THE ATTORB~EY GENEWAL 

OF TEXAS 

Mr. Vernon M. Arrell Opinion No. JM-1183 

Commissioner 

Texas Rehabilitation Commission Re: Applicability of the 

4900 North Lamar Blvd. 

Austin, Texas 78751-2316 

provisions of the Texas 

Internal Auditing Act, 

article 6252-5d, V.T.C.S., 

to the Texas Rehabilitation Commission (RQ-1869) 

Dear Mr. Arrell: 

you ask several questions about the application of the 

Texas Internal Auditing Act [hereinafter the act]. V.T.C.S. 

art. 6252-5d. The legislature passed the act in May 1989, 

and it became effective September 1, 1989. H.B. 2728, Acts 

1989, 71st Deg., ch. 787, at 3568. 

You first ask whether an agency may have an internal 

audit program different from the program described in the 

act as long as the agency's program reflects the intent of 

the act. Section 2 of the act provides in part: 

The purpose of this Act is to establish 

guidelines for a program of internal auditing 

to assist agency administrators by furnishing 

independent analyses . . . of performance in 

carrying out assigned responsibilities. 

You suggest that the use of the word "guidelines" in section 

2 indicates the legislature did not intend to make the provisions of the act mandatory. 

We disagree. Read as a whole, the act unambiguously 

indicates that the legislature intended an agency covered by 

the act to establish and maintain a program that conforms 

to the requirements of the act. In contrast to section 2, 

which merely states the general purpose of the act, the 

sections of the act that describe in detail the internal 

auditing program and its functions contain mandatory 

language. For instance, section 4 states that each agency 

"shall establish a full-time program of internal auditing 

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Mr. Vernon M. Arrell - Page 2 (JM-1183) 

which shall include" an annual audit plan and audits of 

various systems and controls. Section 5 provides that an 

internal auditor shall be appointed, while section 6 lists 

the required duties of that auditor. Sections 8 and 9 also 

contain mandatory language. Section 8 states that the 

program "shall conform" to various professional standards, 

and section 9 requires the state auditor to provide 

technical assistance and training opportunities to agency 

internal auditors. 

Given the legislature's dominant use of mandatory 

language in the implementing sections of the act and the 

detailed requirements in the act for the program and needed 

personnel, we believe that a court would conclude that an 

agency covered by the act must establish and maintain a 

program that complies with the terms of the act as well 

as its intent. Construing the act as mandatory is also 

consistent with a dictionary definition of "guideline" as 

an indication of future conduct. See Webster's Third New 

International Dictionary of the EngliSh Language (Unabridged) 1009 (1969); see also Board of Educ. v. School 

Comm. of Amesbury 452 N.E.2d 302, 306 (Mass. App. Ct. 1983) 

("guideline" implies some instruction for future conduct): 

Gov't Code S 312.002(a) (words shall generally be given 

their ordinary meaning). The narrow and detailed "guidelines" described above are mandatory and are drafted to 

ensure agency action that complies with the act. Finally, 

construing the act as mandatory on or after its effective 

date is consistent with the 1988 legislative interim report 

that recommended passage of legislation requiring certain 

agencies to establish internal auditing programs with 

appropriate personnel and independence. See Governor's Task 

Force, Findings and Recommendations of the Accounting, 

Auditing and Financial Reporting Task Force 5, 10-11 

(December 1988); see also Office of the State Auditor, 

Statewide Report on Internal Auditing: A Report to the 

Legislative Audit Committee 3-4 (May 1988) (major state 

agencies should establish internal audit programs). 

You next ask whether an agency must appoint a certified 

public accountant (CPA) or certified internal auditory (CIA) 

as the internal auditor if the position is occupied by an 

individual who is neither a CPA nor a CIA. Section 5 of the 

act provides as follows: 

The governing board of an agency or its 

designee, or the administrator of an agency 

without a governing board, shall appoint 

an internal auditor, who shall be either a 

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Mr. Vernon M. Arrell - Page 3 (JM-1183) 

certified public accountant or a certified 

internal auditor and who shall have at least 

three years of auditing experience. The 

agency shall employ such additional professional and support staff as the agency 

administrator determines are necessary to 

implement an effective program of internal 

auditing. 

you have not mentioned and we are unaware of any other state 

statute describing the qualifications of an agency internal 

auditor, and thus we interpret your question as meaning 

whether your agency must appoint a CPA or CIA to perform the 

duties imposed on an internal auditor by the act. 

Neither the terms of the act nor the legislative 

history of the act indicate whether individuals employed as 

internal auditors for state agencies who are not CPAs or 

CIAs should continue in employment as state internal 

auditors after the effective date of the act. The effective 

date clause states only that the act takes effect on 

September 1, 1989. We interpret the absence of legislative 

guidance on this issue as an indication that state agencies 

may continue such individuals in their employ on the 

internal audit staff unless otherwise prohibited. Nevertheless, section 5 of the act does require a covered state 

agency to appoint a CPA or CIA as the internal auditor, and 

other sections of the act require that certified auditor to 

carry out the responsibilities of the act. In particular, 

the certified auditor must develop the agency's annual audit 

plan and conduct agency audits in accordance with the annual 

plan. V.T.C.S. art. 6252-5d, 9 6(2)-(3). Additional professional and support staff may be employed as deemed necessary 

by the agency administrator to implement the required 

internal audit program. &L § 5. Thus, while an agency may 

continue in its employ as an internal auditor an individual 

who is neither a CPA nor a CIA as of September 1, 1989, 

neither the agency, its designee, nor the agency administrator of an agency without a governing board may appoint 

that individual as the internal auditor to carry out the 

requirements of the act. 

Your third question concerns section 6(l) of the act. 

Section 6(l) of the act requires the internal auditor to 

report directly to the agency's governing board or to the 

commission. You ask whether section 6(l) is consistent with 

other laws and regulations governing the operation of state 

agencies. You do not provide us with any instances of 

inconsistency: nor were we able to find any in the statutes 

P. 6236 
Mr. Vernon M. Arrell - Page 4 (JM-1183) 

applicable to internal audits of the Texas Rehabilitation 

Commission. See. e.G 

321.0131-321.0136; Hum: 

Gov't Code 55 321.005, 321.013, 

Res. Code 59 111.001-111.058; 

V.T.C.S. art. 4348e. Section 111.018 of the Human Resources 

Code requires the commissioner of the Texas Rehabilitation 

Commission to make regulations governing personnel standards 

and to develop a career ladder program. Section 111.020 

requires the commissioner to appoint the personnel needed to 

carry out agency functions. Neither of those sections, 

however, conflicts on the surface with section 6(l) of the 

act. Those sections merely enable the commissioner to 

supervise and promote the personnel required to do agency 

work, while the act authorizes an internal auditor to 

conduct independent reviews of the work performed by such 

personnel to ensure that the work is performed economically 

and efficiently.1 

Your last question concerns section 6(6) of the act. 

Section 6(6) provides that the internal auditor shall be 

free of any operational or management responsibility that 

would impair the independent review of the agency's operations. you ask whether management or the internal auditor 

alone or both together are to decide when compliance with 

a particular responsibility would impair the auditor's 

independence. In the case of the Texas Rehabilitation 

Commission, we construe your reference to management to mean 

the agency's commissioner as well as deputy or assistant 

commissioners or other executive administrators. Acts 1989, 

71st Leg., ch. 1263, art. 11-68, at 5503 (provisions of the 

General Appropriations Act concerning the commission's key 

administrators). 

Section 7 of the act states that the internal auditor 

"may consult with the agency's governing board or commission, the governor's office, the state auditor, and other 

legislative agencies or committees concerning matters 

affecting duties and responsibilities under this Act." 

Section 6(6) of the act describes as one of the internal 

1. You do not pose nor do we address a situation in 

which a particular personnel standard conflicts with the 

duties imposed by the act on the internal auditor. Furthermore, if a situation of conflict does arise that concerns 

an operational or management responsibility described in 

section 6(6) of the act, the internal auditor may choose to 

consult with the entities listed in section 7 of the act. 

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Mr. Vernon M. Arrell - Page 5 (JM-1183) 

i 

auditor's duties the obligation to be free of certain 

responsibilities that would impair the independent review of 

agency operations. 

Significantly absent from the list in section 7 is 

the agency administrator who is defined in the act as the 

executive head of the agency. V.T.C.S. art. 6252-5d, 

§ S(2). We conclude from this absence first, that the 

agency#s commissioner and deputies or assistants may not 

decide when the internal auditor's compliance with an 

operational or a management responsibility would impair the 

independent review of agency operations and second, that the 

internal auditor may not consult with those individuals in 

making that determination. 2 The independent auditor may, if 

he chooses, consult with the entities listed in section 7 of 

the act in making the determination, but the auditor is not 

required by that section to do so.3 This construction of 

the act effectuates the primary purpose of the act: the 

provision of unbiased reports to the agency's governing 

board or commission about all agency work, including the 

work performed by the agency's executive personnel. See 

V.T.C.S. art. 6252-5d, §§ 2 (purpose is to furnish independent analyses), 4(2) (requirement for audits of administrative systems and controls), e(6) (requirement for 

independent reviews of U agency operations): see also 

Statewide Report on Internal Auditing: A Report to the 

Legislative Audit Committee 11-12 (internal audit groups 

should be located outside of the management functions 

subject to audit so that organizational status enhances 

independence). 

2. The governing board of the Texas Rehabilitation 

Commission is composed of six members appointed by the 

governor. Hum. Res. Code 9 1111.013. Our conclusion therefore is limited to multi-member boards and commissions 

composed of appointed members, and we do not address the 

situation of an agency overseen by a single appointed or 

elected official or by a board or commission of elected 

officials. 

3. Section 8 of the act suggests that the internal 

auditor in making this determination may use various 

professional standards and codes, including the Certified 

Internal Auditor Code of Professional Ethics and the 

Standards for the Professional Practice of Internal 

Auditing. 

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Mr. Vernon M. Arrell - Page 6 (JM-1183) 

SUMMARY 

The provisions of the Texas Internal 

Auditing Act are mandatory. The internal 

auditor appointed by an agency to carry out 

the act must be a certified public accountant 

or certified internal auditor. That auditor 

shall report directly to the agency's 

governing board or commission. That auditor 

is also not required to consult with the 

executive head of the agency to determine 

when compliance with a particular responsibility would impair the independent review of 

agency operations. Instead, the auditor may 

make the decision alone or consult with the 

agency's governing board or commission or 

certain other entities outside the agency. 

-i I M MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

Lou MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAELEY 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Celeste A. Baker 

Assistant Attorney General 

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