In Romania, due to territorial extend of the audited entities, we deal with a great number of isolated departments for internal audit, consisting of 1 to 2 auditors. The international audit standards recommend that the number of internal auditors should cover at least the minimum of activities performed by the departments for internal audit. Related to this matter, the first-class international practice recommends that their number should be of three intrenal auditors at least. The internal auditors of these departments consisting of 1 to 2 individuals encounter particular problems concerning the documentation, standards acquiring or implementation

Ghita Emil

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265 REMARKS ON THE IMPORTANCE AND NECESSITY FOR PUBLIC ENTITIES TO ASSOCIATE IN ORDER TO PERFORM EFFICIENT ACTIVITIES OF INTERNAL AUDIT Ghita Emil Universitatea  „Spiru  Haret”  -  Centrul  Universitar  Craiova,  Facultatea  de  Management  Financiar Contabil, Str. Brazda lui Novac, nr. 4, ghitaemil@yahoo.com, 0744614536  In Romania, due to territorial extend of  the audited entities, we deal with a great number of isolated departments for internal audit, consisting of 1 to 2 auditors. The international audit standards recommend that the number of internal auditors should cover at least the minimum of activities performed by the departments for internal audit. Related to this matter, the first-class international practice recommends that their number should be of three intrenal auditors at least. The internal auditors of these departments consisting of 1 to 2 individuals encounter particular problems concerning the documentation, standards acquiring or implementation.  Key-words: internal and public audit, obligatory procedures of internal audit, risk analysis, realizing the function  of  internal  audit  through  association  (employment  or  office),  chief  employment  or  office  for internal  public  audit, the Ministry of Public Finances the Central Unity  for  Internal  and  Public  Audit Harmonisation (CUIPAH). The analysis of organizing and functioning of compartments for internal audit in public institution  Apart from the subjective issues mentioned above, the internal auditors of these departments face also objective issues on the sense that they are not able to insure the accomplishment of some compulsory proceedings within an audit action, such as: •   activity  of  supervising  the  method  used  for  internal  audit  tasks,  respectively  use  of  all proceedings, assessment of risk analysis, test examination during the on-site intervention, quality  of  remarks  and  recommendations,  of  internal  audit  reports,  supervision  of recommendations implementation; •   ensuring  a  program  for  quality  development  and  improvement  concerning  the  internal auditors’ work.  The situation mentioned above is encountered both in local and public establishments which are chief credit rulers (city halls) and in other central public institutions (agencies, offices, authorities and others) which are not subordinated or they are not under the coordination or authority of other public organizations, but which make circulate annual budgets of 100,000 to 2,000,000 Euro, consecutively, in 3 - year's time and which,  according  to  the  Law  no.672/2002  on  public  and  internal  audit,  they  are  obliged  to  found departments for internal audit. To analyze this matter, the Central Unity for Internal and Public Audit Harmonization - C.U.I.P.A.H. set forth the assessment report for the current status of internal audit organization in small-sized central and local public entities subordinated to another entity, discussed by the Comitty for Internal and Public Audit - CIPA, in December 2004.  The conclusion of the assessment report was that within the public and local entities, which make circulate an annual budget, the equivalent of 400,000 euro in Romanian currency, it is difficult to make available the position of internal audit by own forces, the reasons being the following: •  reduced amount of allotted funds; 266 •  limited domain for auditing; •  lack of trained personnel; •  management misunderstanding the part that the internal audit plays.   All these objective limits make it necessary to find out some more flexible methods for making available the position of internal audit within these small-sized public entities and to dissolve the departments consisting of 1 to 2 internal auditors, isolated and spread on territory, founding some effective and operational structures. The assessment report analyzed the possibility that the internal audit structures, within the territorial General Directorate of Public Finance, should generally perform the audit in small-sized public institutions, chief credit rulers which make circulate an annual budget of 100,000 euro, taking into account that in this case there are only 67 public entities in the entire country. Meanwhile, the assessment report considered also the possibility of increasing the limit for small-sized public entities from 100,000 to 2.000,000 euro whose regular audit should be performed by the Ministry of Public Finance, as well. In this case, the number of small-sized public entities grows from 67 to 735, meaning that the Ministry of Public Finance can not provide it, not even in the farthest future. All these lead to the conclusion that it is necessary to find out a solution of partnership among these small-sized public entities and  together  may  perform  the  position  of  internal  audit, in  accordance  with  the  International  Standards provisions. To  this  effect,  we  recommend  to  perform  the  position  of  internal  audit  in association, respectively by creating common structures of internal audit providing the position of audit for more entities with compatible activity domains. This method could be used in small-sized public entities, especially those which make circulate an annual budget of 100,001 to 2,000,000 euro, its equivalent in Romanian currency. In  these  cases,  the  association  is  going  to  build  up  on  geographical  criterion,  on  main  means  of communication by joining the entities of the larger villages, cities or towns. Generally, it is recommended that by association to be founded departments of minimum 3 internal auditors in order to provide a complete covering, but it is considered that a structure of 5 to 7 individuals working full-time would be more efficient for the internal audit activity in order to be sorted out on performance criteria. The  executives  of  public  and  local  institutions,  which  wish  to  associate  for  organizing,  operating  and performing the internal audit, will keep in view, at least for the start, the following aspects: •  grouping up the public institutions on size criteria in order to create the associations;  •  setting up the rights and obligations of the associating institutions executives concerning the conception and provision of headquarters, furniture articles, computers etc., for the internal audit departments; •  selection  and  working  frame  for  internal  audit  organizing  structure  with  an  executive personnel in order to comply with the law conditions related to professional training, integrity and required objectivity; •  provision  of  juridical  assistance  on  termination  of  association  contracts,  of  conditions  of executive activity development within the internal audit department; •  effectuation  of  supervision  and  control  proceedings  for  norms  implementations  by  the territorial General Directorate of Public Finance Depending on the amount of activities, as well as on the number of public institutions that form the association, the organizing structure that is under construction -department or office - will include the executive position - departmental manager or head clerk - as well as a suitable number of executives, internal auditors, respecting the legal provisions of the Statute of municipal officers. The internal audit departments or offices of the associated entities perform internal audit team - work and the resulted reports are presented to inform on and to be approved by the executives of the respective public institutions. Dependant on the way the activity of the association internal audit department or office goes, the contractual parties  could  as  well  anticipate  other  necessary  rules,  proceedings  and  activities,  on  the  basis  of  the 267 amendments and completions to be set out and mutually agreed on in the document attached to the initial contract of association. The internal audit department or office of the local and public institutions association subordinates to the executives of the local component institutions, and for the operational management of the internal audit department is empowered, having the mutual consent of the executives of the local and public associated institutions, the executive of the local and public institution where the internal audit department performs its activity. If the internal audit structures operate within a different headquarters it is essential to be set out an operational executive system for them. The  manager  of  the  internal  audit  department  or  office,  by  the  obligation  stated  by  the  local  and  public associated institutions, does not have to get involved in the elaboration of the proceedings for internal control within the local and public associated institutions. Also, the manager is appointed/dismissed by the competent executive of the local institutions, having the approval of the C.U.I.P.A.H. The internal audit applies to all the activities performed within the local and public associated institutions concerning the foundation and use of the public funds, as well as the administration of the public inheritance, aiming at implementing, according to the law, the internal audit which examines the actions took on the financial effects on the basis of the public funds or inheritance in order to respect the assembly of principles, procedural and methodological regulations which are applicable to them. Every thee years at least, but not restricted to this, within every local and public associated institution, the internal audit department or office of the association audits the following : a)  the  budgetary  and  legal  engagements  from  where  derive  directly  or  indirectly  the    payment obligations, inclusively the social funds; b)  the payments took upon by budgetary and legal engagements, inclusively the  social funds; c)  the sale, mortgage, cession or rent of the goods from the private sector of the state or of the territorial and administrative unities; d)  the  cession  or  rent  of  the  goods  from  the  private  sector  of  the  state  or  of  the  territorial  and administrative unities e)  the public funds collection, respectively the method used for authorizing and setting up the debt security, as well as for the facilities offered on their cashing; f)  the budgetary credits allocation; g)  the accounting system and its liability; the system of taking decisions; h)  executive and control systems, as well as the risks associated to such systems;  i)  data processing systems. The territorial structures of the M.P.F., delegated by the C.U.I.P.A.H., will supervise the implementation of these  principles  performing  together  with  the  executives  of  the  local  and  public  associated  institutions periodical analyses on the way the internal audit departments or offices organize and carry out the internal audit tasks stated in the activity programme. The internal audit departments or offices, on the basis of the statutory tasks, periodically report to the executives of the local and public institutions, as well as to the internal audit structures within the territorial General Directorate of Public Finances and within the one in Bucharest, the accomplishment of the legal tasks and the method of implementation, in time and respecting the general norms concerning the performance of the activities of the scheduled internal audit tasks. The territorial General Directorates of Public Finances and those from Bucharest periodically inform the Territorial  Councils  of  Public  Administration  on  the  methods  used  for  organizing,  operating  and performing internal audit activities within the local and public associated institutions. The territorial General Directorates of Public Finances and those from Bucharest present to the C.U.I.P.A.H. annual  reports  on  internal  audit  structure,  operation  and  performance  within  the  public  associated institutions. The C.U.I.P.A.H. annually brings up to the executives of the Ministry of Public Finances the Report on the internal audit activities performed by association with the public associated institutions. 268 Conclusions We consider that the suggestion to perform the association of the small-sized internal audit departments is possible and it will have an influence in complying more strictly with the provisions of the international standards and with the first-class practice recognized in the domain. The manager of the internal audit department or office within the associated public institutions is responsible for organizing and performing the internal audit activity, ensuring, according to the law, the execution of the following tasks; a)  elaborates and passes on to be approved by the executives of the associated public institutions the methodological norms of internal audit, norms that are put forward to the C.U.I.P.A.H. to give its notice; b)  elaborates and passes on the internal audit planning to be approved by  the executives of the associated public institutions; c)  carries out the internal audit assignments aiming at the assessment of the financial management and control system within the associated public institutions, paying attention that these comply with the legal, right, economical, efficient and effective norms and presenting to the executives the respective reports; d)  informs the C.U.I.P.A.H. on the recommendations unimplemented by the executives of the local and public associated institutions, as well as on their consequences; e)  periodically  reports  to  the  public  associated  institutions  the  remarks,  conclusions  and recommendations resulted from the internal audit activity; f)  elaborates the annual report on the internal audit activities; g)  in  case  it  is  identified  any  disorder  or  possible  prejudice,  he  immediately  reports  it  to  the executives of the public associated institutions. Factually making the association represents a structuring issue which will serve all the public institutions involved in association and will have an influence on the performance of some audit tasks in accordance with the norms of each institution and under the conditions of providing corresponding independence and objectivity as the internal auditors concern.  Also, after association, the costs will lessen due to a higher quality and a greater efficiency of the internal audit activity that may direct to reach some elements of performance. Bibliography: 1.  M.  Boulescu,  M.  Ghita,  V.  Mares  -  The  fundaments  of  audit,  Editura  Didactica  si Pedagogica, Bucuresti, 2001. 2.  M. Boulescu - Audit and control, Editura Fundatiei,, Romania de  Maine ‘’ -Bucuresti, 2006. 3.  E.  Ghita,  M.  Ghita  -  Audit  and  control,  Editura  Fundatiei,,  Romania  de    Maine ‘’  -Bucuresti, 2007. 4.  E. Ghita - Public internal audit, Editura Sitech, Craiova, 2007. 5.  M. Ghita, M. Spranceana - Internal audit in public institutions, part II, Editura Tribuna Economica, Bucuresti, 2006. 6.  M. Ghita, E. Ghita, S. Domnisoru - A Textbook on Internal Audit, Sitech, Craiova, 2004. 7.  L. E. Ritteenberg - Audit: Concepts for a Medium in Changing, Dryden Press, 1977. 8.  Spencer Pickett, K. H.- Guide for Intern Audit, second edition, John Wiley and Sons, 2003. 

REMARKS ON THE IMPORTANCE AND NECESSITY FOR PUBLIC ENTITIES TO ASSOCIATE IN ORDER TO PERFORM EFFICIENT ACTIVITIES OF INTERNAL AUDIT

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