Internal audit Community of Practice

Transcription

1 Internal audit Community of Practice

2 Control model evolution in ex soviet countries Diana Grosu-Axenti Head of IA CoP Ruslana Rudnitka RIFIX expert

3 Background of communist system No democracy: No real need of separate control for legislative and executive Planned economy: Fixed results, fixed inputs. No sense for more results or economy of inputs. Economy in budget sector could be penalized No single system of FMC NO need for efficiency and effectiveness

4 Background of communist system No accountability. No transparency. Administration based on administrative methods The financial system was oriented to very strict and birocratic system. Realocation were difficult. The head of organizations were not managers, but executors Financial procedures were described in very detailed regulation, which took place of Internal control. No need to implement FMC, so no need to assess and improve it No need on internal audit

5 Background Inspection To inspect to compare the item or activity in line with specified requirements and standards Tradition from Latin countries In ex soviet countries control system is based on revision Periodical checking of economical-financial discipline or at the requests Inspection is a component of Government (Ministry of Finance) centralized control Mostly on periodic review based plans or complains Audit From audio to listen Tradition from Saxon countries Is an conditionality of EU integration Internal auditor asses internal control in all processes, including operational ones Internal audit is a component of internal control External audit is a component of Parliamentary control Based on Risks Assessment

6 Comparison of old and new systems of State Financial Management and Control Retrospective control EA Running control IA Preliminary control IC

7 The change from the present arrangements A traditional system: Ex ante control exercised by Ministry of Finance Ex ante approval also performed by Court of Accounts All transactions subject to inspection activities by Ministry of Finance Inspectors or Controllers Control is 100% Legal penalties for breach of regulations Activities subject to ex post control by the external auditors Comment: Managers not responsible for internal control. 2. 7

8 Why change is necessary? Common Weakness of traditional systems Existing financial controls too many and inefficient Accounting principles outdated Violations to budget rules Questionable transactions Punishment of human error Complaints by third parties Ignores performance analysis and reporting and focus is on the past performance

9 The effects of democratization External audit and Governmental financial control separated. Due to same background: They hade used identical methodology They compete for authority

10 The effect of EU orientation Impose our countries with Latin system of control to implement Saxon system with internal audit Need to implement good governance FMC system specific to the need of institution FMC system reinforce public control and transparency FMC based on managerial accountability and responsibility

11 Internal Audit Financial Inspection SAI Scope Ministerial All public sector State enterprises Planning Risk based At requests MoF decision All public sector State enterprises Independent Audit/controlling Systems Tranzactions Accounts, systems Function Assurance and consultancy Governmental control Certify accounts, Evaluate Government performance Reporting To Manager MoF Parliament CHU Government Sanctions No Yes Yes In the case of eventual fraud send report to Standard have to elaborate Law enforcement bodies Law enforcement bodies