DAY 1: OVERVIEW The nature of internal auditing The internal audit environment The scope of internal audit work Standards, principles and practices

THE INTERNAL AUDIT ENVIRONMENT The role of Internal Audit in Corporate Governance Accountability, management and control in government Need for internal control Nature of internal and external audit in government Linking Internal Audit to other activities Government internal auditing in Bangladesh

THE ROLE OF INTERNAL AUDIT IN CORPORATE GOVERNANCE Internal audit standards re: governance

GOVERNANCE DEFINED “Enterprise governance is the set of responsibilities and practices exercised by the board and executive management with the goals of:

GOVERNANCE DEFINED (cont’d) Providing strategic direction Ensuring that directives are achieved Ascertaining that the risks are managed appropriately Verifying that the enterprise’s resources are used responsibly” IT Governance Institute

GOVERNANCE DEFINED (cont’d) “Corporate governance is about promoting corporate fairness, transparency and accountability.” President of World Bank, June 1999

DISCUSSION How does governance work in NBR?

IIA STANDARDS: GOVERNANCE (2130) “The internal audit activity should assess and make appropriate recommendations for improving the governance process in its accomplishment of the following objectives:

IIA STANDARDS: GOVERNANCE (2130) (cont’d) Promoting appropriate ethics and values within the organization Ensuring effective organizational performance management and accountability Effectively communicating risk and control information to appropriate areas of the organization Effectively coordinating the activities of and communicating information among the board, external and internal auditors, and management.”

NEW STANDARD 2130.A1 “The internal audit activity should evaluate the design, implementation and effectiveness of the organization’s ethics-related programs and activities.”

WHY IS THERE A NEED FOR INTERNAL CONTROL? To meet departmental objectives To guard against specific risks To help the ministry/department to cope with a changing and challenging environment To maximize opportunities To demonstrate accountability To account for the use of external funds, eg from DFID, EU, World Bank, USAID Other specific control objectives

THE NATURE OF GOVERNMENT AUDITING External audit: to provide independent assessments to external stakeholders, (eg Parliament) of the reliability of financial statements, use of funds, strategic and operational performance, and accountability Internal Audit: to provide independent assurance, advice and support to the most senior members of the organization, eg Principal Accounting Officer/Chairman, NBR

GOVERNMENT EXTERNAL AUDITING Financial (“Certification”) Regularity (compliance and probity) Value for money (economy, efficiency and effectiveness) Performed by staff of the Office of the Auditor General

GOVERNMENT INTERNAL AUDITING Systems based Identify strengths and weaknesses of internal controls Risk management Performed by officers and staff of the organization

GOVERNMENT INTERNAL AUDITING What makes it different from the private sector? Different models (eg centralised, decentralised) International influences: expectations for government internal audit in member and applicant states; special requirements for audit of internationally-funded projects Examples

LINKING INTERNAL AUDIT TO OTHER ACTIVITIES Relationships With whom? Why? How? See the Manual, 4.4 - Ministry of Finance State Audit Office (C&AG) Other internal audit units Management Others? eg other review functions

GOVERNMENT INTERNAL AUDITING IN BANGLADESH Progress so far Future developments Guidance: law, policy and mission statement, government rules and orders, draft manual, practices in the ministries

QUESTIONS?