LAW OF THE REPUBLIC OF ARMENIA

of January 15, 2011 No. ZR-17

About internal audit

Accepted by National Assembly of the Republic of Armenia on December 22, 2010

Chapter 1. General provisions

Article 1. Subject of regulation of the Law

1. This Law establishes the principles, nature, circle, system of internal audit of the organizations of the public sector, basic rights and obligations of participants of internal audit, and also governs the main relations connected with the organization and activities of internal audit.

Article 2. The basic concepts used in the Law

In this Law the following basic concepts are used:

1) the organizations of the public sector (further - the organizations):

and. the state bodies and local government bodies provided by the Constitution of the Republic of Armenia and the laws of the Republic of Armenia;

. organizations of the state or communities;

century state or municipal non-profit organizations;

of the organization with the state or municipal participation more than fifty percent;

2) internal audit - the independent, objective function on confirmation of reliability and consultation directed to increase and improvement of result of organization activity. He helps the organization to achieve the objectives by the systematized and regulated assessment and improvement of risk management of the organization, supervision of them and management processes.

Internal audit is performed on the basis of strategic and annual internal audit programs by provision to management of the organization of services in confirmation of reliability and consultation;

3) system of internal audit - set of procedures, requirements, stipulated by the legislation the Republic of Armenia for the purpose of implementation of internal audit, and the rights and obligations of participants of internal audit;

4) systems of financial management, supervision - set of the rules (policy), procedures and actions established by management of the organization to which in reasonable form implementation of the purposes of the organization according to the following conditions is guaranteed:

and. compliance to the legislation of the Republic of Armenia and to other conditions concerning organization activity (to agreements and other);

. economical, effective and useful functions;

century set and reliability of data;

reliability of protection of assets and resources from losses, abuses and losses;

5) economically - reduction of the resources provided for achievement of the provided result or the purpose with preserving previously established quality;

6) effectively - degree of result or implementation of the purpose of function, that is comparison of the planned and actual state in result or the purpose of function;

7) it is useful - ensuring the maximum level of result or the purpose of function in case of the provided resources (investments);

8) risk - probability of event which can influence implementation of the purposes of the organization. The risk changes on impact and probability of origin;

9) risk management - process of identification, assessment and supervision of risks for implementation is more whole than the organization;

10) supervision - the actions of management of the organization directed to prevention or decrease in risks of implementation is more whole than the organization;

11) independence - implementation of internal audit function separately from other functions of the organization;

12) objectivity - unconditional manifestation of professional disinterest in the course of collection, assessment and exchange of data of internal auditors during audit. Internal auditors perform the balanced and adequate assessment of all circumstances and do not come under inappropriate influence of own interests or judgments of other persons;

13) capability - ownership and use by internal auditors of the corresponding knowledge, skills, experience and other capabilities necessary for execution of their obligations;

14) impartiality - fair and responsible implementation by internal auditors of the work;

15) confidentiality - reliable storage by internal auditors of the data received in the course of work. Internal auditors should publish and provide without appropriate authority the information which became to them known in process or as a result of activities, except as specified, stipulated by the legislation;

16) standards of internal audit - the standards of professional activity of internal audit of the Republic of Armenia approved on the basis of internationally acknowledged standards of professional activity of internal audit;

17) rules of conduct - the rules of conduct of internal auditors of the Republic of Armenia approved on the basis of internationally acknowledged behavior of internal auditors. Rules of conduct extend both to private internal auditors, and to the organizations performing internal audit;

18) regulations of internal audit - the document approved by the head of the organization for representation of the division manager of internal audit of the organization by whom are established the purpose, powers and obligations of internal audit. In addition to other conditions, regulations also:

and. specifies provision of internal audit in the organization;

. establishes framework of internal audit;

regulates the questions connected with the documents necessary for accomplishment of audit engagements for internal auditors, state body and property century;

19) the audit engagement - the specific task or studying of internal audit including service in confirmation of reliability and consultation;

20) authorized body - the state body established by the Government of the Republic of Armenia;

21) committee of internal audit - the collegiate organ created by the head of the organization and run by it which helps system of internal audit of the organization and for this purpose performs the powers provided by this Law.

Article 3. Principles of internal audit

1. Internal audit is performed according to standards of internal audit, rules of conduct of internal auditors and the following principles:

1) independence;

2) objectivity;

3) capability;

4) impartiality;

5) confidentiality.

2. Internal audit helps the head of the organization who bears responsibility for ensuring availability corresponding to the legislation of the Republic of Armenia and effective systems of financial management, supervision.

Chapter 2. Framework, organization and nature of internal audit

Article 4. Framework of internal audit

1. All functions connected with financial management, supervision of organization activity are exposed to internal audit.

Article 5. Organization of internal audit

1. The system of internal audit is effective in subordination at the head of the organization. At the same time:

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