INTERNAL AUDIT MANUAL

1. INTERNAL AUDIT MANUAL Doroteya Manolova Head of CHUIA Ministry of Finance Republic of Bulgaria PEM-PAL IA COP IA Manual Working Session June, 6-7 2011 - Chisinau, Moldova

2. LAW ON INTERNAL AUDIT IN THE PUBLIC SECTOR Based: on the International Professional Practices Framework Scope/Content: • Definition • Requirements for appointment of the IAs(…and national certificate “Internal auditor in public sector” or international certificate (CAE or CGAP) • Rights and obligations of the CAE and internal auditors • Planning(strategic,annual plan) • Audit process phases-planning, field work,reporting and follow up • Annual reporting of the IA activiity

3. IA MANUAL: Contents • Management of the internal audit activity - (vol.І) • Audit engagement (vol.ІІ) • Audit tools and instruments (vol.ІІІ)

4. IA MANUAL : MAIN OBJECTIVES AND STRUCTURE Objectives: • To cover all aspects of IA activity • To create sufficient basis for implementation of the IA activity in compliance with the Law, Standards, Ethic Code Each chapter consists of: • Short introduction (why,when…does we need to do that?) • Steps for executing the particular activity • The relevant Standard/s - № and text.

5. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter І – Nature of the IA • Definitions of the IA, • types of audit engagements – assurance and consultancy • purpose and structure of the Standards for internal audit in public sector • Ethic Code • Internal Audit Charter(Guidelines)

6. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter 2-Personnel management policy • Organizational structure of the IA?–IA Unit only • Job descriptions Models • Training and professional development plan (recommendation for training – minimum: • 40h a year for auditors in the IAU • 160h-for new colleagues-auditors during the first year)

7. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter 3-Interaction with other organizations The scope of interaction between IAU and: • Audit Committee • Other IAUs, CHUIA,Audit of EUFunds Executive Agency • National Audit Office and other external auditors

8. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter 4 - Strategic and annual planning: • Strategic planning.Steps: - understanding of the goals,systems/processes etc. of the organization • identification of the audit universe • risk assessments of the audited areas/elements of theaudit universe • audit strategy • Communication and approval of the plan • Annual planning

9. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter 5-Quality assurance of the audit activity Quality assurance and improvement program • Internal assessment - Current and periodical internal assessment • External assessment

10. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Chapter 6 – Reporting • Reports of IA activity: types and frequencies • Accent on the annual reporting: - Content of the annual report(LIAPS) - When and whom to be submitted

11. IAM - Vol.І : MANAGEMENT OF THE INTERNAL AUDIT ACTIVITY Two chapters focus on the indicators of fraud: Vol.І_(Part VІ of the Chapter 6) – Identification and reporting of the indicators of fraud Definitions and reporting procedure of bribe, theft, fraud Vol.ІІІ (Chapter 6) - Audit procedure for detection the indicators of fraud • List of widespread forms of frauds • Indicators of fraud depending on : - official position of the employee, - scope of the fraud, etc.

12. IA MANUAL - Vol.ІІ :AUDIT ENGAGEMENT Chapter 1 & 2 – Plainng • Pre-planning stage • Planning stage Chapter 3 – Field work(testing) • Carrying out checks • Analysis of the results and residual risk assessment

13. IA MANUAL -Vol.ІІ :AUDIT ENGAGEMENT Chapter 4 – Reporting of the results • Users of the report • Structure and content of the report • Steps of the reporting: • draft audit report • closing meeting • comments (if any) • audit report and action plan

14. IA MANUAL -Vol.ІІ :AUDIT ENGAGEMENT Chapter 5 – Follow-up By letters to the manager By audit engagements Chapter 6 – Eengagement supervision on • planning, • checking, • reporting phase

15. IA MANUAL-Vol.ІІІ :AUDITTOOLS AND TECHNIQUES Chapter 1 – Audit information • Basic characteristics: -sufficient, reliable,relevant,useful • Nature of information -Physical information -Testimonial information -Documentary information -Analytical information

16. IA MANUAL-Vol.ІІІ :AUDITTOOLS AND TECHNIQUES Chapter 2 – Audit Procedure • Interview, Observation and inspection, samplings,scanning • Analytical audit procedure Chapter 3 – Working papers • Form and content • Patterns of working documents • Filling : -current audit files permanent audit files • Access to the audit documentation

17. IA MANUAL-VOL.ІІІ :AUDITTOOLS AND TECHNIQUES Chapter 4 – Quality of the audit report • Main characteristics - to be: accurate, objective, clear, concise, constructive, complete, timely Chapter 5 – Consultancy engagement • Specificity of the phases of the engagement • Official and non-official consultancy engagements

18. THANK YOU!