Audit Committee, Report, 1 December 2003

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English

Audit Committee, Report, 1 December 2003

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Agenda Item No: Report No:Report Title: Changes to the CIPFA Code of Practice for Internal Audit inLocal Government Report To: Audit Committee Date: 1 December 2003Ward(s) Affected: AllReport By: Director of Finance and Community ServicesContact Officer(s): David Heath, Chief Internal AuditorPurpose of Report:To present to Councillors the key changes in the CIPFA Code of Practice forInternal Audit and the ways in which the changes will impact on the Council’sInternal Audit Section. Officers Recommendation(s):1 To receive and consider the report.2 To note the proposed amendments to the working methods and documentation of theInternal Audit Section.Reasons for Recommendations1 At its meeting on 27 May 2002,the Audit Committee approved the Charter for InternalAudit that sets out the purpose, authority and responsibilities for the Internal AuditSection. The Charter commits the Internal Audit Section to operating in accordancewith the CIPFA Code of Practice for Internal Audit in Local Government in the UK.2 The Charter was based on the CIPFA Code of Practice (2000) and the CIPFA AuditPanel has recently issued an updated 2003 version of the Code. The Chief InternalAuditor has reviewed the new Code and is advising the Audit Committee of theoutcome of his review.Information3 The Service Plan for Audit and Best Value Division for April 2003 to March 2004includes as an objective a review of Internal Audit practices to ensure that they complywith the ...

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Extrait

Agenda Item No:

Report No:

Report Title:

Changes to the CIPFA Code of Practice for Internal Audit in

Local Government

Report To:

Audit Committee

Date: 1 December 2003

Ward(s) Affected:

All

Report By:

Director of Finance and Community Services

Contact Officer(s):

David Heath, Chief Internal Auditor

Purpose of Report:

To present to Councillors the key changes in the CIPFA Code of Practice for

Internal Audit and the ways in which the changes will impact on the Council’s

Internal Audit Section.

Officers Recommendation(s):

To receive and consider the report.

To note the proposed amendments to the working methods and documentation of the

Internal Audit Section.

Reasons for Recommendations

At its meeting on 27 May 2002,the Audit Committee approved the Charter for Internal

Audit that sets out the purpose, authority and responsibilities for the Internal Audit

Section.

The Charter commits the Internal Audit Section to operating in accordance

with the CIPFA Code of Practice for Internal Audit in Local Government in the UK.

The Charter was based on the CIPFA Code of Practice (2000) and the CIPFA Audit

Panel has recently issued an updated 2003 version of the Code.

The Chief Internal

Auditor has reviewed the new Code and is advising the Audit Committee of the

outcome of his review.

Information

The Service Plan for Audit and Best Value Division for April 2003 to March 2004

includes as an objective a review of Internal Audit practices to ensure that they comply

with the requirements of the revised CIPFA Code of Practice (2003).

The review has

been completed, and with it an assessment of the changes that need to be made to the

Charter for Internal Audit, the Guide to Internal Audit and the Internal Audit Manual.

In many area of the revised Code (eg Ethics, Due Professional Care, Staffing and

Training, Reporting, Relationships with Management and Others, Management of Audit

Assignments, Quality Assurance) the working practices at Lewes already meet the new

standards, and no further changes will be required.

However, there are some areas of

the new Code that require consideration and these are outlined below.

It is not proposed

to issue revised versions of the internal documents immediately, but to spread the work

over the remainder of this financial year so as not to adversely affect the Annual Plan of

audits for 2003/2004.

Proposed changes to working practices and documentation

Introduction

The introduction to the revised CIPFA Code lists the legislation that establishes the

requirement for Local Authorities to have an adequate and effective system of internal

audit.

The main change is the reference to the Accounts and Audit Regulations 2003

that must now be reflected in the Charter and other internal documents.

Definition of Internal Audit

The revised CIPFA Code recognises that Internal Audit is not only an assurance

function that provides an independent opinion on the control environment, but it may

also undertake other work at the request of the parent organisation subject to the

availability of skills and resources.

This other work can include consultancy on issues

such as risk management, control and corporate governance.

The change in definition

reflects the experiences of the Internal Audit Section at Lewes, and it is proposed that

the revised definition be included in the Charter and other documents.

Scope of Internal Audit

The revised CIPFA Code (Standard 1.2) covers the ways in which an organisation’s risk

management processes, if of sufficient quality, can help to inform the planning of the

audit work to be undertaken.

The Chief Internal Auditor will revise the Internal Audit

planning methodology to reflect the Council’s risk management strategy to enable its

use in compiling the next Strategic Audit Plan in March 2004.

Independence

The Internal Audit function at Lewes fully achieves the main requirements of the

revised CIPFA Code in this area.

In a new development to help ensure that long term

responsibility for the audit of a particular aspect of an organisation does not impair an

auditor’s independence, the Code (Standard 2.4) recommends that audit responsibilities

be rotated within the audit team.

At Lewes, the majority of audits in the Strategic Audit Plan are rotated to ensure the

necessary independence.

However, for certain types of work the Chief Internal Auditor

proposes to maintain the present arrangements by which individual auditors retain

responsibility for the audit of key Council activities (ie computing, contracts, EMAS) so

as to make best use of staff resources and experience in the specialist areas.

Audit Committee

For the first time the CIPFA Code (Standard 3) covers in detail the relationship between

Internal Audit and an Authority’s Audit Committee or equivalent.

At Lewes, the links

between the Audit Committee and the Chief Internal Auditor are largely as

recommended in the Code, particularly in terms of reporting to the Audit Committee.

is proposed that to ensure full compliance with the standard the Chief Internal Auditor’s

Annual Report will also cover the arrangements for the co-operation between Internal

Audit, External Audit and other review bodies.

Audit Strategy

The revised CIPFA Code (Standard 6) outlines the requirement for an audit strategy that

is a high level statement of how the Internal Audit Service is delivered and developed.

The strategy can be presented as a document in its own right or integrated into an

existing document, such as a business plan or service plan.

The strategy should be

approved by the Authority.

At Lewes, the main strategic document is the Strategic Audit Plan that is approved by

the Audit Committee.

Some additional strategic issues such as staff development are

covered in the Service Plan for the Audit and Best Value Division.

It is proposed that

the Strategic Audit Plan to be presented in March 2004 will include all the strategic

areas recommended by the revised CIPFA Code, including any audit work on corporate

governance arrangements, risk management and key internal control systems.

Financial Implications

There are no additional financial implications from this report.

Environmental Implications

I have completed the Environmental Implications Questionnaire and there are no

significant effects as a result of these recommendations.

Background Papers

Charter for Internal Audit approved at the meeting of the Audit Committee on 27 May

2002.

Appendices

None.

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