The Saeima1 has adopted and
the President has proclaimed the following law:
Internal Audit
Law
Chapter I
General Provisions
Section 1. Terms Used in the Law
The following terms are used in the Law:
1) cost efficiency of resources - the level to which
functions of a ministry or institution reach the preferable
result in comparison to the costs of the resources invested;
2) economic efficiency - the ratio of the quality and
quantity of anticipated or achieved results of activities in
relation to the resources invested and activities;
3) functional efficiency - the conformity of the
anticipated or achieved results of activities and of the selected
alternatives with specific objectives;
4) institution - an authority directly subordinate to
the Prime Minister, an authority subordinate to a minister,
except for the ministry;
5) internal control system - an aggregate of risk
management, control, and administrative measures the task of
which is to ensure achieving of objectives, efficient operation,
active protection, credibility of reports, conformity of
operation of a ministry or an institution with legal acts and the
establishment of which is the responsibility of the State
secretary of the ministry or the head of the institution
accordingly;
6) internal audit - independent and objective activity
of an internal auditor which results in the provision of an
assessment of the operation of the internal control system in
order to improve the operation of the internal control system in
the ministry and institution;
7) consultation - a service of providing advices the
objective of which is to improve the internal control system and
the essence and extent of which is determined by the State
secretary of the ministry, the head (executive body) of the
institution or a unit of the ministry or institution.
Section 2. Purpose of the Law
The purpose of the Law is to ensure an independent and
objective assessment of the internal control system in order to
improve the operation of such system in the State
administration.
Section 3. Application of the
Law
(1) The Law shall apply to ministries and institutions. The
Law determines the legal framework for the establishment,
operation, and co-ordination of the internal audit system in the
ministry and institution, also the duties, rights of internal
auditors, and conditions for the conformity with the principles
of independence and objectivity.
(2) The internal audit system of a derived public entity, the
work organisation of internal audit, and the procedures for
performing an internal audit shall be determined by its
decision-making body. In order to ensure more efficient
performance of the internal audit function, the decision-making
body of the derived public entity, if necessary, may enter into a
co-operation contract with the ministry of the relevant sector
regarding inclusion of such person in the internal audit system
of the ministry.
(3) The provisions of Section 13 of this Law regarding the
rights of an internal auditor shall also apply to such derived
public entities and private individuals who have received
resources from programmes and projects funded by the European
Union or foreign financial assistance funding, or resources from
the State budget accordingly.
(4) This Law shall apply to the control of use of resources
(funds granted) of international organisations if it is provided
for in the relevant international agreements.
(5) If one internal auditor implements the internal audit
function in the ministry or institution, he or she shall be
subject to the same provisions of this Law which are laid down
for an internal audit unit.
Section 4. Establishment of an
Internal Control System
The establishment of an internal control system, the
supervision and improvement thereof shall be ensured by the State
secretary of the ministry or the head of the institution in
accordance with the State Administration Structure Law.
Chapter
II
Establishment, Operation of the Internal Audit System and
Co-ordination of the Internal Audit
Section 5. Establishment of the
Internal Audit System
(1) The Prime Minister shall determine the internal audit
system for the authorities directly subordinate thereto.
(2) A minister shall determine the internal audit system for
the authorities subordinate thereto. The decision on the need for
the establishment of the internal audit system for a State
security institution shall be taken by the minister under whose
supervision the respective State security institution is.
(3) The State secretary of the ministry or the head of the
institution shall be responsible for the establishment of the
internal audit unit.
(4) The internal audit unit shall be directly subordinate to
the State secretary of the ministry or the head of the
institution (decision-making body).
(5) The internal audit unit shall be established in the
authorities and ministries directly subordinate to the Prime
Minister.
(6) The need for the establishment of the internal audit unit
in the authorities subordinate to a minister, except for a
ministry, shall be co-ordinated by the minister of the relevant
sector with the Minister for Finance, evaluating the following
criteria:
1) the extent and social significance of the functions
stipulated for the authority;
2) the participation of the authority in the implementation of
the financial assistance of the European Union or international
organisations or foreign financial assistance;
3) the amount of the funds from the State budget allocated to
or transferred under management of the authority and the amount
of material values;
4) the impact of the risks related to the operation of the
authority on the State budget losses;
5) the structure of the authority.
Section 6. Duties of the Official
Responsible for the Establishment of the Internal Audit Unit
(1) The State secretary of the ministry or the head of the
institution (decision-making body) shall:
1) be responsible for the operation of the relevant internal
audit system;
2) determine the procedures for work organisation of the
internal audit and supervision of introduction of the internal
audit recommendations in the relevant ministry or
institution;
3) approve the strategic plan and annual plan of the internal
audit unit;
4) take the decision to introduce the recommendations included
in the internal audit report;
5) submit to the Ministry of Finance the information and
documents necessary for the assessment of the operation of the
internal audit unit;
6) inform the Ministry of Finance of the appointment to or
release from the office of the head of the internal audit unit
within two weeks;
7) send information to the law enforcement authorities on the
facts established during the performance of the internal audit
regarding which justified doubts have arisen that they are
related to illegal activities;
8) send information to the State Chancellery for evaluation on
the facts established during the performance of the internal
audit which affect the operation of State administration in
general.
(2) The State secretary of the ministry and the head of the
institution directly subordinate to the Prime Minister shall:
1) ensure accordingly that the internal audit unit plans as
well as annual activity reports of the ministry and authorities
subordinate to the minister or of the authorities directly
subordinate to the Prime Minister are submitted in a timely
manner to the Ministry of Finance and the State Audit Office;
2) within two weeks after the establishment of the internal
audit system and changes in the internal audit system, inform the
Ministry of Finance thereof.
Section 7. Tasks of the Internal
Audit Unit
(1) The internal audit unit shall:
1) draw up and submit an internal audit strategic plan and
annual plan to the State secretary of the ministry or the head of
the institution (decision-making body) for approval;
2) perform planned internal audits based on the risk
assessment, providing an assessment of:
a) the conformity of the operation of the internal control to
the objectives of the ministry or institution;
b) the reliability and adequacy of financial accounting and
other information of the ministry or institution;
c) the conformity of the activities of the units of the
ministry or institution with laws and regulations, stipulated
functions, and approved action plans;
d) the cost efficiency of operational resources of the
ministry or institution, economic efficiency, and functional
efficiency, protection of resources against losses;
3) provide recommendations to the State secretary of the
ministry or the head of the institution (decision-making body)
regarding the necessary improvements to the internal control
system;
4) supervise the implementation of the internal audit
recommendations approved by the State secretary of the ministry
or the head of the institution (decision-making body);
5) provide consultations in order to promote the achievement
of the objectives of the ministry or institution;
6) submit an annual report on operation of the internal audit
unit to the State secretary of the ministry or the head of the
institution (decision-making body) which, according to the
stipulated amount of work, includes an opinion on the internal
control system of the ministry or institution;
7) co-ordinate the co-operation and exchange of information
between internal and external auditors;
8) determine the training needs of internal auditors;
9) ensure the supervision of the implementation and quality of
the work related to the internal audit in all stages of internal
audit. If the tasks stipulated for the internal audit unit of the
ministry or institution are performed by one internal auditor, a
permanent supervision of the implementation and quality of the
work related to the internal audit in all stages of internal
audit may be ensured by an internal audit unit of another
ministry or institution accordingly;
10) ensure the supervision of implementation of the
recommendations of audits of the State Audit Office and external
auditors in the ministry or institution.
(2) The head of the internal audit unit shall determine the
methodology for the performance of the internal audit of such
unit and drawing up of work documents.
Section 8. Competence of the Cabinet
in the Field of Internal Audit
The Cabinet shall:
1) determine the procedures for work organisation of internal
audit and performance of internal audit as well as the cases when
the authority determined by the Cabinet has the right to perform
the internal audit in the ministry or institution in relation to
the management of the European Union Structural Funds and
Cohesion Fund, the European Economic Area Financial Mechanism,
the Norwegian Financial Mechanism, and the Latvian-Swiss
Co-operation Programme;
2) upon proposal of the Minister for Finance, until 1 November
of the current year determine joint priorities to be audited in
the State administration until the next calendar year;
3) determine the procedures for certification of internal
auditors, keeping in effect and cancellation of a certificate of
an internal auditor. The decision to grant or to refuse to grant
a certificate of an internal auditor of the State administration
shall be taken within 12 months from the day when a submission
was received;
4) determine the basic principles and content of the
assessment of operation of internal audit units as well as the
procedures for assessment of operation of internal audit
units.
Section 9. Independence of the
Internal Audit Unit
The internal audit unit shall be independent from other units
of the ministry or institution in the performance of its
tasks.
Section 10. Co-ordination of the
Internal Audit
(1) The Ministry of Finance shall draw up an internal audit
policy the objective of which is to provide assurance of the
operation of the internal control system in ministries and
institutions. The Ministry of Finance shall be responsible for
the co-ordination of internal audit and the unified planning of
long-term development of the internal audit.
(2) When performing the co-ordination of internal audits, the
Ministry of Finance shall have the following tasks:
1) to prepare and submit to the Cabinet and the State Audit
Office the compiled annual report on the activities of internal
audit units in ministries and institutions. The report shall
include the opinion of ministries and institutions on the
internal control system in ministries and institutions;
2) to co-ordinate the training and improvement of professional
qualification of internal auditors;
3) to provide ministries and institutions with consultations
in the field of internal audit;
4) to assess the operation of internal audit units established
in ministries and institutions at least once every five years.
Employees of the Ministry of Finance have the right, in the
relevant ministry or institution, to become acquainted with the
information and documents necessary for the assessment of the
operation of internal audit units;
5) to supervise the certification system of internal
auditors;
6) to draw up the methodology guidelines of internal
audit.
Chapter
III
Internal Auditor
Section 11. Appointing to Office
(Hiring) and Dismissal from Office (Firing) of the Internal
Auditor
(1) The State secretary of the ministry or the head of the
institution shall appoint to the office and dismiss from the
office and hire and dismiss the internal auditor on the basis of
the State Civil Service Law, this Law, and other laws and
regulations.
(2) A person who conforms to the mandatory requirements set
forward for the applicant for the office of a civil servant may
enter into State civil service or employment relationship in
order to fulfil the duties of the internal auditor.
(3) The duties of the head of the internal audit unit may be
fulfilled only by such a person who has acquired the certificate
of an internal auditor of State administration in accordance with
the procedures laid down in the laws and regulations governing
the field of certification of internal auditors or a certificate
confirming the professionalism of the internal auditor which is
recognised by the association Institute of Internal Auditors.
(4) State civil service or employment relationship with the
internal auditor shall be terminated:
1) in the cases laid down in the State Civil Service Law or
the Labour Law;
2) for negligent performance of official duties or for a
violation of the principles of ethics which is inconsistent with
the requirements of the office of the internal auditor.
Section 12. Duties of the Internal
Auditor
(1) The internal auditor has a duty to perfect his or her
knowledge and improve professional skills on a regular basis. The
head of the internal audit unit and the State secretary of the
ministry or the head of the institution shall promote the
improvement of the qualification of the internal auditor.
(2) When fulfilling official duties, the internal auditor
shall be liable for the lawfulness of his or her actions or
failure to act. If the internal auditor has doubts regarding the
lawfulness of tasks, he or she has the obligation to refuse the
performance of such task, notifying in writing the official who
has assigned the task as well as the next highest official
respectively.
(3) The internal auditor shall comply with the following
principles of ethics of the internal auditor in his or her
activities:
1) fairness. The internal auditor shall perform his or her
work fairly, with due care and responsibility, comply with the
internal principles of ethics of the ministry or institution,
shall not engage in the activities which discredit the profession
of the internal auditor or the internal audit, respect the
ethical objectives of the ministry or institution and promote the
achievement thereof;
2) objectivity. During an audit, the internal auditor shall
evaluate all circumstances and evidence, without being influenced
by his or her own interests or interests of other persons, and
disclose all the significant facts about the system inspected in
the internal audit report;
3) confidentiality. The internal auditor shall not use the
information acquired during the fulfilment of his or her duties
in such manner that would harm the objectives of the ministry or
institution. The internal auditor shall disclose the information
acquired during an internal audit to the third person only with
the permission of the State secretary of the ministry or the head
of the institution (decision-making body);
4) competence. When fulfilling his or her duties, the internal
auditor shall use the knowledge, skills, and experience.
Section 13. Rights of the Internal
Auditor
The internal auditor has the right to become acquainted with
the documents at the disposal of the relevant ministry or
institution, financial resources, premises, and other material
values as well as to receive copies of documents and explanations
from employees in the issues related to the internal audit.
Section 14. Restrictions in the Work
of the Internal Auditor
(1) The internal auditor shall not engage in the performance
of the direct functions of the ministry or institution, the
implementation of the programmes and projects completely or
partly financed by the European Union or the foreign financial
assistance, the drawing up of individual projects or programmes,
as well as in the establishment of the internal control system.
The internal auditor may participate in the performance of such
functions in the capacity of an advisor.
(2) The internal auditor may not, for at least one year, audit
such functions which he or she has previously performed in the
ministry or institution.
(3) The internal auditor shall notify the head of the internal
audit unit in writing, but the head of the internal audit unit
shall notify the State secretary of the ministry or the head of
the institution (decision-making body) of any situation where
there is or may be a conflict of interest.
Chapter
IV
Internal Audit Council
Section 15. Establishment of the
Internal Audit Council
(1) The Internal Audit Council shall operate in accordance
with the by-law approved by the Cabinet.
(2) The Minister for Finance shall approve the staff of the
Internal Audit Council.
Section 16. Objective of the
Internal Audit Council
The objective of the Internal Audit Council shall be to
promote the improvement of the quality of internal audit as well
as the introduction and development of the internal audit policy
and methodology in ministries and institutions.
Transitional
Provisions
1. With the coming into force of this Law, the Internal Audit
Law (Latvijas Vēstnesis, 2010, No. 34) is repealed.
2. The Cabinet shall, by 1 June 2013, issue the legal acts
laid down in this Law on the internal audit.
3. Until the coming into force of the relevant Cabinet
regulations, but not later than until 1 June 2013, the following
Cabinet regulations shall be in force, insofar as they are not in
contradiction with this Law:
1) Cabinet Regulation No. 760 of 10 August 2010, Procedures
for the Performance of Comparative Checks of the Work of Internal
Audit Units;
2) Cabinet Regulation No. 918 of 28 September 2010, Procedures
for the Performance of Internal Audit;
3) Cabinet Regulation No. 1128 of 14 December 2010, Procedures
for the Certification of Internal Auditors.
4. Section 11, Paragraph three of this Law shall come into
force on 30 January 2014.
This Law has been adopted by the Saeima on 13 December
2012.
President A. Bērziņš
Rīga, 28 December 2012
1The Parliament of the Republic of
Latvia
Translation © 2024 Valsts valodas centrs (State
Language Centre)
