1. Internal Audit Practices MINISTRY OF FINANCE OF REPUBLIC OF TURKEY Twinning Project - Kick-off Meeting Dedeman Hotel 30.3.2005

2. Global Definition of Internal Audit Internal audit is; providing an independent and objective assurance and consultancy activity, performed in order to improve and add value to the activities of the organization. Internal auditors helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. (Institute of Internal Auditors, 2002)

3. Elements of Internal Audit Definition Is objective, Provides assurance and consultancy service, Improves and adds value to the activities of the organization, Helps the organization accomplish its objectives, Auditing of risk management, internal control processes and managerial processes, Systematic and disciplined approach,

4. Internal Control Internal control is all kinds of decisions, implementations and other measures taken by all employees including the managers with the purpose of realizing the organization’s activities as targeted. In this respect, the managers are responsible for planning, organizing and managing the activities of the organization. The success of the control depends on the outcome of the managers’ abilities to plan, organize and manage. Internal auditors shall be responsible for the success of the internal audit and the managers of the internal control.

5. Content of Internal Audit Auditing of risk management processes Auditing of internal control processes –Integrity, accuracy and reliability of all kinds of information produced in the organization, –Effectiveness and efficiency of operations, –Compliance with law and internal legislation, –Safeguarding of the organization’s assets, Auditing of managerial processes

6. Risk Risks are all kinds of events or circumstances that may prevent the Organization from accomplishing its objectives. Risks are measured according to their frequency of occurrence and the damage they will cause and are minimized through appropriate internal control measures. Risk management is a systematic management practice that covers the definition, measurement and elimination of all kinds of risks.

7. Risk Based Audit Risk based audit is the contemporary expression of the transition from auditing focused on past activities to managing the future. Risk based audit is based on these assumptions, –Audit resources are not infinite, –Unit activities to be audited are subject to different risks, –Unit activities to be audited have relatively differing degree of importance.

8. Risk Based Audit Process Preparation of Annual Audit Plan as Risk Based (Macro Risk Analysis) aims –Determination of audit priorities, –Mobilization of audit resources are started from most risky activities, Risk Analysis in Individual Audits (Micro Risk Analysis) –covers definition of risks related to audited activity, assessment of current internal controls, development of internal control practices for the elimination of risks.

9. Other Duties of Internal Auditors Auditing of management processes, Production of future-oriented information, IT Audit, Consultancy activities, Contributing to development projects, Performance measurement and efficiency analysis,

10. Conclusion Internal audit is implemented in the same way in different countries from both the Europe and from anglosaxon cultures in the world except for our country. It will gain importance in public management with its detailed and generally accepted standards, ethical rules and implementation guides. It was first introduced in the public sector of our country with Law No 5018. It is possible that a successful internal audit system in compliance with international standards in the public administrations, the only problem is the harmonization issue.

11. Conclusion With the successful implementation of internal audit system, –Managerial responsibility principle introduced with the Law No 5018 will be implemented with success. –Our audit system which is past-oriented and legislation- oriented will be developed in line with international practices. –EU legislation and international practices and standards will be attained in the field of audit. –It will be possible to increase the efficiency and effectiveness of the activities of public administrations.

12. Thank You CENTRAL BANK OF REPUBLIC OF TURKEY General Directorate of Internal Audit