Para 3.20.11 — MSO (Audit)
Original Rule Text
3.20.11 It should be ascertained whether an internal audit system has been introduced in the entity and, if so, whether the unit responsible is completely independent of the operating unit. The prevalent system of internal audit should also be examined to verify whether it provides for an objective, timely, systematic and professional examination of financial, administrative and other operations subsequent to their execution for the purpose of their evaluation and verification and whether the system is geared to ensure prompt and adequate follow-up corrective action on the internal audit reports.
# Review and evaluation
What This Means
The auditor should check whether the organization has an internal audit unit and, if so, whether it operates independently from the departments it audits. The internal audit system should be evaluated to see if it provides objective, timely, and professional review of financial, administrative, and operational activities after they occur. Importantly, the auditor must also check whether there is a mechanism for prompt corrective action based on internal audit findings.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Verify whether an internal audit system exists in the entity
- 2Check that the internal audit unit is independent of the operating units it audits
- 3Internal audit should cover financial, administrative, and other operations post-execution
- 4There must be a system for prompt follow-up and corrective action on internal audit reports
Practical Example
While auditing a Central Government hospital, the CAG auditor finds that the internal audit wing reports to the same Administrative Officer who handles procurement. This lack of independence means internal audit reports on procurement irregularities are unlikely to result in corrective action, which the CAG auditor flags as a significant control weakness.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why must internal audit be independent of the operating unit?▼
What is the role of CAG audit if internal audit already exists?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.