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PUBLIC FINANCES

Internal Audits at Local Governments. Audit Experiences of the State Audit Office of Hungary

Tamás Sepsey
Director of Audit, State Audit Office of Hungary
Published in: Public Finance Quarterly 2011/4 (p. 411-428.)


SUMMARY: Internal audit applied by local government does not fulfil its functions and in reality does not contribute to the proper, regulated, economical, efficient and effective management of local governments. In the majority of local governments internal audit has a systemic attitude, which consistently fails to assess and to develop the effectiveness of the risk management and controlling procedures of local government. This situation partly results from the contradictions between the Act on Local Governments and the Act on Public Finances and partly from the misapplication of internal audit and the misinterpretation of its role. The State Audit Office (SAO), also taking into account international standards, has put particular emphasis on the assessment of the operation of internal audit in local governments for many years. On the basis of the experiences resulting from such audits, well founded proposals can be submitted for reasonable amendments to statutes, with particular regard to the comprehensive reform of the Act on Local Governments.
KEYWORDS: internal audit, local government, audits performed by the State Audit Office, internal control system, performance audit
JOURNAL OF ECONOMIC LITERATURE (JEL) KÓD: R50, M48


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