Internal Audit manual dr. Ágnes Gerencsér Ministry of Finance Central Harmonistaion Unit

2 Internal Audit regulation 1.) Primary legislation: Act XXXVIII of 1992 on Public Finance 2.) Secondary legislation: Gov. Decree No. 217/1998 (XII. 30.) on the Rules of Operation of Public Finances - FMC Gov. Decree No. 193/2003 (XI. 26.) on Internal Audit of Public Budgetary Organisations - IA 3.) Tertiary legislation: Manuals, guidelines

3 IA manuals Made by the CHU Website Based on the IA law, but not binding Flexible A)IA manual (general) B)IA manual for local governments and minority governments (special)

4 Structure of the Hungarian IA Manual 1.Internal Audit Charter 2.Professional Code of Ethics 3.Functional independence 4.Basic rules 5.Methodological guidelines 6.Uniform documents 7.Appendices 8.Glossary

5 1. Internal Audit Charter Part of the organisation’s IA manual. Aims of the internal audit (assurance + consulting activity) Reports Independence Responsibility Rights and obligations (internal auditor – auditee) Sphere of authority Standards

6 2. Professional Code of Ethics Approved by the head of the PBO. Integrity Independence, objectivity Secrecy Expertise Cooperation Incompatibility

7 3. Functional independence 2 meanings: Organisational independence No other executive role Head of the PBO Head of the IA unit internal auditor(s) Directly subordinated

8 4. Basic rules 4.1 Head of the IA unit Responsible for: Management of auditing activity Capacity assessment, trainings Evaluation Quality assurance Involvement of external experts Effective consulting activity

Planning A) Preparation for planning B) Planning Strategy plan Annual plan C) Preparation for the audit

The audit A) Opening discussion head of the audited unit + auditors (+ head of the IA unit) B) Audit work-sheets C) Access to audit documents D) Fundamental examination procedures, techniques –Analytical procedures –Sampling procedures E) Interview

The audit F) Assessment of control points / procedures G) Gathering and registering of evidence Declaration of completeness H) Audit protocol, serious insufficiency

Audit report Responsibility - preparation: chief audit executive - reality of statements: internal auditor Content requirements 1.) Executive summary 2.) The content of the audit report [name of the org., law, subject, period, goals, methodology, conclusions, name of the management, subscription of the auditor(s)] 3.) The findings 4.) Risk and effect 5.) Recommendation 6) The state of the measure

Audit report Conciliation 1.) head of the IA unit head of the audited unit/org. (comments – 15 work days) 2.) (closure) discussion participants: chief audit executive, internal auditors, head of the IA unit, head of the audited org. + 3.) (possible) modification: chief audit executive decides The closure of report - chief audit executive: signature of the final version of the audit report Reporting system Draft report

Utilisation Action plan - prepared by the head of the audited org./unit - comment: IA unit - (possible) discussion - final decision: head of the audited org./unit Follow up 1.) head of the audited org./unit follows up the implementation of the action plan [register] Summary: to the head of the IA unit + head of the chapter 2.) ex-post examination: the audit unit can make sure of compliance of carrying out the adopted actions (~ audit – but narrower: only weaknesses) [register]

Criminal, infringement, compensation and disciplinary procedings Irregularities: FMC guidelines Role of the IA: prevention

16 5. Methodologies IIA international standards Audits System audit Performance audit IT audit EU Structural Funds audit EU Cohesional Fund audit

17 6. Uniform document samples 7. Appendices 8. Glossary

18 Thank you for the attention! Question? Dr. Ágnes Gerencsér Hungarian Ministry of Finance Central Harmonisation Unit Phone: