Audit Committee, Report, 1 December 2003
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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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Language English
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):
1
To receive and consider the report.
2
To note the proposed amendments to the working methods and documentation of the
Internal Audit Section.
Reasons for Recommendations
1
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.
2
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
3
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.
4
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
5
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
6
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
7
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
8
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.
9
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
10
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.
It
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
11
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.
12
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
13
There are no additional financial implications from this report.
Environmental Implications
14
I have completed the Environmental Implications Questionnaire and there are no
significant effects as a result of these recommendations.
Background Papers
15
Charter for Internal Audit approved at the meeting of the Audit Committee on 27 May
2002.
Appendices
16
None.