1. 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. 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. 3 IA MANUAL: Contents Management of the internal audit activity - (vol.І) Audit engagement (vol.ІІ) Audit tools and instruments (vol.ІІІ)

4. 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. 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. 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. 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 EU Funds Executive Agency National Audit Office and other external auditors

8. 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 the audit universe - audit strategy - Communication and approval of the plan Annual planning

9. 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. 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. 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. 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. 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. 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. 15 IA MANUAL-Vol.ІІІ :AUDIT TOOLS AND TECHNIQUES Chapter 1 – Audit information Basic characteristics: -sufficient, reliable,relevant,useful Nature of information -Physical information -Testimonial information -Documentary information -Analytical information

16. 16 IA MANUAL-Vol.ІІІ :AUDIT TOOLS 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. 17 IA MANUAL-VOL.ІІІ :AUDIT TOOLS 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. 18 THANK YOU!