quality assessment of internal audit activities performed on a periodical basis nikolina bibić,
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Quality assessment of internal audit activities performed on a periodical basis Nikolina Bibić, Ministr y of Finance , Central Harmonization Unit Republic of Croatia. Contents : Introduction 1.1 . Legal basis - PowerPoint PPT PresentationTRANSCRIPT
Quality assessment of internal audit activities performed on a periodical
basis
Nikolina Bibić,Ministry of Finance,
Central Harmonization UnitRepublic of Croatia
Contents:
1. Introduction
1.1. Legal basis
1.2. Overview of established internal audit units in the public sector of the Republic of Croatia
2. Development of the quality assessment model Model 1 Model 2 Model 3
3. Conclusion
1.1. Legal basis
Public Internal Financial Control Law
(2006)
Rulebook on Internal audit of Budget Users
(2008 and 2013)
CHU
Service for Methodology and Standards
Service for Coordination of Training and Quality Control
Service for International Activities
1.2. Overview of established internal audit units in the public sector of the Republic of Croatia
BUDGET USERS
TOTALNUMBER
OFENTITIESWITH AN
OBLIGATIONFOR
ESTABLISHING
INTERNALAUDIT UNIT
NUMBER OF BUDGET USERS THAT HAVE ESTABLISHED THE INTERNAL AUDIT UNIT
(as of 31.12.)
2012.
%OF TOTAL
NUMBER OFENTITIES THAT
HAVEESTABLISHEDTHE INTERNAL
AUDIT UNIT
2005. 2006. 2007. 2008. 2009. 2010. 2011.
Central level
148 21 31 32 42 54 72 79 10067,56
Local level 148 1 7 40 43 56 59 73 7450
Total 296 22 38 72 85 110 131 152 174 58,78
2. Development of the quality assessment model
Model Year Document Title
1 2012. Methodological Guidelines for Conducting Periodic Quality Assessment of Internal Audit Activities
2 2013. Instruction for Conducting Periodic Quality Assessment of Internal Audit Activities (Version 1.0)
3 2014. Instruction for Conducting Periodic Quality Assessment of Internal Audit Activities (Version 2.0)
Model 1
Methodological Guidelines for Conducting Periodic Quality Assessment of Internal Audit Activities
(2012)
• Organizatioanal position ofthe Internal Audit Unit • Staff•Methodology of work•Periodic reporting• Working papers
Model 2
Instruction for Conducting Periodic Quality
Assessment of Internal Audit Activities (Version
2.0)2013.
Assessment areas1. ESTABLISHMENT OF INTERNAL AUDIT
2. INTERNAL AUDITORS
3. CONTINUING PROFESSIONAL DEVELOPMENT
4. INTERNAL AUDIT MANAGEMENT
5. INTERNAL AUDIT PLANNING
6. WORKING PAPERS
7. CONDUCTING INTERNAL AUDIT
8. RECOMMENDATIONS MONITORING
9. REPORTING
10. QUALITY ASSURANCE AND IMPROVEMENT PROGRAM
11. IRREGULARITIES AND FRAUD
• Quality assessment performed on the basis of Annual Plan • Quality assessment performed by employees of the Central
Harmonization Unit (team of two)• Minister of Finance issues a decision on appointment • Signing a Declaration of Confidentiality and Impartiality • Checks take about 7-10 days (2-3 days of field work)
Model 2
1. Survey for internal auditors
2. Anonymous survey
1. Interview with management
2. Anonymous survey for audited entities
Checklists for all assessment areas
(11)
Percentage of compliance
Assessment of compliance
Description of assessment
Opinion on compliance
≤50% 0 Non-compliant ....non-compliances impair the ability to perform internal audits
51% - 75% 1 Partially compliant
potential for significant improvements
76% – 99% 2 Substantially compliant
potential for minor improvements
100 % 3 Fully compliant All requirements are fulfilled
INTERNAL AUDITORS
HEAD OF INTERNAL AUDIT UNIT
MANAGEMENT
Reporting process
Content of the report
• Introduction Purpose and scope of the assessment Legal framework for conducting the assessment Persons who conducted the assessment Place and period in which the assessment is conducted Quality assessment methodology
• Assessment results (by areas of assessment) Findings, assessments, opinions, recommendations
• Conclusions• Annexes
Response of the head of internal audit unit to the draft report
Reporting process
Draft Report on Conducted Assessment
Response of the head of Internal Audit Unit
Final Report on Conducted Assessment
Within 15 working days after the assessment
Within 7 working days after receipt of the draft report
Within 5 working days after receipt of the response
Head of Internal
Audit Unit
CHU
Head of Institution
Head of Internal Audit Unit
Assessment results
Model 2 – identified weaknesses
• Focus on assessment of compliance, not on quality
• All questions in the checklist are of equal importance
• Questions were repeated by areas (11)
• Technical questions – not related to quality assessment
• The report is too detailed
• The conclusion did not provide a general / overall assessment
3. Model
Instruction for Conducting Periodic Quality
Assessment of Internal Audit Activities (Version
2.0)2014.
Assessment areas
1. ESTABLISHMENT OF INTERNAL AUDIT
2. INTERNAL AUDITORS
3. INTERNAL AUDIT MANAGEMENT
4. STRATEGIC AND ANNUAL PLAN OF INTERNAL AUDIT
5. PLANNING OF INDIVIDUAL AUDITS
6. PERFORMANCE OF INDIVIDUAL AUDITS
7. REPORTING ON INDIVIDUAL AUDITS
8. QUALITY ASSURANCE AND IMPROVEMENT PROGRAM
1. Survey for internal auditors
2. Anonymous survey
1. Interview with management
2. Anonymous survey for audited entities
Checklists for all assessment areas
(8)
Questions related to Level 1
Questions related to Level 2
Description of assessment
Opinion
Non-compliant ....non-compliances impair the ability to perform internal audits
Partially compliant potential for significant improvements
Substantially compliant
potential for minor improvements
Fully compliant All requrements are fulflled
INTERNAL AUDITORS
HEAD OF INTERNAL AUDIT UNIT
MANAGEMENT
Reporting process
Content of the report
• Introduction Purpose and scope of assessment Methodology used for quality assessment
• Opinion about performed assessment (by areas of assessment) Findings, assessment, opinion, recommendations
• Conclusion Tabular presentation of proposed improvements (addressed to the head
of budget user) Tabular presentation of examined areas and quality level (addressed to
the head of internal audit unit) Comprehensive opinion (based on individual assessments by areas)
Model 3
• The implementation of this quality assessment model will begin from march 2014
• According to the Annual Plan, quality assessment of 31 Internal Audit Units / budget users shall be performed in 2014
• Selection criteria:– Internal Audit Unit - established more than four years ago
– Head of Internal Audit - appointed
– The amount of budget funding
– A user of EU funds
3. Conclusion
Quality assessment has two parts:
1. compliance of the internal audit function and
2. functional efficiency assessment
Thank you for your attention!