AUDIT STANDARD No. 8 – EVALUATION OF INTERNAL CONTROL AND INTERNAL AUDIT
The Audit standard No. 8 regulates the nature, objectives, scope and evaluation criteria of the internal control and internal audit.
1. Definition of the evaluation of the internal control and internal audit – expressing independent audit opinion concerning the adequacy and effectiveness of the internal control including the internal audit.
2. Objectives of the evaluation of the internal control and internal audit. The study and evaluation of the adequacy and effectiveness of the internal control and the reliability of the internal audit results of the auditee are carried out in order to:
2.1 evaluate the audit risk;
2.2 determine the audit approach;
2.3 select the nature, duration and scope of the audit procedures.
3. Scope of the evaluation. The scope of the study and evaluation is determined depending on the type and objectives of the audit and the intended adequacy and effectiveness of the internal control and internal audit:
3.1 In the financial audit - study and evaluation are carried out mainly of the control procedures, that support the preserving of the assets and the information and provide the correctness and completeness of the accounting records as well as support the management of the auditee in compliance with the legal framework;
3.2. in the performance audit – study and evaluation are performed mainly of the control procedures that support the auditee’s management in an effective, efficient and economic way and guarantee the observance of the management policies and the preparation on a timely basis of reliable information for the management needs.
4. Evaluation criteria. The evaluation of internal control and internal audit should be carried out at all stages of the audit process according to their specifics on the grounds of the following criteria:
4.1 presence of adequate and effective internal control and functionally independent internal audit unit;
4.2 reporting to the management errors and irregularities found, implementation of the internal audit recommendations and its duly documentation;
4.3 competence and qualification of the internal auditors, including policies and procedures for appointment and training of the personnel and the persons involved in the auditee’s internal control unit;
4.4 the extent of professional concern of the management and the staff for establishing adequate and effective internal control including activities if the conditions and environment in which the auditee is functioning are changed;
4.5 the extent of professional concern of the internal auditors in planning, implementing and recording of the internal audits conducted and in drawing up of suitable programmes, working papers etc.
4.6. whether the activity of the internal audit unit has been performed in compliance with its status and the adopted public sector internal audit standards.
5. The procedures and techniques for evaluation of internal control and internal audit are determined by the National Audit Office.