1 history of rifix working group interaction between internal and external audit and financial...
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History of History of RIFIXRIFIX Working GroupWorking Group
Interaction between Interaction between Internal and External Internal and External Audit and Financial Audit and Financial
InspectionInspection
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“Internal Audit – External Audit – Financial Inspection”
Permanent concerns
Main differences?
How to distribute roles and tasks?
Ways for interaction?
Where must this cooperation be defined? A law, bylaws…?
Once PIFC system is installed – what to do with inspection?
Etc.
Preconditions to creation of RIFIXRIFIX
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- Interaction between Internal and External Audit and Financial Inspection; a working group is suggested
7th Plenary meeting, Yalta, Ukraine, May 2010
13th Plenary meeting, Ohrid, Macedonia, October 2011- Interaction between Internal Audit and Financial Inspection
17th Plenary meeting, Budapest, Hungary, June 2012- Difference in functions between External Audit, Financial Inspection and
Internal Audit? RESOLUTION on setting up a Working Group!
23rd Plenary meeting, Tbilisi, Georgia, April 2013- Informing participants of the Plenary on creation of a Working Group; a
short discussion on activities of this Working Group
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Agenda item: study links between Internal and External Audit and set up a Working Group to further study this issue; revision and internal audit: friends or foes?
7th Plenary meeting in Yalta, Ukraine, 25-28 May 2010
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Yalta Resolution:
• Reform of inspection must start simultaneously with implementation of internal audit
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Agenda item: a short presentation and open discussion on the “Role of financial inspection (its legal and organizational framework, functions, roles) and relation with internal audit".
13th Plenary meeting in Ohrid, Macedonia, 25-29 October 2011
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Conclusions of Ohrid meeting :The function of Financial Inspection must effectively complement introduction of Internal Audit.
Investigative activities of Financial Inspection will enable Internal Audit to focus on study of organization’s operational processes and systems in order to suggest improvements in its management.
Internal Audit and Financial Inspection must cooperate together by offering meaningful information within their competence.
Competences of Financial Inspection and Internal Audit must be clearly delimited.
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Agenda item: principles and differences in functions of Supreme Audit Institution, Financial Inspection and Internal Audit Unit?
17th Plenary meeting in Budapest, Hungary, 15-16 June 2012
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Conclusions of Budapest meeting:A centralized Financial Inspection functioning in a government system is a necessary instrument to identify important violations and fraud.
In this regard, it is necessary to distribute competences and responsibilities between Internal Audit, Financial Inspection and External Audit in order to ensure efficient development of public financial control.
Set up a working group to elaborate on relations and distribute competences and responsibilities between Internal Audit, Financial Inspection and External Audit.
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Informing IACoP members about a newly created Working Group on relations between Internal Audit, Financial Inspection and External Audit (or RIFIX).
23rd Plenary meeting in Tbilisi, Georgia, 22-24 April 2013
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-Meeting members of the Working Group; membership was determined based on earlier selection process.
-Definition of goals and objectives of the Working Group
START OF ACTIVITIES!!!
25th meeting of CoP 1st meeting of RIFIX Working Group, St.-Petersburg,
Russia, September 2013
Goals and objectives of the Working Group: (1)
• to offer a “Correct model” of how to distribute role and place of IA, FI and EA in public administration;
• to define ways of cooperation between IA, FI and EA:
- coordinate planning – minimize duplications; - mutual use of audit results; - lines of responsibility; - CHU within the system of interaction between IA, FI and EA
• to offer an adequate Modernization Strategy of Inspection in the context of PIFC system implementation :
- function of inspection within PIFC system (area of responsibility, competences and tasks); - focus on identification of financial fraud and abuse;
- interact with EU Anti-Fraud Committee (OLAF)
Goals and objectives of the Working Group: (2)
ELABORATED DOCUMENTS:
• Concept of sharing roles and tasks between IA, FI and EA;
• Memorandum (model) of interaction between IA, FI and EA;
• Inspection reform strategy in the context of PIFC implementation;
REQUIRED EXPERIENCE AND KNOWLEDGE!!!
Expected results
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Meeting in St.-Petersburg, Russia, September 2013- Survey results on current interaction between IA, EA and FI in all countries members of
the Working Group summarized;- International theoretical principles of interaction studied.
Achievements:
Meeting in Moscow, Russia, May 2014- Definition of common fundamental terms and concepts used by the group;- Elaboration of RIFIX Conceptual Note;
Meeting in Astana, Kazakhstan, September 2014- Update and finalization of the RIFIX Conceptual Note;- Discussion of the whole transition process from inspection to internal audit
Terminology
Developing a common understanding of what we mean
when we say something
Why clarity?• We are challenged by the problems of language, notions and
options• Language problems:
– Audit or control?– Accountability or responsibility?
• Notions– Financial control – a process or a person?– What do such key terms as assurance and risk assessment
mean?– Meaning and application of PIFC and FMC
• Options– Different forms of Supreme Audit Institutions (SAI)?– Different characteristics of ex ante and ex post financial control?
Some conclusions of the Survey
St.-Petersburg 2013
Moscow 2014
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SAI and IA
SAI and FI IA and FI
Armenia
Insufficient, improvement
required Rather bad
Insufficient, improvement
required
Bosnia & Herzegovina Sufficient and clear
Insufficient, improvement
required
Insufficient, improvement
required
Bulgaria
Insufficient, improvement
required
Insufficient, improvement
required
Недостаточно, требует
улучшения
Croatia Sufficient and clear Sufficient and clear
Недостаточно, требует
улучшения
Hungary
Insufficient, improvement
required
Insufficient, improvement
required
Insufficient, improvement
required
Kazakhstan Sufficient and clear Sufficient and clearSufficient and
clearRepublic of Kyrgyzstan
Insufficient, needs improvement _
Macedonia (FYR) Sufficient and clear Sufficient and clear
Sufficient and clear
Moldova
Insufficient, improvement
required
Insufficient, improvement
required
Insufficient, improvement
required
Montenegro
Insufficient, improvement
required
Insufficient, improvement
requiredSufficient and
clear
Romania Sufficient and clear Sufficient and clearSufficient and
clear
Russian Federation Sufficient and clear
Insufficient, improvement
requiredSufficient and
clear
6/12 4/11 5/11
Extent of cooperation between regulatory institutions В20. How do you assess cooperation in your country between …ВВ. 21-23. How is cooperation organized between the following institutions …
Most common types of cooperation :1.SAI and IA: exchange of reports and information (75%), coordination of plans, membership in commissions/councils and systemic use of reports/results (50%).2.IA and FI: (no FI in Kyrgyzstan) exchange of reports and information (9/11), coordination of plans and systemic use of reports/results (5/11), membership in commissions/councils (4/11).3.IA and FI: (no FI in Kyrgyzstan) exchange of reports and information (5/11), coordination of plans, membership in commissions/councils and systemic use of reports/results (4/11).
Sufficient and clear Insufficiently clear, improvement requiredRather bad
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Exchange of control results
Planning Joint
control activities
Systematic use of each other’s
results
ARM x x x x
B&H x x x
BLG x x x
CRO x x
HUN x x x
KAZ x x x
KYR
MAC x x x x
MLD x
MON x x x
ROM x x x
RUS x x x x
10 9 5 9
• Note: “other” areas referred to training.
• Respondents were least of all interested in “joint control activities”.
• Problems of interaction between IA, EA and FI :
1. Competition for prestige (7/12);
2. Inadequate procedures (5/12); and
3. Mentality (4/12).
Further cooperation will add valueВ. 29. Please indicate the areas where you think cooperation may be useful?
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Next steps:
- Elaborate a memorandum (agreement) on interaction between Internal Audit, External Audit and Financial Inspection
- Elaborate a transition strategy from Financial Inspection to Internal Audit???
- best practice of change management – how to manage the change towards IA