Section 3 - Office of Audits(A)Director of Audits(1) The AOC Director of Audits will report functionally to the Chief Justice and administratively for day-to-day operations to the AOC Director's Office.(2) The AOC Director of Audits will have unrestricted access to and may communicate and interact directly with the AOC Director's Office, the Committee, and when necessary, the Chief Justice.(3) The AOC Director of Audits will have unrestricted access to and may communicate and interact directly with all AOC employees. This ability to communicate includes the ability to speak in private meetings without management present.(4) The AOC Director of Audits has the responsibility to:(a) Oversee and supervise the Office of Audits, including the Division of Audit Services and the Division of Internal Audit.(b) Establish and ensure adherence to policies and procedures designed to guide the Division of Audit Services and the Division of Internal Audit.(c) Submit an Office of Audits budget to the Committee for review and approval.(d) Submit to the Committee for review and approval, at least annually, an audit plan for the Office of Audits, containing the proposed Division of Internal Audit engagements and Division of Audit Services audits to be performed in the coming year.(e) Communicate to the Committee the impact of resource limitations on the audit plan.(f) Review and adjust the audit plan, as necessary, in response to changes in the AOC's business, risks, operations, programs, systems, and controls.(g) Communicate to the Committee any significant interim changes to the audit plan.(h) Ensure each engagement and audit identified in the audit plan is executed, including the establishment of objectives, scope, and activities, the assignment of appropriate and adequately supervised resources, the documentation of work programs and testing results, and the communication of engagement or audit results with applicable conclusions, findings, and recommendations to appropriate parties when applicable.(i) Follow up on any engagement or audit findings to confirm implementation of recommendations or adherence to corrective action plans when applicable.(j) Communicate the results of all engagements and audits to the Committee and AOC senior management periodically and for each engagement or audit as appropriate.(k) Confirm the principles of integrity, objectivity, confidentiality, and competency are applied and upheld.(l) Certify the Office of Audits collectively possesses or obtains the knowledge, skills, and other competencies needed to meet the requirements of these rules.(m) Validate trends and emerging issues that could impact the AOC and communicate to the Committee as appropriate.(n) Ensure adherence to the AOC's relevant policies and procedures, unless such policies and procedures conflict with these rules. Any such conflicts will be resolved by or otherwise communicated to the Committee.(o) Document conformance of the Office of Audits with the standards set forth in these rules.(p) Develop, implement, and maintain a quality assurance and improvement program that covers all aspects of the AOC's internal audit function.(q) Coordinate and assist in external audits as required by Section 4 of these Rules.(r) Receive and respond to all claims of fraud, waste, and abuse made to the KCOJ Courts Tipline and investigate or refer as appropriate.(s) Develop and implement an internal audit strategy that supports the KCOJ's strategic objectives.(t) Establish internal audit performance objectives and a measurement approach, with input from the Committee.(u) Track and report progress with performance objectives.(v) Ensure that internal auditors conform with the IIA's Global Internal Audit Standards, including the principles of Ethics and Professionalism: integrity, objectivity, competency, due professional care, and confidentiality.(w) Understand and contribute to the AOC's expectations for the proper use of public resources, property, funds, and work time, recognize behaviors that are contrary to those expectations, and report to the Committee when those behaviors may represent an agency-wide concern. When those behaviors are observed as it relates to a specific person(s), the report should be made to the appropriate investigatory body.(B)Independence and Objectivity of the Office of Audits(1) The AOC Director of Audits will ensure that the Office of Audits remains free from all conditions that threaten the ability of the Office to carry out its responsibilities in an unbiased manner, including matters of audit selection, scope, procedures, frequency, timing, and report content.(2) If the AOC Director of Audits determines that independence or objectivity may be impaired in fact or appearance, the details of impairment will be disclosed to the Committee.(3) Office of Audits employees will maintain an unbiased mental attitude that allows them to perform audits and engagements objectively.(4) The Office of Audits will have no direct operational responsibility or authority over any of the activities audited. Accordingly, Office of Audits employees will not implement internal controls, develop procedures, install systems, prepare records, or engage in any other activity that may impair their judgment, including: (a) Assessing specific operations for which they had responsibility within the previous year.(b) Performing any operational duties for the AOC or other judicial branch offices.(c) Initiating or approving transactions external to the Office of Audits.(d) Directing the activities of any AOC employee not employed by the Office of Audits, except to the extent that such employees have been appropriately assigned to auditing teams or to otherwise assist the Office of Audits.(5) Where the AOC Director of Audits has or is expected to have roles and/or responsibilities that fall outside of the Office of Audits, safeguards will be established to limit impairments to independence or objectivity.(6) Office of Audits employees will:(a) Disclose any impairment of independence or objectivity, in fact or appearance, to the AOC Director of Audits.(b) Exhibit professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined.(c) Make balanced assessments of all available and relevant facts and circumstances.(d) Take necessary precautions to avoid conflicts of interest, bias, and undue influence.(7) The AOC Director of Audits will disclose to the Committee any interference and related implications in determining the scope of internal audit, performing work, and/or communicating results.(C) Division of Internal Audit(1) There is established a Division of Internal Audit within the Office of Audits.(2) Purpose and Mission (a) The purpose of the Division of Internal Audit is to provide the Committee and AOC management with independent, risk-based, and objective assurance and advisory services as to the AOC's risk management, governance, and internal control processes.(b) The mission of the Division of Internal Audit is to maintain the public trust and confidence in the AOC through the provision of independent, risk-based, and objective assurance and advisory services.(c) The Division of Internal Audit will bring a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.(3) The Division of Internal Audit will evaluate the AOC's internal controls, including its governance, operations, information technology security, and accounting processes. It will:(a) Ensure compliance with applicable laws, Administrative Procedures of the KCOJ, and Rules of Court, and with all AOC policies and procedures;(b) Provide support in accurate and timely financial reporting and data collection; and(c) Help maintain operational efficiency by identifying problems and correcting lapses before they are discovered in an external audit.(4) The AOC Director of Audits and employees of the Division of Internal Audit must be unbiased and objective in the performance of their job duties and must be independent from the operations they evaluate.(5) Professional Standards (a) The AOC Director of Audits must comply and govern itself with the IIA's Global Internal Audit Standards.(b) The Division of Internal Audit must be staffed with qualified, skilled, and experienced people who work in accordance with the IIA's Global Internal Audit Standards.(6) Authority of the Division of Internal Audit (a) The Division of Internal Audit must have full, free, and unrestricted access to all functions, records, property, and personnel pertinent to carrying out any audit, subject to accountability for confidentiality and safeguarding of records and information.(b) The Division of Internal Audit must allocate resources, set frequencies, select subjects, determine scopes of work, apply techniques required to accomplish audit objectives, and issue reports.(c) The Division of Internal Audit must obtain assistance from any AOC personnel, as necessary or appropriate, as well as other specialized services from within or outside the AOC, in order to complete an engagement.(7) Scope of the Division of Internal Audit (a) The scope of assurance and advisory services provided by the Division of Internal Audit covers the entire breadth of the AOC, including all the AOC's activities, assets, and personnel.(b) The scope of activities to be performed as part of any engagement may encompass, but is not limited to, objective examinations of evidence to provide independent assurance and advisory services to the Committee and AOC management on the adequacy and effectiveness of governance, risk management, and control processes for the AOC.(c) The audit plan may include engagements that evaluate whether:(i) Risks relating to the achievement of the AOC's strategic objectives are appropriately identified and managed.(ii) The actions of the AOC's officers, directors, management, employees, and contractors are in compliance with applicable laws, Administrative Procedures of the KCOJ, and Rules of Court, and with all AOC policies and procedures.(iii) The results of operations or programs are consistent with established goals and objectives.(iv) Operations or programs are being carried out effectively and efficiently.(v) Established processes and systems enable compliance with applicable laws, Administrative Procedures of the KCOJ, and Rules of Court, and with all AOC policies and procedures.(vi) Information and the methods used to identify, measure, analyze, classify, and report such information are reliable and have integrity.(vii) Resources and assets are acquired economically, used efficiently, and protected adequately.(d) The Division of Internal Audit may perform advisory services consistent with this subsection as may be agreed to with the applicable AOC stakeholders, provided the Division of Internal Audit employees do not assume any management responsibility. Any opportunities for improving the efficiency of governance, risk management, and control processes identified during the advisory services engagement will be communicated to the applicable AOC stakeholders and appropriate level of AOC management.(8) The AOC Director of Audits will meet quarterly with the Committee and report periodically as needed regarding: (a) The Division of Internal Audit's performance relative to the audit plan.(b) The Division of Internal Audit's conformance with the IIA's Global Internal Audit Standards, and corrective action plans to address any significant conformance issues.(c) Any significant risk exposures and control issues identified, including fraud risks, governance issues, and other matters requiring the attention of, or requested by, the Committee.(d) The results of the Division of Internal Audit's engagements.(e) The resource requirements related to the Division of Internal Audit's engagements.(f) Any response to reported or known risks by AOC management that may be unacceptable to the AOC or the Supreme Court.(9) The AOC Director of Audits may rely upon the work of other internal and external service providers as needed.(10) Quality Assurance and Improvement Program(a) The Quality Assurance and Improvement Program will include two types of assessments:i. External assessments must be performed once every five years in accordance with the IIA's Global Internal Audit Standards.ii. Internal self-assessments must be performed annually and include ongoing monitoring of the AOC's internal audit function for conformance with the IIA's Global Internal Audit Standards and progress toward performance objectives.(b) The results of all assessments must be communicated to the Committee.(c) The Quality Assurance and Improvement Program will assess, if applicable, compliance with laws and/or regulations relevant to internal auditing. The assessment will also include plans to address the AOC's internal audit function deficiencies and opportunities for improvement, if applicable.(D) Division of Audit Services(1) There is established a Division of Audit Services within the Office of Audits.(2) Purpose and Mission (a) The purpose of the Division of Audit Services is to provide independent and objective audits relating to the financial activities of elected and appointed officials and the operating costs for court facilities and to facilitate the resolution of financial accounts when an elected or appointed official takes office.(b) The mission of the Division of Audit Services is to maintain the public trust and confidence in the judicial branch by performing required annual audits and other investigations as warranted.(3) The AOC Director of Audits and employees of Audit Services must be unbiased and objective in the performance of their job duties and must be independent from the operations they evaluate.(4) Audit Services must be staffed with qualified, skilled, and experienced people.(5) Authority of the Division of Audit Services(a) The Division of Audit Services must have full, free, and unrestricted access to all functions, records, property, and personnel pertinent to carrying out any circuit court clerk, master commissioner, domestic relations commissioner, or court facility operating costs audit, subject to accountability for confidentiality and safeguarding of records and information.(b) The Division of Audit Services must allocate resources, set frequencies, select subjects, determine scopes of work, apply techniques required to accomplish audit objectives, and issue reports.(6) Scope of the Division of Audit Services(a) The Division of Audit Services will perform a financial and compliance audit of at least 40 Circuit Court Clerk's offices per year.(i) The Division of Audit Services should conduct an audit in each Circuit Court Clerk's office at least once every three years.(ii) The Division of Audit Services will issue the audit report to each Circuit Court Clerk audited. Copies of audits containing critical findings will be sent to the AOC Director.(iii) Pursuant to KRS 431.531(4), the AOC Office of Communications must publish an annual report on the KCOJ website no later than December 1 each year listing the amount of funds collected by each Circuit Court Clerk pursuant to KRS 30A.120 for the preceding fiscal year.(b) The Division of Audit Services will complete annual audits of Master Commissioners in accordance with AP Part, Part IV.(c) The Division of Audit Services will complete annual audits of Domestic Relations Commissioners in accordance with the Family Court Rules of Procedure and Practice (FCRPP) 4 and the Domestic Relations Accounting Procedures Manual Section 100.1.(d) The Division of Audit Services will perform annual operating costs audits for court facilities in accordance with KRS Chapter 26A and the AOC Policies for the Operation and Maintenance of Court Facilities.(7) The AOC Director of Audits will meet quarterly with the Committee and report periodically as needed regarding:(a) The Division of Audit Services' performance relative to the audit plan.(b) Any significant risk exposures and control issues identified, including fraud risks and other matters requiring the attention of, or requested by, the Committee.(c) The results of the audits.(d) Any resource requirements related to performing the audits.(e) Any response to risk by an appointed or elected official that may be unacceptable to the Supreme Court.Ky. Admin. P. Ct. Justice. 3
Adopted by Order 2019-11, eff. 10/23/2019; amended by order 2021-34, eff. 9/20/2021; amended by order 2024-35, eff. 11/7/2024.