Internal Audit Policy for Kabul Municipality

The policy applies to all staff working under the internal audit department and is designed to bring transparency and accountability in all operational and financial activities of the Kabul Municipality. The major risk factor in a municipality audit across Afghanistan is the non-availability of records for assets and liabilities, as municipalities do not follow a uniform system of accounting. The financial statements are prepared on a cash basis using a single-entry system, which makes it difficult to ascertain the financial health of a particular municipality. To address this issue, the policy recommends introducing a double-entry accounting system after carrying out an exercise for identification and valuation of existing assets and liabilities. The internal audit department is responsible for providing assurance services, including financial, performance, compliance, system security, and due diligence engagements. The department must be independent and objective in performing its work, with direct and unrestricted access to senior management and the board. The Director General of Internal Audit (DG of IAD) must communicate and interact directly with the board and report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. The policy defines various terms, including add value, adequate control, assurance services, board, charter, chief audit executive, code of ethics, compliance, conflict of interest, consulting services, control, control environment, risk, and risk management. The control environment includes elements such as integrity and ethical values, management's philosophy and operating style, organizational structure, assignment of authority and responsibility, human resource policies and practices, and competence of personnel. The internal audit activity must be formally defined in an internal audit charter, consistent with the Definition of Internal Auditing, the Code of Ethics, and the Standards. The DG of IAD must periodically review the internal audit charter and present it to senior management and the board for approval. The nature of assurance services provided to the organization must be defined in the internal audit charter, as well as the nature of consulting services. Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities, and the internal audit activity collectively must possess or obtain the knowledge, skills, and other competencies needed to perform its responsibilities. Internal auditors are encouraged to demonstrate their proficiency by obtaining appropriate professional certifications. The policy emphasizes the importance of independence, objectivity, and professionalism in the internal audit department. It provides a framework for the internal audit activity to add value and improve the organization's operations, while ensuring transparency and accountability in all operational and financial activities of the Kabul Municipality.