Uzi Berlinsky,
Inspector-General’s Dept.,
Ministry of Economy and Planning

The Internal Audit Law, 1992 is a milestone in the development of auditing and corruption control in Israel and even beyond her borders. Few countries have enacted a law so sweeping and so stringent.

The Law not only requires every public or governmental agency, every publicly traded corporation, bank and insurance company to appoint an internal auditor but specifies what sort of person shall be appointed and how, what will be his powers and how they will be protected.

Duties of the Auditor

It is the internal auditor’s responsibility to continuously verify that:

* the actions of his agency and its employees comply with the law and the regulations binding on it;
* the actions of his agency and its employees comply with the principles of sound management, ethics, economy and efficiency;
* the operations of the agency contribute to its declared goals and decisions are made according to proper procedure;
* the agency’s assets and liabilities, funds and investments are properly managed and accounted for; audit by the State Comptroller is carried out and his findings implemented, if the agency is subject to the Comptroller’s supervision.

Who May be Auditor

The internal auditor must be an individual corporations or partnerships are disqualified must have at least a B.A. degree in an area of study recognized by a professional committee, and naturally no criminal record. He may not hold any additional post in the agency, nor outside it if the second post creates, or is liable to create, a conflict of interest with the first.

Powers of the Internal Auditor

The internal auditor and his staff or agents have the right to request and receive any document and information in the possession of the agency, from any employee of the agency, within a period of time specified by the auditor. They will be given access to any databank or database and any electronic data processing work plan. They are entitled to enter and inspect any agency property.

A most crucial qualification of auditor powers is that any report written by, or information received by, the auditor may serve as evidence in internal disciplinary proceedings but will not be admissible as evidence in a judicial process. The purpose of this reservation is (a) to distinguish between the work of an internal auditor and that of an investigator or legal agent and (b) to make it easier for workers to approach him with information. To the same end, he cannot be compelled to reveal the identity of informants or the sources of information.

Protection of the Auditor’s Powers

Cases are known where auditors who uncovered grave irregularities involving senior officials found themselves dismissed, suspended or ostracized on the job. To protect auditors from retaliation or intimidation the new law closely guards their dismissal. For an auditor to be dismissed before his full term, he himself must give consent. In the case of a government ministry, the State Comptroller must also agree and in other public agencies a two-thirds majority of the Board, at-id only after the auditor has personally addressed them on the matter. The auditor’s staff cannot be dismissed without his approval or that of an authorized tribunal and without negotiating obstacles similar to those protecting the auditor himself.


The law adopts the principle of dual reporting, i.e. that the internal auditor will report both to the day-today manager of the agency employing him (managing director, director-general, etc.) and to the superordinate director of the whole agency whose position embodies the premise of public control and the public interest (the minister in the case of a government ministry, the chairman of the board of directors, etc.). Dual reporting attains the proper balance, whereby the auditor receives from the chief executive the direction and feedback to make his function relevant to the ongoing operations of the agency and reports to this executive’s superior to affirm his essential independence and his supervision of the chief executive himself.

Reporting of a Suspected Criminal Offense

Article 11 of the law states that, "If the audit … gives reason to believe that a criminal offense has been committed, the internal auditor will call the matter to the attention of his superior without delay." If the superior himself falls under suspicion, then, in the case of an agency subject to the audit of the State Comptroller, the auditor will notify the State Comptroller. In neither case, does the internal auditor report to the police.