Republic of the Whilippines COMMISSION ON AUDIT Commonwealth Avenve, Queson City, Philippines RESOLUTION No. 2020-012 Date : N31 2h SUBJECT: Adoption of the revised Internal Audit Charter of the Commission on Audit WHEREAS, Republic Act (RA) No. 3456 (Internal Auditing Act of 1962) as amended by RA No. 4177, and Administrative Order Nos. 278, s. 1992 and 70, s. 2003, mandated the creation, organization, and operation of internal Audit Service in all government institutions which shall assist management to achieve efficient and effective fiscal administration and performance of agency affairs and function; WHEREAS, Commission on Audit (COA) Resolution No. 2008-012 dated October 10, 2008 adopted and implemented the 2008 COA Organization Restructuring wherein the Internal Audit Office (IAO) was created; WHEREAS, COA Resolution No. 2018-002 dated February 1, 2018 adopted and implemented the Internal Audit Charter of the Commission; WHEREAS, COA Resolution No. 2018-007 dated February 1, 2018 and COA Circular No. 2018-003 dated November 21, 2018 approved and adopted the Internal Auditing Standards for the Philippine Public Sector (ASPPS); WHEREAS, there is a need to revise and update the Internal Audit Charter of this Commission to align the purpose, authority and responsibility of the AO with the IASPPS; NOW, THEREFORE, premises considered, the Commission Proper RESOLVES, as it does hereby resolve, to adopt the revised Internal Audit Charter of this Commission. This Resolution takes effect upon its approval. Done this ist day of nN PARTICIPATED JOSE A. FABIA ROLAND C, PONDOC Commissioner CommissionerA. REPUBLIC OF THE PHILIPPINES COMMISSION ON AUDIT Commonwealth Avenue, Quezon City, Philippines INTERNAL AUDIT CHARTER Introduction 1 ‘The Commission on Audit (COA), the Supreme Audit Institution (SAI) of the Philippines, is committed to carry out its constitutional mandate with the highest degree of professionalism, competence, integrity, teamwork, and organizational efficiency and promote the people’s trust in the government by upholding public accountability. The Commission is a member of the International Organization of Supreme Audit Institution (INTOSAI), the umbrella organization of SAls which develops guidance in establishing and maintaining effective internal control in the public sector. The Internal Auditing Act of 1962 [Republic Act (RA) No. 3456], as amended by RA No. 4177 provided for the creation of the internal auditing services in all government agencies. Further, Administrative Order Nos. 278 s. 1992 and 70 s. 2003 called for the strengthening of the internal contral systems in all government agencies through the creation of the Internal Audit Service. Pursuant to the foregoing laws, COA Resolution No. 2008-012 dated October 10, 2008 approved the creation of the Internal Audit Office of the Commission on Audit. With the approval and adoption of the Internal Auditing Standards for the Philippine Public Sector (IASPPS) under COA Resolution No. 2018-007 dated February 01, 2018 and issuance of COA Circular No. 2018-003 dated November 21, 2018 prescribing the use of the IASPPS, IAO deemed it appropriate to revise the Internal Audit Charter (IAC)' to conform with the requirements of the standards. This IAC defines the purpose, authority and responsibility of [AO and is intended to serve as a guide to all the key players in the overall governance process in COA. |AO's activities shall be governed by: the definition of internal auditing: the IASPPS; the 10 core principles; and the Code of Ethics embodied in the Code of Conduct and Ethical Standards for Public Officials and Employees (RA 6713), Revised Code of Conduct and Ethical Standards for Commission on Audit Officials and Employees, and the Code of Ethics of the Institute of Internal Auditors? In case of conflict in the ethical standards to be observed, RA No. 6713 prevails. COA Resolution No. 2018-002 dated February 01, 2018 approved the adoption of the internal Aucit Charter of the Commission on Audit. Philippine internal Auditing Framework for Public Sector. COA Resolution No. 2016-016. September 30, 2016.Arnax A, P6. Vision An intemal audit office that promotes transparency and accountability, and provides excellent value-added services in the operations of the Commission. 7 Mission To provide independent, objective assurance and advisory services designed to promote transparency, accountability, effectiveness and efficiency of the Commission's operations through value-adding audit recommendations. B. Purpose 8. The purpose of the IAQ is to assist COA’s top management to achieve an efficient and effective fiscal administration and performance/ Operations. It shall provide independent, objective assurance and advisory services designed to add value and offer new insights to contribute to the improvement of COA's governance, risk management, and control processes using a systematic, disciplined, and risk-based approach towards the achievement of its goals.> C. Authority/Powers 9. The IAO, to effectively carry out its function, is authorized to: 9.1 have full, free, and unrestricted access to all offices, records, property, and personnel pertinent to carrying out any engagement. subject to accountability for confidentiality and safeguarding of tecords and information; and 9.2 obtain cooperation and the necessary assistance from personnel of the Sectors/Central and Regional Offices/Units, as well as other specialized services of external service providers in order to complete the engagement. 10. The Director, to effectively manage IAO, is authorized to. 10.1 have direct and unrestricted access to the Commission Proper (CP) and Assistant Commissioners’ (AsComs'’) Group to discuss sensitive matters, issues facing IAO, sufficiency of organizational status, or authority to perform duties without impedimer * Ibid. Annex Ai and Internal Auditing Standards for the Philippine Public Sector (IASPPS) with Philippine Application Guidelines. Page v SA aS SS +10.2 coordinate with the Office of the Commission Secretariat for the IAO to be present in CP meetings on matters relevant to the effective management of IAO; and 10.3 allocate resources, set frequencies, select subjects, determine scopes of work, apply the techniques required to accomplish audit objectives, and issue reports. D. Organization and Reporting Structure 11. The Director of |AO reports functionally to the CP and administratively to the Chairperson. To establish, maintain and assure that [AO has sufficient authority to fulfill its duties, the CP shall 11.1. approve the IAO's Charter, 11.2 approve the risk-based internal audit plan; 11.3. approve the IAO’s budget and resource plan; 11.4 receive communications from the Director of !AO on the IAO's performance relative to its plan and other matters; 11.5 approve decisions regarding the appointment and replacement or reshuffling of the Director of IAO; and 11.6 make appropriate inquiries of management and the Director of AO to determine whether there are inappropriate scope or resource limitations. E. Independence and Objectivity 12. 13. 14, {AO shall have freedom from conditions that threatens its ability to carry out internal audit responsibilities including matters of audit area/process selection, scope, procedures, frequency, timing, and content of the report, Internal auditors shall: 13.4 maintain an impartial, unbiased mental attitude and avoid any conflict of interest to remain objective; 13.2. exhibit the highest level of professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined; 13.3 make a balanced assessment of all the relevant circumstances and not be unduly influenced by their own interests or by others in forming judgments; and 13.4 disclose any potential impairments to independence or objectivity. 1AO shall be independent in performing the engagement in all matters and internal auditors must not assume management responsibility on all of its engagements and will not participate in the following activities: 14.4 implementation of internal controls; af14.2 development of procedures, but the [AO may be consulted on the adequacy of related controls; 14.3. installation of systems/programs; 14.4 preparation of records for management; and 14.5 operations for which they had responsibility within the previous year. 15. 1AO may participate as members of committees, teams, etc. provided such participation does not compromise or appear to compromise the independence of 1AO or its staff. When the Director of IAO has or is expected to have roles/responsibilities outside internal auditing, safeguards will be applied to maintain independence and objectivity. 16. Further, in the event the Director of IAO determines that independence or objectivity may be impaired in fact or appearance, the details of impairment shall be disclosed to appropriate parties. F. Scope of Work 17. The scope of internal audit encompasses, but not limited to, objective examination of evidence (e.g. financial, performance, operational and compliance assurance services) for the purpose of providing independent assessment to obtain reasonable assurance on the adequacy and effectiveness of governance, risk management and control processes of the COA. 18. Internal audit assessments include evaluating whether: 18.1 risks relating to the achievement of COA’s strategic objectives are appropriately identified and managed; 18.2 actions of COA officials, employees, and supplier of services and goods are in compliance with COA’s policies, procedures, and applicable laws, regulations, and governance standards; 18.3 the results of operations or programs are consistent with established goals and objectives; 18.4 operations or programs are being carried out effectively and efficiently; 18.5 established processes and systems enable compliance with the policies, procedures, laws, and regulations that could simply impact COA; 18.6 information and the tools used to identify, measure, analyze, classify, and report such information are reliable and have integrity; and 18.7 resources and assets are acquired economically, used efficiently, and protected adequately 19. IAO may perform advisory and related service, the nature and scope of which will be agreed with the auditee, provided the IAO does not assume ete, Se eemanagement responsibilities. Examples of these activities are the following: conduct of training: provide recommendations and advice; participation in ad-hoc meetings; assistance in risk management activities; other projects and reviews requested by the AsComs’ Group, Commissioners or the Chairperson 20. Opportunities for improvement of the efficiency of the COA’s governance, risk management, and control processes may be identified during the engagements and these will be communicated to appropriate level of management. G. Responsibilities 21. The Director of IAO shall have the responsibility to: 214 21.2 21.3 214 21.5 21.6 21.9 21.10 21.11 21.12 prepare the three-year strategic plan aligned with COA’s strategic plan; develop and implement an Annual Internal Audit Plan (AIAP) based on the prioritization of the audit universe using a risk-based methodology, including inputs from the Chairperson, Commissioners, and Assistant Commissioners, subject to review and approval of the CP; review and make necessary adjustments in the AIAP in response to changes in risks, operations, programs, systems, and controls; report to the CP any significant adjustments to the AIAP and the impact of resource limitation; establish and maintain a system to monitor and follow-up the implementation of recommendations or agreed upon corrective actions on audit findings; establish and ensure adherence to policies and procedures to guide the intemal auditor promote or maintain quality of internal audit performance; manage any threats to independence and objectivity at the individual auditor, engagement, functional, and organizational levels; ensure that IAO collectively possesses or obtains the knowledge, skills, and other competencies needed to meet the requirements of the IAC; ensure that internal auditors exercise due professional care in the conduct of audit engagement; coordinate activities and consider relying upon the work of the COA Resident Auditors in the Central and Regional Offices and other internal assurance, such as the Quality Assurance Office and advisory service providers (e.g. Consultants, etc.) to avoid duplication of effort; adhere or maintain proper regard to the IAC; and ¢21.13 confer with the AsComs' Group or the Commission Secretariat regarding the preferred format as well as the effective and efficient submission of proposed revisions in the IAC for approval of the cP, 22. The Director of IAO is accountable to the CP for the efficient and effective operation of the intemal audit function. The results of the operations should be consistent with the established objectives and goals stated in the AIAP. H. Reporting 23. The Director of |AO communicates periodically to the CP regarding the: 23.1. IAO’s purpose, authority, and responsibilty; 23.2 IAO's plan, significant changes, and performance relative to its plan; 23.3 IAO's organizational independence; 23.4 IAO’s conformance with applicable code of ethics and standards, and action plans to address any significant conformance issues; 23.5 _ significant risk exposures and control issues, including fraud risks, governance issues, and other matters requiring the attention of or Tequested by the Chairperson and other members of the CP; 23.6 results of audit engagements or other activities (reports after completion of audit), which may include management response or corrective action to the specific findings and recommendations as well as a timetable for anticipated completion of action to be taken; 23.7 any response to risk by management that may be unacceptable to the Commission; and 23.8 resource requirements and the impact of resource limitations. |. Quality Assurance and Improvement Program 24. IAO maintains a Quality Assurance and Improvement Program (QAIP) that covers all aspects of the IAO. The QAP will include an evaluation of the IAO’s conformance with the Standards and an evaluation of whether internal auditors apply the Revised Code of Conduct and Ethical Standards for Commission on Audit Officials and Employees, RA No. 6713 — Code of Conduct and Ethical Standards for Public Officials and Employees, and the Code of Ethics of the Institute of Internal Auditors. The program will also assess the efficiency and effectiveness of [AO and identify opportunities for improvement. 25. The Director of IAO will communicate to the CP, at least annually, the QAIP, including the results of on-going and periodic internal assessments, and the external assessment conducted at least once every five years by a qualified, independent assessment team outside COA. Ee a erJ. Review of the Charter 26. This Charter shall be subject to review, at least annually or as may be deemed necessary, to ensure adequacy of the IAO's purpose, authority and responsibility and compliance with the |ASPPS. Any substantive revisions or amendments shall be formally approved by the CP.