13TH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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SENATE 
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INTRODUCED BY HON. MANUEL B. VELAR JR. 
EXPLANATORY NOTE 
This Bill seeks to fully institutionalize the Internal Audit Service in the Government, 
amending for the purpose Republic Act No. 3456 and as amended by Republic Act No. 4177 and 
otherwise known as the "Internal Auditing Act of 1962." 
The "Internal Auditing Act of 1962" has not been hlly implemented. Partial 
implementation only came into being after the issuance of Administrative Order No. 278 dated 
April 28, 1992 by President Corazon C. Aquino. The organization of internal audit services in 
government offices, agencies and local government units, have also been hampered due to the 
absence of organizational structures and positions in the government. 
The government's continuing drive against graft and corruption is perceived as weak 
because of the non-implementation of the Internal Auditing Act. The problem of graft and 
corruption in the government is well recognized as systemic. It would require the review, audit 
and the improvement of internal controls in the systems and processes in the government to help 
address and solve the problem. 
The amendments mandate the concerned government agencies to promulgate within a 
prescribed period the implementing rules and regulations of the Internal Auditing Act and to 
organize Internal Audit Services and create Internal Auditor positions in government as deemed 
necessary to fully implement the provisions of the Internal Auditing Act. 
In view of the foregoing considerations, and to strengthen the government's drive against 
graft and corruption, the early approval of this bill is urgently requested. 


13TH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 
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INTRODUCED BY HON. MANUEL B. VELAR JR. 
AN ACT TO AMEND REPUBLIC ACT NUMBERED THREE THOUSAND FOUR 
HUNDRED FIFTY-SIX, AS AMENDED BY REPUBLIC ACT NUMBERED FOUR 
THOUSAND ONE HUNDRED SEVENTY-SEVEN, OTHERWISE KNOWN AS 
“INTERNAL AUDITING ACT OF 1962” 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
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SECTION 1. 
Sections three and four of Republic Act No. 3456, as amended by Republic Act 
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No. 4177, otherwise known as “Internal Auditing Act of 1962,” are hereby further amended to 
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read as follows: 
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“SEC. 3. The Internal Audit Service shall be under the direct administrative supervision and 
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control of the head[s and/or assistant heads] of the agency. It shall be organized as an 
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independent staff unit and shall correspondingly perform staff hnctions. It shall be responsible 
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for instituting and conducting a program of internal audit for the agency. The chief of the Internal 
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Audit Service shall have the rank and salary equivalent to the third ranking official of the agency. 
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He/SHE shall report directly to the head [or assistant head] of the agency. 
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“SEC. 4. The [Auditor General] COMMISSION ON AUDIT (COA) shall be responsible for 
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the [promulgation and] enforcement of [general policies] the rules and regulations on internal 
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auditing, noncompliance or disregard of which shall be considered as a breach of official duty 
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and may be used as a basis for an administrative action against the defaulting official. [He] THE 
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COMMISSION shall coordinate government internal auditing activities [and schedule the 
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gradual installation of internal audit 
services 
in 
all 
branches, subdivisions 
and 
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instrumentalities 
of the government, including government-owned and/or -controlled 


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corporations,] and shall develop for execution, working plans and training programs to maintain 
continuously the effectiveness of these internal audit services.” 
SEC. 2. 
The Commission on Audit (COA), within ninety (90) days after this Act shall take 
effect together with the Civil Service Commission (CSC), Department of Budget ’ and 
Management (DBM) and in consultation with other agencies concerned, and the Association of 
Government Internal Auditors (AGIA), shall promulgate rules and regulations for the effective 
implementation of this Act. Upon such promulgation, the heads of the agencies including 
government-owned and/or -controlled corporations are mandated and shall be responsible for the 
installation of internal. audit services in their respective agencies within one (1) fiscal year. 
Internal audit activities shall include the following: 
(a) 
the means used to identify, measure, classify, and report such information; 
(b) 
Ascertaining the extent o f  compliance and reviewing the systems established to ensure 
compliance with government policies, plans and procedures, laws and regulations which have an 
Ascertaining the reliability and integrity of financial and operational information and 
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impact on operations; 
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cost; 
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(e) 
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Ascertaining the extent to which the assets and other resources of the institutions are 
accounted for and safeguarded from losses of all kinds; 
Reviewing and evaluating the soundness, adequacy and application of accounting, 
financial and other operating controls and promoting the most effective control at reasonable 
Reviewing operations or programs to ascertain whether or not resources are consistent 
with established objectives and goals and whether or not such programs are being carried out as 
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planned; 
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assigned responsibilities ; and 
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(8) 
Recommending corrective actions on operational deficiencies as observed. 
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Evaluating the quality of performance of groupdindividuals in carrying out their 
The Commission on Audit shall submit to both Houses of Congress copies of the Implementing 
Rules and Regulations within thirty (30) days after their promulgation. 


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SEC. 3. 
Any violation of this Act shall render the officials concerned liable under Republic 
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Act No. 6713, otherwise known as the “Code of Conduct and Ethical Standards for Public 
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SEC. 4. 
Officials and Employees,” and other existing administrative and/or criminal laws. 
All laws, executive orders, rules, regulations and other issuances or parts thereof 
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which are inconsistent with this Act are hereby repealed or modified accordingly. 
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SEC. 5. This Act shall take effect fifteen (15) days following its publication in at least two (2) 
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Approved, 
national newspapers of general circulation.