What is internal Audit?

Just what do auditors do? How do they select their ‘auditee’? Many units/departments don’t give audits a second thought until they are selected for review. Here is some general information about the internal audit function in the Department of Finance and Treasury at the Ministry of Finance and Economic Management, (MFEM).

Who are internal Auditors?

As defined by the Institute of Internal Auditors (IIA), (International Professional Practices Framework)-Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organizations operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Internal Auditors roles include monitoring, assessing and analyzing organizational risk and controls; and reviewing and confirming information and compliance with policies, procedures and laws. Working in partnership with management, internal auditors provide the management, the audit committee and the DG the assurances that risks are mitigated and that the government’s corporate governance is strong and effective. And, when there is room for improvement, internal auditors make recommendations for enhancing processes, policies and procedures.

Where does the Audit function fit in the Organization?

The Internal Audit in Finance has a solid line reporting relationship to the Director General of Finance, and the Audit Committee and is structurally reporting currently to the Director of Finance and Treasury Department.

How is the Unit established and when?

The Internal Audit Unit was established and mandated under the PFEM Act section 70, with a Ministerial Order made by the then Minister of Finance that gave added and clearer emphasis to the Auditing role in the Government/Public Sector back in 2005.

Vision- Our vision is:

General trust in a lawful, responsible and effective use of public resources and delegated responsibilities to the government, its institutions and public servants.

This implies that the citizens, parliament and the executive government of Vanuatu, as well as the international community, should be able to have full confidence that all governmental institutions and public organizations use their resources, decision powers and execution of governmental programmes in a professional and honorable manner. The IAU should actively contribute to safeguard this as one of the most important mechanisms for promoting and strengthening of accountability in the public sector.

Mission- Our mission is to:

    • Provide independent, objective assurance and consulting services designed to add value and improve the government’s operations.
    • Assist the ministries and the audit committee in the effective discharge of their responsibilities by providing analysis, recommendations, counsel and information concerning activities audited.

Our Objectives/Responsibilities:

Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve Ministry of Finance and Economic Management (MFEM) operations. It helps the ministry to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Particularly, IAU have the following objectives;-

  • Ascertaining the level of compliance with established government laws, policies, procedures, and plans including behavioral and ethical expectations;
  • Reviewing and upraising the soundness, adequacy and application of accounting, financial and other controls in place to achieve goals.
  • Ensuring the economical, effective and efficient use of government resources.
  • Ascertaining the effectiveness with which the government assets are accounted for and safeguarded.
  • Conducting special investigations
  • Ensuring the integrity and reliability of financial and operational information produced by the MFEM departments and other line ministries.


Our Values that should influence and guide all our work are:-

  • Professionalism- mastery of the profession(competence, attitude), respect, judgement, objectiveness, eager to learn, find the truth, exchange of information;
  • Honesty and Self sustainability-Ethical base- no one is able to bribe, corrupt or to use menace against our staff.
  • Integrity and Independence-Ability to stand up for IAU’s basic ideas- be true to own professional findings and results.
  • Result Orientation and effectiveness – always focus on the results, value for money, and demonstration of long term endurance.

What’s the difference between external and internal auditors?

External Auditors can be government auditors such as the Office of the Auditor General or independent public accounting firms that can be hired by the government. The Office of the Auditor General reviews the government’s annual financial statements and other government statutory bodies and enterprise to ensure compliance with international accounting standards/International financial reporting standards or other general accounting standards prescribed and obligated by these bodies to ensure the information presented accurately portrays their financial condition. Internal Auditors sometimes look at the same data or perform some of the steps as external auditors. If there is a problem, it’s better to find it and fix it before external auditors review our practices. In addition, Internal Auditors concentrate however on internal controls to ensure the adequacy of such in the government and compliance to laws and regulations.

How are Units selected for Audit?

Due to the huge size of the government, and due to limited resources, all line units/ministries/departments can’t be selected for audit annually. Therefore the Unit performs a risk analysis exercise, (though the standard risk matrix is not tabulated at this stage), it assists the unit to see risk vulnerable areas so that the unit can concentrate on them for the year. In addition, the management of the department of Finance, Education and Health as two major government budget consumers, and the Office of the Auditor General are consulted to identify such areas for review.

What are internal auditors looking for?

Primarily compliance with the financial regulations, the Public Finance and Economic Management Act, other policies and sound internal controls and procedures. The Government’s policies are designed to help ensure we all comply with applicable laws and regulations and operate efficiently. By following these policies we help protect the government from unnecessary risks and help ensure sound practices are consistent throughout the government. Government policies can be found here, however not all internal controls can be codified in policy. If we find control weaknesses, we regularly make recommendations to implement a control even though it may not be specifically required by policy.

What if something isn’t handled correctly?

We will make recommendations for improvement. The recommendations are realistic because we want you or the authorities responsible to implement them. It is the responsibility of the management to weigh possible additional costs of implementing our recommendations in terms of benefits to be derived and the relative risks involved.

Can a department request an audit?

Yes! We consider requests for audit work through the Director of Finance and the Director General of Finance, although our ability to perform the audit might be affected by our staffing levels, or the annual Audit work plan. Still, if you are concerned about an area in your department, we will try to make time for a limited examination of the area. An example of the Audit request form is in appendix 1(one) of this document.

How long does an Audit take?

We budget between 200 and 300 hours for a typical audit, depending on the size and complexity of the area. We should normally have one auditor leading the audit, and auditors will sometimes have more than one audit in process at a time so an audit could take from two months to four months to complete.

What if I don’t have the time to deal with Auditors? What if it’s a bad time for an audit?

During the audit opening meeting, we will discuss the audit schedule and try to accommodate time constraints that you may have. Although 200 to 4oo hours look like a lot of time, much of our work is done behind the scenes. Many people operate under the erroneous believe that in doing an audit we will spend lots of time with you and take time away from your other obligations. We may need to meet key personnel on the audit two or three times for maybe an hour at a time over the audit period. We may spend equal amounts of time, and perhaps less, with others in the department, but we will not be monopolizing anyone’s time in the department and much of our work such as planning and report writing, is done in our offices.

Who will receive copies of the Internal Audit report?

We send copies of the audit reports to the management of the departments audited, (auditee) the Director General of the department concern, the Director of Finance and Treasury Department, the Director General of Finance, the Auditor General, the Public Service Commission for disciplinary cases required and the Audit Committee.

Who audits the Internal Audit Unit?

Excellent question! Actually the Office can be reviewed by bench marking or peer review by other internal audit units in the region to ensure compliance to the international standards for the professional practices of internal auditing. Unfortunately, these procedures had to be endorsed by the management before actual rolling out of this exercises. Moreover as a government office, it can be reviewed by the Office of the Auditor General of Vanuatu, similarly to other government departments.

If I call Internal Audit with Information about a possible irregularity, will my identity be kept a secret?

This is a hard question to answer without knowing whether or not the specific circumstance you are reporting will end up in a legal action. Moreover, as a general rule, we do not reveal our sources to the person being investigated. Furthermore; the amendment of the new financial regulation under the “whistle blower policy” section accommodates this area and should cover and provide all the freedom to express oneself when it comes to irregularities occurring in the government etc.

Internal Audit Request Form