Audit activities and the methodology of the European Court of Auditors are an interesting area of research due to the several reasons. One of them is certainly the fact that the Court of Auditors deals with public sector auditing, but it cannot be considered as a typical supreme audit institution. The Court of Auditors was established for the purpose of auditing the finances of the European Union, a supranational community of 28 Member States that have only partially transferred their sovereignty to the European institutions. Audit tasks of the European Court of Auditors are based on the fundamental audit principles, but when it comes to the audit standards and guidelines, the Court of Auditors had to adjust them in certain parts in order to better respond to the specific context of the European Union. The purpose of this thesis is to explore the audit framework and the fundamental principles and standards of public sector auditing on which the specific methodology of the Court relies, but also to analyse its implementation in practice through the analysis of reports and other publications. The European Court of Auditors carries out its role as an independent protector of the European Union's finances and budget through two key audit activities - the audit of budget execution with the final aim of improving financial management and the audit of the European Union policies with intention to improve the economy, efficiency and effectiveness of public funds management. The second part of the thesis is therefore focused on the contribution of the European Court of Auditors in protecting the European Union's financial interests as well as its effort in designing public policies.