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Internal Audit Manual - COA
Internal Audit Manual - COA
Ministry of Finance
Government of the Republic of Trinidad Tobago
TABLE OF CONTENTS
Page
Introduction..
1.
iii
1.2
1.3
4
6
6
7
7
7
8
8
9
9
10
11
12
13
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International Standards
1.3.1 International Best Practice
1.3.2 The Code of Ethics...........
1.3.3 Rules of Conduct..
1.3.4 International Auditing Standards..
1.4
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Introduction
(i) Purpose
This Internal Audit manual is designed to provide a comprehensive guidance for the
development and operations of internal auditing in the Public Service. It is intended to be used as
a source of reference and guidance for Internal Auditors in the daily performance of their duties.
Users of this manual are assumed to possess a basic knowledge and understanding of
management framework with practical guidance, tools and information for managing the Internal
Audit activity and for planning, coordinating and reporting to Management / the Accounting
Officer.
Against this background, this document aims to provide a standard set of guidelines regarding
Internal Auditing in the Public Service.
Internal Auditors must keep pace with current trends in their profession if they are to remain
effective in assisting management in the proper discharge of their duties
The Comptroller of Accounts believes that this manual will set the tone and will create the
necessary impetus for a sustainable and effective Internal Auditing mechanism in Government.
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The Internal Auditor must therefore be involved in any phase of activity in which he can be of
service to the Accounting Officer.
Activities include: appraising the soundness and application of accounting, financial and operating controls;
ascertaining the reliability of accounting and other data developed within the
organization;
ascertaining the extent of compliance with establish policies and procedures;
appraising the quality of performance in carrying out assigned responsibilities;
NB: Please note that this Auditing Manual is a work in progress. Inclusions will be inserted as
the various sections areas developed, reviewed and verified.
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Chapter 1
Internal Audit Environment
The Internal Audit Environment is shown on the flowchart at figure 1, page 2. The
various components are as follows:
Legislative Framework
Specific to GORTT
Governs the
The Treasury
Reports to
of Internal Audit
Current Environment
- Compliance
- Independence
(location)
- Post Auditing
- Manual
Reports to
New Environment
Internal Audit
Section
- Risk management
- Independence
(mind)
- During the Audit
- IT Environment
Minister of Finance
Objectives
Relationship
with
Auditor Generals Department
Reports to
Parliament
Reports to
1.1
Internal Auditors in the operation and execution of their duties are governed by legal
provisions. These provisions are as follows:-
1.1.1
Chapter 8 of the Constitution of the Republic of Trinidad and Tobago deals with Finance
and outlines the following requirements:
Chapter 8, Section 113 (1) of the Constitution of the Republic of Trinidad and Tobago
states:(1) The Minister responsible for Finance shall cause to be prepared and laid before
the House of Representatives before or not later than thirty days after the
commencement of each financial year estimates of revenues and expenditure of
Trinidad and Tobago for that year.
Chapter 8, Section 116 (1-2) of the Constitution of the Republic of Trinidad and Tobago
states:(1) There shall be an Auditor General for Trinidad and Tobago, whose office shall
be a public office.
and
(2) The public accounts of Trinidad and Tobago and of all officers, courts and
authorities of Trinidad and Tobago shall be audited and reported on annually by the
Auditor General, and for that purpose the Auditor General or any person authorized by
him in that behalf shall have access to all books, records, returns and other documents
relating to those accounts.
In order to assist the Minister of Finance in complying with these provisions, Accounting
Officers are charged with the responsibility for preparing and submitting the estimates of
revenue and expenditure to the Minister of Finance and the Appropriation Accounts to
the Auditor General. Accounting Officers have the responsibility of ensuring that proper
systems of accounting as prescribed by the Treasury are establish and maintained within
their respective Ministry/Department.
The Auditor General is empowered by the Constitution to carry out audits of the
accounts, balance sheets and other financial statements of all enterprises that are owned
or controlled by or on behalf of the State. She shall submit reports annually to the
Speaker, the President of the Senate and the Minister of Finance. The Auditor General is
also responsible for monitoring the systems and records used in the preparation of these
accounts to ascertain whether they are functioning properly and are in compliance with
the relevant laws and guidance.
Internal Auditors in Central Government are charged with the responsibility of assisting
Accounting Officers in the effective discharge of their duties as defined in the Exchequer
and Audit Act, Chapter 69:01. Internal Auditors must examine the records of their
Ministries/Departments in order to ascertain the extent of compliance with established
policies and procedures as established by the Treasury and must ensure that expenditure
incurred and revenue earned conform to the Estimates of Expenditure/Revenue approved
by Parliament. They must also ensure that expenditure incurred under the various votes,
are made in accordance with Budgeted Allocations and that expenditure does not exceed
releases granted.
1.1.2
In the daily performance of their duties, Officers are guided by and operate under the
rules as enshrined in the Exchequer and Audit Act, Chap.69:01.
This Act provides for:- the control and management of the public finances in the Republic of Trinidad and
Tobago;
- the duties and powers of the Auditor General;
- the collection of, issue and payment of public moneys;
- the audit of the Public Accounts and the protection and recovery of public property;
- the control of the powers of statutory bodies and for matters connected therewith.
The Act also interprets the title of the Accounting Officer in Part I Section 2 which states
inter-alia:an accounting officer means any person appointed by the Treasury and charged with
the duty of accounting for any service in respect of which moneys have been
appropriated by the Constitution or by Parliament, or any person to whom issues are
made from the Exchequer Account.
Internal Auditors are a valuable resource for Accounting Officers and as such must be
aware of the role of the Accounting Officer.
1.1.3
The Financial Regulations to the Exchequer and Audit Act, Chapter 69:01
In addition to the Exchequer and Audit Act which states and interprets the law, Internal
Auditors are also guided by the Financial Regulations in their daily operations. These
Regulations provide a more detailed guidance and makes provision for an independent
Internal Audit Unit.
Part II Section 13 (4) of the Regulations states:Each Accounting Unit shall have a check staff and an independent internal audit
unit
Part II Sections 4 (1) and (3) of the Exchequer and Audit Act makes provision for the
control and management of the accounts.
Part I Section 8 of the Regulations also states:
It is the duty of an accounting officer to
(a) ensure that the proper system of accounting as prescribed by the Treasury is
established and maintained.
Guided by the Financial Regulations in their role and responsibilities, Internal Auditors
will be able to give assurance to Accounting Officers that records are accurate, systems
of internal controls are performing effectively, and there is compliance with systems laid
down by the Treasury.
1.1.4
The Financial Instructions 1965 was issued by the Treasury under Section 4 of the
Exchequer and Audit Ordinance 1959. These Instructions give details on accounting
procedures to be adopted by the various Ministries/Departments so as to promote reliance
on the accuracy of records and to ensure that systems are functioning as intended.
1.1.5
Circulars are issued from time to time by the Minister of Finance and the Comptroller of
Accounts.
1.1.6
Circulars from the Minister of Finance are issued when new accounting
systems/procedures are being introduced.
Circulars from the Comptroller of Accounts are issued for clarification/updating
of existing systems and procedures.
The terms and condition of employment for officers employed in the Public Service has
been compiled in a manual by the Chief Personnel Officer (CPO). Unlike the Financial
Regulations which deals with accounting matters within the Public Service and the
treatment of such, the Manual of the Terms and Conditions of Employment addresses the
administration of rules, regulations and circular instructions relating to the terms of
employment of Officers in the Public Service.
Section I of the manual embodies those rulings, guidelines, interpretations and
classifications that are most frequently sought from the CPO in respect of areas such as:
-
hours of work,
treatment of work in excess of normal working hours,
different types of leave, traveling and subsistence allowance,
transfers between Trinidad and Tobago,
uniform and
employment on contract.
Each area dealt with in the Manual is referenced to the relevant regulations from the Civil
Service, Public Service, CPO and Ministry of Finance Circulars.
Sections II and III of the manual contain circulars/circular memoranda mentioned in
Section I. The manual must be read in conjunction with the relevant provisions of the
Civil Service Regulation, Public Service Regulation or the Traveling Allowances
Regulations as may be appropriate.
This manual is one of the tools used by the Internal Auditor in interpreting and clarifying
issues on the terms and conditions of employment of officers employed in the Public
Service.
1.1.7
The Chief Personnel Officer issues circulars from time to time for the variation of
officers terms and conditions of employment in relation to the terms and conditions,
salaries and allowances for all officers employed in the Civil Service as well as
clarification of existing circulars when necessary.
1.1.8
These Commissions are followed by specific Acts and Regulations governing the
relevant service are as follows:-Public Service Commission:
Civil Service Act Chapter 35:50
Fire Service Act
Chapter 23:01
Prison Service Act Chapter 13:02
- Civil Service
- Fire Service
- Prison Service
1.1.9
The Civil Service Act, Chapter 23:01 makes provision for the establishment and
classification of:
- the Civil Service,
- a Personnel Department,
- procedures for negotiations and consultation between the Government and
members of the Civil Service,
- the settlement of disputes,
- other matters concerning the relationship between the Government and the Civil
Service.
The Act outlines the terms and conditions of employment of officers employed in the
Civil Service.
1.1.10 Civil Service Regulations
The Civil Service Regulations guided by the Civil Service Act, Chapter 23:01 defines the
various positions within the Civil Service and the details of the entitlements of these
positions. The Regulations also treats with various areas such as probation periods,
secondment, remuneration, increments, allowances, payment of pensions and gratuities
and other matters relating to officers.
An amendment to the Regulations in 1996 made provision for the Code of Conduct.
It is recommended that copies of the Regulations and Code of Conduct should be given to
every officer on their first appointment by the Public Service Commission by which he
was appointed together with his letter of appointment.
The Code of Conduct in the Civil Service Regulation deals with the conduct of an officer
while the Public Service Commission Regulations defines the method for dealing with an
officers discipline and the relevant disciplinary action to be taken.
The Civil Service Act, Chapter 23:01 amended in 1966 provides for a Code of Conduct
which addresses the general conduct of a Civil Servant whereas the methods for dealing
with Public Officers discipline and disciplinary actions are covered by the Public Service
Commissions Regulations.
The Internal Auditor in the conduct of the audit must be knowledgeable of the following
laws in relation to the various bodies:
1.
2.
3.
4.
5.
6.
The various Acts, Regulations, Instructions and Circulars are some of the main tools used
by Internal Auditors. The Internal Auditor must be knowledgeable of all aspects in order
to interpret and apply them to accounting transactions, verify compliance with the
relevant laws and provide advice and recommendations to his Accounting Officer.
The Internal Auditor, in assessing and reviewing the existing internal controls provides
Accounting Officers with an independent assessment of the Departments internal
controls and risk management framework and policies. This promotes reliability of
information provided and used in the decision-making process.
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1.2
The increasing demand for good governance and transparency by the citizenry in the use
of taxpayers dollars has impacted the way in which organizations conducted their
businesses in the past. In order to facilitate this demand for good governance and
transparency and in keeping with Governments mission and vision, the Public Service
business processes, communication techniques, and delivery services are continuously
being upgraded and transformed.
In this changing environment where the pace of Legislative Reform tends to lag behind,
the Internal Auditor is met with challenges in carrying out his responsibilities. In order to
cope with these challenges, the Internal Auditor must adopt relevant Standards and Tools
from internationally recognized Auditing and Accounting bodies in the conduct of their
audits.
In the past the focus of Internal Audit activities within the Public Service was in the areas
of compliance, independence, post-auditing and auditing in a manual environment. This
traditional approach has continued in audit activities in the current environment. Internal
Auditors must now enhance their approach in order to fulfill their audit responsibilities in
this continuously evolving environment.
management needs to reconsider the design of the existing controls when risk
changes and
the controls which were designed to reduce risk at an acceptable level, continues to
operate effectively.
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With ongoing assessments and the efficient and effective management of risks through
strong internal controls, the organization is able to have:
-
more efficient , reliable and cost effective delivery of services to its customers;
more reliable decisions;
innovation;
minimal waste and fraud;
better value for money through the efficient use of resources;
improved project and programme management better outputs and outcomes.
Once risks are mitigated, the organizations performance will improve and the likelihood
of its strategic and current objectives being achieved will increase.
1.2.2
Internal Auditors have traditionally operated in a paper based environment within the
Public Service. Checks for completeness, accuracy and verification of accounting
transactions are carried out against the relevant hard copy documents. A manual system
provides an audit trail which allows the Auditor to trace a transaction from its source to
its completion. While manual processing has its advantages it often operates at a slower
pace and is prone to a higher degree of errors.
Government, in improving its business processes with the aim of promoting the
efficiency and timeliness of its service delivery to its customers is engaged in ongoing
development and implementation of Information Technology (IT) related systems within
the Public Service. Internal Auditors must now be able to identify and assess the controls
in this computerized environment. Auditing software is now available for use by Internal
Auditors in the form of Computer Assisted Auditing Techniques (CAAT). With CAAT
tools, an auditor can review, test and analyze an entire population of data. Some areas of
testing include testing in compliance with standards, identifying control issues,
verification of balances etc.
With the continuous development in new IT systems and the upgrading of existing ones,
business processes are constantly evolving with IT driven processes. Several accounting
and reporting processes within the Public Service are undergoing changes due to the
incorporation of either partially or wholly IT applications into its processes.
With the introduction and varying complexity of computerized systems, there exists a
corresponding loss of audit trail. The Internal Auditor must now tailor his audit activities
in order to give assurance on the integrity, accuracy, validity, timeliness and
completeness of outputs derived from such systems. He must assess the controls for
adequacy and relevance which will mitigate any risk which may prevent or delay the
organizations ability in meeting its objectives.
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Some areas of risk in an IT environment that the Internal Auditors must consider in
relation to internal controls are:
-
Data input
Controls that are no longer relevant
Hardware failure
Threats /viruses
System failure
Fraud human factor
Resource management efficient use of
1.2.3
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The Internal Auditor, in meeting his responsibilities must conduct the audit in line with
the organization objectives for transparency and accountability. This will require the
Internal Auditor to develop a sound working relationship with management and relevant
staff at all levels. The internal auditors knowledge and understanding of the organization
will assist in building effective relationships and in evaluating and improving the
effectiveness of risk management, internal controls and governance processes. Also, an
effective and well run audit team will be sought out for services, information and
guidance.
The Internal Auditor must analyze the strengths and weaknesses of the organizations
internal controls, considering its governance, organizational culture, and related threats and
opportunities for improvement which can affect whether the organization is able to achieve
its goals.
Internal Auditors may be called upon to advice on controls necessary in the development
of new systems for the organization and may also be involved in the auditing of those
systems for efficiency and effectiveness of the controls in place. In order to maintain
independence in these circumstances, Audit Committees within the Organizations can be
set up to review the Audit Report of the Internal Auditor.
Independence and objectivity continues to be required of the Internal Auditor in the
performance of his duties. He must have an unbiased mental attitude in the performance
of his engagements in such a manner that the quality and integrity of his work is not
compromised in any way.
1.2.4
The work viewed by the Internal Auditor has been primarily historical in nature. Upon
completion of the transaction process, the Internal Auditor verifies the various accounting
transactions for compliance, accuracy and completeness. Errors and irregularities are
often discovered at this stage. With the emphasis on good governance and transparency
this continued approach to auditing will not mitigate impending risks. Risk-based
auditing allows the Internal Auditor to continuously assess new and emerging risk and to
review existing policies and procedures in order to strengthen where necessary. Reports
from ongoing audits may recommend new controls, where needed, in order to safeguard
and use the resources of the organization in an efficient manner, add value to and
improve its operations.
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