed investments across their lifecycle. The decree also introduced institutional and digital innovations, including a chief inspector function to prevent early budgetary and procurement violations and a dedicated Artificial Intelligence and Digital Transformation Group tasked with large-scale data analysis to enhance risk detection and expand audit coverage. Because the COA combines inspection, monitoring, and external audit functions, its role as an independent auditor of IFI-financed projects may raise independence and confidentiality concerns. Establishing a ring-fenced IFI audit unit with clearly segregated reporting lines, operational autonomy, and a dedicated ISSAI-aligned audit manual—introduced through the decree, would help safeguard independence and standardize practices. Relevance for Other DMCs Developing member countries (DMCs), particularly in Central and West Asia, face similar structural constraints when engaging supreme audit institutions to conduct financial audits of IFI-financed projects in line with international standards. Common challenges include limited legal mandates, compliance-oriented methodologies that do not consistently apply risk-based assurance, and capacity gaps in advanced audit techniques, digital tools, and quality assurance systems. Regional diagnostics and SAI performance assessments consistently highlight the need to strengthen country-owned audit capacity and align national systems with international standards. In this context, Uzbekistan’s reform experience offers a practical and replicable model. Engaging SAIs in project financial audits strengthens national systems in several ways. It promotes institutional ownership of audit quality and accountability, reduces long-term dependence on private firms, and embeds expertise within public institutions. It also allows project audit findings to inform broader public financial management reforms, including budgeting, procurement, and internal control improvements. Most importantly, internationally aligned SAIs enhance credibility and trust among parliaments, citizens, and development partners. By reinforcing SAIs rather than outsourcing core assurance functions, DMCs can strengthen country systems while meeting IFI requirements for independent, high-quality financial audits. A Replication Framework for SAI-Led IFI Audits Replicating Uzbekistan’s experience in other DMCs requires three foundations: a clear legal mandate authorizing SAI-led financial audits of IFI-financed projects; structured institutional capacity development; and well-defined communication protocols with stakeholders. Reform should begin with a comprehensive diagnostic of the SAI’s mandate, methodology, human resources, and technological infrastructure. Where necessary, legal and regulatory changes must explicitly empower SAIs to conduct full-scope financial audits of externally financed projects. Establishing a dedicated IFI audit unit—functionally separated from inspection or investigative activities—can help safeguard independence and confidentiality. Methodologically, SAIs should institutionalize risk-based audit approaches aligned with ISSAI requirements and donor standards. Implementation is most effective when phased, combining targeted training with mentored pilot audits. Investments in digital audit tools and data analytics are essential to improve documentation, supervision, and audit quality. Continuous refinement of audit manuals, procedures, and quality assurance mechanisms is critical to institutionalization. Performance should be monitored through measurable indicators such as ISSAI compliance, audit quality, timeliness, and effective use of digital analytics. Replication is not a one-time pilot exercise but a structured reform process requiring sustained leadership, investment in people and systems, and long-term commitment to assurance-based auditing. [1] Why ADB was involved: The Asian Development Bank supports the strengthening of country systems to enhance transparency and accountability in public financial management. In Uzbekistan, ADB partnered with the Chamber of Accounts to pilot the application of international audit standards to project financial statements. This initiative aligns with ADB’s broader strategy to use and strengthen country systems, reduce reliance on external auditors, and promote sustainable institutional capacity. [2] Role in the pilot: ADB provided technical guidance, engaged an international audit consultant, and delivered training resources to support the Chamber of Accounts during the pilot. The experience is informing ADB’s future approach to engaging Supreme Audit Institutions across its developing member countries. Ask the Experts Sajid Raza Senior Financial Management Specialist, Procurement, Portfolio, and Financial Management Department, Asian Development Bank Sajid is a fellow chartered accountant with more than 25 years of professional experience specializing in financial due diligence, risk assessment, governance strengthening, and the design of financial management and audit systems in both the public and private sectors. Prior to joining ADB, he served as Director, Advisory at KPMG. He currently serves as the country financial management focal point for Afghanistan, Georgia, and Uzbekistan. Raushania Sibagatulina Financial Management Officer, Procurement, Portfolio, and Financial Management Department, Asian Development Bank Raushania is a finance professional with more than 25 years of experience in financial management, accounting, and compliance. She serves as a financial management officer at the Uzbekistan Resident Mission of ADB, where she specializes in financial due diligence, audits, and risk assessment for development projects. She is a certified professional accountant with expertise in financial management, budgeting, internal controls, and regulatory compliance. Her work includes overseeing financial integrity and supporting effective management of development project portfolios. Asian Development Bank (ADB) The Asian Development Bank is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—49 from the region. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.