Disclaimer: The Following is an unofficial translation, and not necessarily an updated one. The binding version is the official Hebrew text. Readers are consequently advised to consult qualified professional counsel before making any decision in connection with the enactment, which is here presented in translation for their general information only.
INTERNAL AUDIT LAW 5752-1992 Definitions 1. In this Law – "public body" – each of the following: (1) an audited body, within its meaning in section 9(1), (2) or (5) of the State Comptroller Law 5718-1958 [Consolidated Version] (hereafter: State Comptroller Law); (2) a supported body, within its meaning in section 32 of the Principles of Budgets Law 5745-1985; (3) an audited body, within its meaning section 9(7) or (8) of the State Comptroller Law, a body corporate some or all of the activity of which is financed directly or indirectly out of State funds, or a body corporate licensed to provide service to the public, all if sections 16 to 18 do not apply to it and if the Minister and the Minister of Justice, with approval by the Knesset State Audit Committee, determined by announcement in Reshumot that it is a public body for purposes of this Law; (4) a sick fund recognized under the National Health Insurance Law 5754-1994; (5) a religious council set up by virtue of the Jewish Religious Services Law [Consolidated Version] 5731-1971; but all exclusive of an institution of higher education recognized under section 9 of the Council for Higher Education Law 5718-1958; "Committee" – the committee established under section 3(b); "Minister" – the Minister of Economics and Planning. Must make internal audit 2. (a) Internal audits shall be carried out in every public body by an internal auditor. (b) A Minister in charge of any Government Ministry may prescribe that the person authorized to appoint an internal auditor in that Ministry is also authorized to appoint an internal auditor for any body or unit in that Ministry, which is not subject to the Ministry's Director General, and he may prescribe – to the extent required – ways of coordination between the internal auditors in that Ministry. (c) The internal auditor of the Chief Accountant's Division in the Ministry of Finance shall be responsible for the internal audit of the implementation of the Government budget in the accounting and finance sections of the Government Ministries. Qualification 3. (a) A [person shall not be appointed and he shall not serve as internal auditor of a public body, unless he meets the following qualifications: (1) he is an individual;
(2) (3) (4)
(c) (d) (e)
he is an Israel resident; he was not found guilty of an offense that involves disgrace; he holds a degree from an institution of higher education in Israel or from an institution of higher education abroad to which recognition was accorded for this purpose by an institution of higher education in Israel, or he is an attorneyat-law or an auditor; (5) he has two years experience in the practice of auditing, or participated in a professional training program approved by a training committee composed of a representative of the Chamber of Internal Auditors, who is the chairman, of the General Supervisor in the Ministry of Economics and Planning, and a representative of an institution of higher education which teaches internal auditing, designated by the Minister after consultation with all the institutions that teach as aforesaid. A Committee is hereby set up and its members are: (1) the Director General of the Ministry of Justice, who shall be the Committee's chairman; (2) the Civil Service Commissioner or his deputy; (3) the president of Chamber of Internal Auditors; (4) the head of the Chamber of Advocates; (5) the president of the Chamber of Auditors. The Committee shall decide whether to approve the proposal of a public body to appoint as its internal auditor a person who does not meet the qualifications of subsection (a)(4) and (5). Every decision by the Committee shall be reasoned. The Committee shall prescribe its own procedures.
Responsibilities 4. (a) The internal auditor shall, inter alia, examine – (1) whether the actions of the public body in which he is the internal auditor, as well as those of its officers and ranking employees, are correct in terms of obedience to Law, orderly management, probity, economy and efficiency, and whether they are useful for the attainment of the objectives set for them; (2) whether instructions that obligate the public body are obeyed; (3) the management of the public body's assets and obligations, including its account books, as well as its ways of maintaining property, of saving money and of investing it; (4) whether the public body's decisions are adopted by proper procedures; (5) if the public body is an audited body, as said in paragraphs (1) or (3) of the definition of "public body" in section 1 2
(hereafter: public body) – the correction of shortcomings pointed out by the State Comptroller. The internal auditor shall conduct the audit in accordance with accepted professional standards.
Responsibility 5. (a) The internal auditor's superior in a Government Ministry is the Minister in charge of that Ministry or its Director General, or the director of a unit said in section 2(b), all as prescribed by the Government either generally or for a certain Ministry. (b) The internal auditor's superior in the Chief Accountant Division of the Ministry of Finance and in the accounting and finance sections of Government Ministries is the Accountant General. (c) The internal auditor's superior in the Bank of Israel is the Governor. (d) Subject to the provisions of section 49(b) of the Government Companies Law 5735-1975, the internal auditor's superior in any other public body is the chairman of the Board of Directors, or the chairman of the body the responsibility of which corresponds to that of a Board of Directors, or the general manager, all as the Board of Directors prescribes. (e) An internal auditor shall be directly responsible to the person who – according to this section – is his superior. Reporting 6. (a) An internal auditor shall give his superior, as said in section 5, a report of his findings. (b) In addition to the provision of subsection (a), an internal auditor shall submit each of his reports – (1) in a Government Ministry, in which the Minister in charge of the Ministry is not the internal auditor's superior under section 5(a) – to the Minister in charge; (2) in any other public body – to the Director General. (c) Every report submitted by an internal auditor shall be in writing; it shall include all his conclusions, and he may include in it his recommendations. Discussing the findings of an internal auditor 6A. (a) When an internal auditor's report has been submitted as said in section 6, then within 45 days after the day on which it was submitted the governing body of the public body shall discuss his findings; a copy of the minutes of the discussion shall be delivered to the superior, within the meaning of the term in section 5. (b) If the governing body of the public body failed to do as said in subsection (a), then any one of its members may apply to the superior in writing, demanding that a discussion be held; when a 3
said demand has been made, then the superior shall order that the discussion be held within 30 days after the demand was received. Approval of work program 7. (a) The internal auditor shall submit a proposed annual or periodic work program for approval by the superior said in section 5, and the superior shall approve it with the changes he deems appropriate. (b) The Minister in charge of a Government Ministry, the chairman of a Board of Directors or the chairman of a body that functions like a Board of Directors, and also the superior may assign internal audit tasks to the internal auditor, in addition to those prescribed in the work program said in subsection (a). Exclusivity 8. (a) The internal auditor shall not, in the body in which he serves as internal auditor, have any responsibility other than internal audit, except for the responsibilities of a commissioner of public complaints or of a commissioner of employees' complaints, and even that only if the additional responsibility does not interfere with the performance of his primary responsibility. (b) The internal auditor shall not – outside the body in which he serves as internal auditor – have any responsibility which creates or is liable to create a conflict of interests with his responsibility as internal auditor. Delivery of documents and access to information 9. (a) The internal auditor may request and he shall receive every document and all the information held by the body in which he serves as internal auditor or held by any of its employees, which the internal auditor's believes to be necessary for the performance of his duties; any person required to deliver a document or to provide information as aforesaid must do so within the period and in the manner stated in the demand. (b) The internal auditor shall – for the performance of his work – have access to every conventional or computerized archive, to every data base and to every computerized data processing program of the body in which he serves as internal auditor. (c) The internal auditor may enter and examine every property of the body in which he serves as internal auditor. (d) In respect of statutorily restricted information, the statutory restrictions that apply to persons entitled to receive that information shall apply to the internal auditor and to persons authorized to receive that information under this Law. (e) Subject to the provisions of section 10, the internal auditor must 4
maintain the confidentiality of every document and of all the information that reaches him in the performance of his duties, unless its disclosure is necessary for the performance of his task as required by the Law, or if the disclosure is required under any statute. The powers vested in and the obligations imposed on the internal auditor under this section also apply to his assistants and to every person who acts on his behalf.
Audit as evidence 10. (a) No report, opinion or other document issued or produced by an internal auditor in the performance of his duties shall constitute evidence in any legal proceeding, but it shall not be disqualified as evidence in disciplinary proceedings. (b) Information received by an internal auditor in the performance of his duties shall not be evidence in any legal proceeding, but shall be admissible as evidence in disciplinary proceedings. Report of a criminal offense 11. (a) If the audit of a public body gives rise to an assumption that a criminal offense was committed, then the internal auditor shall inform the superior without delay. (b) If an internal auditor has grounds for believing that the superior is involved in a criminal offense, then the auditor shall bring the matter directly to the State Comptroller's knowledge. End of tenure of an internal auditor 12. (a) The tenure of an internal auditor shall not be terminated without his consent before the end of the period for which he was appointed, and he may be suspended – (1) in a Government Ministry – only with the approval of the Civil Service Commissioner; (2) in the Bank of Israel – only by the Governor; (3) in any other public body – only if the Board of Directors, or the body that performs the function of a Board of Directors (in this paragraph: the Board of Directors) so decides, after lawful notice was given to all members of the Board that the dismissal or suspension will be discussed during that meeting, and with the approval of the Board of Directors by a two thirds majority of its members, after the internal auditor was given an opportunity to have his say on the matter before the Board of Directors. (b) Notwithstanding the provisions of subsection (a), if an internal auditor ceased to be an Israel resident, or if he was convicted by a final judgment of an offense that involves disgrace, then his tenure shall be terminated. Employees of the internal auditor's office 5
13. (a) (b)
The internal auditor may perform his work with the help of persons in his office or with the help of others who were chosen by a proper procedure. Persons shall be appointed to work in an internal auditor's office only by a procedure appropriate to the appointment of employees in the public body, and only after the internal auditor has expressed his opinion. Employees in the internal auditor's office and persons who work on his behalf on internal audit shall accept instructions in connection with an audit only from the internal auditor. The service of an employee in the internal auditor's office shall be terminated only by proper procedure and with the agreement of the internal auditor, or by the order of a competent Court or Tribunal, or – in the absence of the internal auditor's agreement – under section 12, mutatis mutandis.
Saving of effect 14. (a) The provisions of this Law shall not derogate from the provisions of any statute. (b) The provisions of this Law shall not derogate from the status, position and authority vested in an internal auditor in a public body by its memorandum or by-laws or by any other duly adopted decision, nor shall it reduce the status, position and authority so vested, all whether or not specified in this Law. (c) The provisions of this Law shall not prevent a public body from enhancing – in its memorandum or by-laws or by another duly adopted decision – the status, position and authority vested by them in the internal auditor, or to from broadening the status, position and authority so vested, all whether or not specified in this Law. Penalties 15. The following are liable to a fine: (1) any person obligated, by virtue of the position he holds, to appoint an internal auditor, who did not do so, and who has no reasonable justification therefor; (2) any person who appointed an internal auditor, knowing that he is not qualified under section 3; (3) any person who knowingly violated an obligation imposed on him under section 9(a), or who denied a comptroller access, visitation or examination as said in section 9(b) or (c). Amendment of Companies Ordinance 16. In Chapter Four of the Companies Ordinance [New Version] 57431983, insert after Title B: "Title C: Internal Auditor 6
Internal auditor 96W1(a) The Board of Directors of a company, within its meaning in section 96A, shall appoint an internal auditor, in accordance with the proposal of the audit committee. (b) The provisions of sections 3, 5(d), 7 to 10, 14(b) and (c) and 24(c) of the Internal Audit Law 5752-1992 shall apply to the internal auditor, subject to the other provisions of this Title and mutatis mutandi as the case may be, except that section 9 shall be read as if the following appeared at its end: " (g) Notwithstanding the aforesaid provisions of this section, the audit committee may – at the request of the Board of Directors – restrict the internal auditor's access to documents and information that include a commercial secret. " (c) The internal auditor shall examine, inter alia, whether the company's acts are correct in terms of obedience to the Law, of probity and of orderly business procedure. (d) The internal auditor shall report his findings to the chairman of the Board of Directors, to the general manager, and to the chairman of the audit committee. (e) The internal auditor's term of office shall not be terminated without his consent, and he shall not be suspended from office, unless the Board of Directors so decides upon a proposal by the audit committee. " Amendment of Banking Ordinance 17. In the Banking Ordinance 1941, insert the following after section 14D: " Internal auditor 14E. (a) The Board of Directors of a banking corporation shall appoint an internal auditor, upon a proposal of the Board's audit committee (hereafter: audit committee). (b) The internal auditor shall examine, inter alia, whether the acts of the banking corporation are correct in terms of obedience to the Law, probity, economy, efficiency and orderly banking procedure, and he shall also examine whether instructions of the Supervisor of Banks are obeyed. (c) Subject to other provisions of this section and mutatis mutandis, the following sections of the Internal Audit Law 5742-1992 shall apply to the internal auditor: section 3, except for subsection (a)(2), sections 7 to 10, section 14(b) and (c) and section 24(c). 7
The internal auditor shall work in accordance with accepted professional standards and under the guidance of the audit committee and he shall report his findings to the chairman of the Board of Directors, the general manager and the chairman of the audit committee. An internal auditor shall be appointed or suspended by the Board of Directors, upon a proposal by the audit committee. The Supervisor may, after consultation with the Advisory Committee, make rules for the implementation of this section. "
Amendment of the Insurance Business (Control) Law 18. In the Insurance Business (Control) Law 5741-1981 – (1) insert the following before section 93: "Internal auditor 92A. (a) The Board of Directors of an insurer shall appoint an internal auditor for the body corporate. (b) The internal auditor shall also examine whether the acts of the insurer are correct in terms of obedience to the Law, of instructions by the Superintendent of Insurance, of probity, economy, efficiency and orderly business procedure. (c) Subject to other provisions of this section and mutatis mutandis, as the case may be, the following sections of the Internal Audit Law 5742-1992 shall apply to the internal auditor: 3, 7 to 10, 14(b) and (c), and 24(c). (d) The internal auditor shall work in accordance with accepted professional standards, and he shall report his findings to the chairman of the insurer's Board of Directors, and to its the general manager. (e) The tenure of an internal auditor shall not be terminated or suspended without his agreement, unless the Board of Directors so decides. (f) In this section, "insurer" – whoever received an Israel insurer's license under section 15(a)(1). " (2)
In section 109, insert "the Board of Directors" after "every reference in this Law to", and replace "an officer, within the meaning of" with "a committee or officer, within the meaning of".
Amendment of the Council for Higher Education Law 19. Insert the following after section 15 of the Council for Higher Education Law 5718-1958:
"Auditor 15A. The provisions of sections 3 and 4, 8 to 10, 12, 14(b) and (c), and 24(c) of the Internal Audit Law 5742-1992 shall apply, mutatis mutandis, to the auditor of a recognized institution. " Amendment of Local Councils Ordinance 20. Insert the following after section 35 of the Local Councils Ordinance: "Auditor 35A. Notwithstanding any provision of this Ordinance, the Minister of the Interior may, with the approval by the Knesset State Audit Committee, include in an order to establish a local council instructions like those which the Municipalities Ordinance (Amendment No. 39) Law 5750-1990 added to the Municipalities Ordinance, or all or some of the provisions of sections 3, 4, 7 to 10, 12, 14(b) and (c) of the Internal Audit Law 5742-1992, mutatis mutandis as the case may be. " Amendment of Municipalities Ordinance (Amendment No. 39) Law 21. In the Amendment of Municipalities Ordinance (Amendment No. 39) Law 5750-1990, section 12 is repealed. Amendment of the Government Companies Law 22. Insert the following after section 49 of the Government Companies Law 5735-1975: " Precedence 49A. The provisions of section 96W1 of the Companies Ordinance [New Version] 5743-1983 shall apply to a Government company, to which section 96A of that Ordinance applies, even if it is an inspected body. " Implementation and regulations 23. The Minister is charged with the implementation of this Law and he may – in consultation with the Chamber of Internal Auditors and with approval by the Knesset State Audit Committee – make regulations on any matter related to its implementation in public bodies. Effect and transitional provisions 24. (a) Sections 1 and 2 shall go into effect in the month after one year passed since the publication of this Law. (b) Sections 16 to 20 shall go into effect on the first of the month after six months passed since the publication of this Law. (c) The provisions of this Law shall not affect the tenure of any person who in fact filled the position of an internal auditor in a public body immediately before this Law was published, even if he 9
does not meet the qualifications under section 3 and even if he bore a different title. Publication 25. This Law shall be published within 30 days after it was passed. (Date of publication: April 9, 1992 – Tr.)