Review of Internal Audit

Background

The operation of an effective internal audit function is a key part of the system of internal control of an organisation. It provides management with assurance about the design and operation of control, risk management and governance processes.

The Public Finances (Jersey) Law 2005 establishes the office of Chief Internal Auditor. The Law requires the Chief Internal Auditor to undertake a programme of work to provide assurance that the finances of the States are regulated, controlled and supervised in accordance with legislation.

Internal Audit is undertaken, under the supervision of the Chief Internal Auditor, partly by an in-house team and partly by a professional accountancy firm under the direction and control of the Chief Internal Auditor. 

In 2012, public sector internal audit standard setters in the United Kingdom, issued Public Sector Internal Audit Standards (PSIAS) for adoption from 1 April 2013. The States of Jersey voluntarily adopted the Standards from 1 January 2013 and reported compliance with the Standards in the annual Internal Audit report issued in January 2014.

Scope

This review assesses:

• the framework for internal audit within the States; and
• the internal audit work of both the in-house team and the external provider 

against:

• the requirements of Public Sector Internal Audit Standards; and
• the requirements of legislation.

Conclusions

There are gaps in the arrangements for internal audit compared to best practice in the UK. The Chief Internal Auditor has begun to address these gaps. However, there is a need for a comprehensive review of current arrangements against relevant standards. A detailed action plan should be agreed with stakeholders to ensure that appropriate changes are implemented and embedded in the work of Internal Audit going forward