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Title: Implementation Regulations of Internal Control and Audit Systems for the Credit Departments of Farmers' and Fishermen's Associations Ch
Date: 2018.03.15
Legislative: 1.Promulgated on January 28 , 2004
2. Amended on December 26, 2008
3. Amended on March 15, 2018
Content: Article 1
These Regulations are enacted in accordance with Paragraph 2, 
Article 28 of Agricultural Finance Act (referred to as the 
“Act” hereunder).

Article 2
The credit departments of farmers’ and fishermen’s 
associations (collectively referred to as “credit departments” 
hereunder) shall establish internal control and audit systems 
and draw up operating processes based on the operational manuals 
for various businesses compiled by institutions commissioned by 
the central competent authority as basis for operations, 
management and internal audit.  

Article 3
The fundamental objectives of internal controls are to promote 
sound operations of the credit departments and, through joint 
compliance by directors, supervisors, secretary-general, 
management and all business-related personnel of credit 
department to promote the efficiency of operations, maintain 
security of assets and ensure the reliability and integrity of 
financial and management information as well as compliance with 
applicable rules and regulations. 

Article 4
Credit departments should establish an internal control system 
in accordance with the following provisions:
1. Management oversight and control culture: The board of 
   directors shall be responsible for approving and periodically 
   reviewing overall business strategies and major policies, and 
   shall ensure that an adequate and effective internal control 
   system is established and maintained; the secretary-general 
   shall be responsible for implementing business strategies and 
   policies approved by the board of directors, developing 
   processes that identify, measure, monitor, and control the 
   risks of the credit department, and setting an appropriate 
   internal control system and monitoring its effectiveness and 
   adequacy.
2. Risk identification and assessment: An internal control 
   system requires that the material risks that could adversely 
   affect the achievement of the overall goals of the credit 
   department are being identified and continually assessed.
3. Control activities and segregation of duties: Control 
   activities shall be an integral part of the daily operations
   of a credit department. An appropriate control structure 
   shall be set up, with internal control processes defined at 
   every level. An effective internal control system requires 
   that there is appropriate segregation of duties and that 
   employees are not assigned conflicting responsibilities.
4. Information and communication: A credit department shall 
   maintain adequate and comprehensive financial, operational 
   and compliance information that are reliable, timely, easily 
   accessible, and provided in a uniform format. The internal 
   control system shall also have effective channels of 
   communication. 
5. Monitoring activities and remediation of deficiencies: A 
   credit department shall continuously monitor the overall 
   effectiveness of its internal controls. Any internal control 
   deficiencies discovered in internal audits or by other 
   internal control personnel shall be immediately reported to 
   appropriate management and shall be promptly remedied.

Article 5
A credit department shall establish an internal audit system and 
a self-inspection system to maintain effective and proper 
operation of the internal control system.
The internal audit system should require that internal auditors 
are responsible for auditing the operations of relevant units 
(including the credit department and sub-departments, electronic 
data processing unit and property safekeeping unit) and 
periodically evaluate the performance of self-inspection 
conducted by relevant units.
The purpose of an internal audit system is to assist the board 
of directors, board of supervisors and secretary-general in 
examining and evaluating whether the internal control system 
works effectively and to provide timely suggestions for 
improvement so as to ensure the ongoing and effective 
implementation of internal controls.   
With respect to the self-inspection system, staff of credit 
business related units should check on each other the actual
implementation of business under the supervision of deputy chief 
or personnel at comparable position or higher as assigned by 
each unit to discover deficiencies early and take corrective 
actions in a timely manner.

Article 6
Farmers’ and fishermen’s associations should assign an 
appropriate number of full-time internal auditors based on the 
size of business volume to perform audits of the credit 
department. The internal auditors shall report the audit 
business and implementation of internal controls by the credit 
department to the board of directors and board of supervisors 
once every half a year. 
For farmers’ or fishermen’s associations with a credit 
department set up for less than three years or situated in a 
remote area, their internal auditors may concurrently work on 
businesses other than those of the credit department, provided 
it has been approved by the competent authority.  

Article 7
An internal auditor shall meet the following qualification 
requirements:
1. Having graduated from a senior vocational school with a major 
   in business or related division/section and having not less 
   than 3 years of experience in financial business; or having 
   not less than 6 years of experience in financial business 
   and having worked not less than 3 years as an auditor at an 
   accounting firm or a programmer or system analyst at a 
   computer firm, and during which, having received not less 
   than 3 months of training in financial business and 
   administration.
2. Free of any record of demerit or more serious disposition 
   from employer in the last three years, unless the demerit 
   record was a result of joint and several disciplinary action 
   on account of the violation or offense of a co-worker, and 
   the demerit has been offset by other merits; and
3. Having attended auditor training course or computer audit 
   training course offered by a professional training 
   institution recognized by the central competent authority and 
   obtained a completion certificate therefor.
If the internal auditor of a credit department that has been 
established for less than three years or is situated in a remote 
area does not meet the qualification requirements set out in the 
preceding paragraph, the credit department shall report to the 
competent authority for approval under a special case status. 

Article 8
An internal auditor shall, during his/her employment, attend 
finance-related training offered by a professional training 
institution mentioned in Subparagraph 3, Paragraph 1 of the 
preceding article every year and obtain a completion certificate 
therefor.
A professional training institution under the preceding 
paragraph shall, at the end of each year, submit a plan on the 
contents, hours and instructors of the training courses it plans 
to offer the following year to the central competent authority 
for consent and submit a report on the training offered the 
previous year to the central competent authority for record.
The central competent authority may, in view of the actual 
business needs of a credit department, coordinate the adjustment 
of contents, hours and instructors of the training courses 
offered by a professional training institution under the 
preceding paragraph.

Article 9
An internal auditor may not commence his/her assignment until 
after obtaining approval from the competent authority. The 
preceding provision applies to change of internal auditor.
An internal auditor may not be discharged (dismissed), 
transferred or demoted unless he/she has committed gross 
negligence. Notwithstanding the foregoing, an internal auditor 
may be transferred to a different job with the consent of at 
least two thirds of all directors.
In the meeting of the board of director under the preceding 
paragraph, if any director has a dissenting or qualified 
opinion, it shall be recorded in the meeting minutes.
Farmers’ and fishermen’s associations shall submit a report on 
the qualifications and training records of their internal 
auditors to the competent authority for recordation at the end 
of each year.

Article 10
The duties of an internal auditor are as follows:
1. Audit of business and account books (including electronic 
   data and bad debt write-off).
2. Audit of assets and liabilities.
3. Audit of contracts, bills, receipts, internal rules, and 
   statements.
4. Taking inventory of stock and articles in custody.  
5. Investigation of internal fraud cases and other material 
   contingencies.
6. Follow-up of improvement actions taken against deficiencies 
   found in financial examination and items to be rectified 
   under the order of the competent authority.
7. Inspection of documents handed over during handover of job. 
8. Planning, supervision and audit of self-inspection operation. 
9. Formulation and evaluation of and making suggestions for 
   internal control system. 
10. Participating in the formulation or revision of operating 
    and management rules for respective operations.
11. Other audit related matters.

Article 11
Internal auditors should exercise due diligence required of 
their profession, maintain impartiality and independence in the 
performance of duties without giving advance notice and keep the 
audit information confidential. 

Article 12
When conducting audits, an internal auditor should use the 
approaches of inventory taking, inspection, observation, 
inquiry, correspondence, double check and analysis to gather 
adequate and suitable evidence as basis for expressing opinions 
on business 

Article 13
In the performance of audit work, internal auditors shall record 
the information and data obtained on their working papers. In 
case spot check audit is carried out, the internal auditor shall 
note the spot check method, starting and ending time period or 
account numbers examined and scope of examination in the working 
papers to delineate responsibility. 

Article 14
When an internal auditor conducts audit work, staff of the 
audited unit should cooperate closely and provide necessary data 
and documents to facilitate the audit work. In addition, if 
deemed necessary, an internal auditor may, together with 
managing personnel, ask the audited staff to open the cabinet 
and drawer under their care for inspection. 

Article 15
For the performance of audit work, an internal auditor may, if 
deemed necessary and after obtaining the approval of 
secretary-general, request the staff of other units or staff in 
the audited unit but not handling the audited business to assist 
in the calculation work. The assisting staff shall sign their 
name on the working papers to take responsibility for the 
accuracy of dollar amounts (balance) they calculated.

Article 16
Internal auditors shall draw up an audit plan for the following 
year in accordance with the requirements of the central 
competent authority and based on the operational and management 
needs of the credit business and past work experience. The 
audit plan shall be submitted to the secretary-general in a 
confidential manner for approval and implemented accordingly. 
Internal auditors shall conduct at least one general audit and 
one special audit of the credit business related units every 
year. For business units with deficiencies in business 
operation, the internal auditor should conduct review at least 
once every three months. If deemed necessary, the competent 
authority may order a farmers’ or fishermen’s association to 
conduct a special audit.  
When the duties performed by the board of supervisors of a 
farmers’ or fishermen’s association according to law involves 
credit business, the internal auditor should provide assistance. 

Article 17
An internal auditor should produce a written report for each 
audit work performed and submit the report to the board of 
directors and the board of supervisors through the 
secretary-general. If the report mentions deficiencies in 
regulatory compliance, the board of directors will discuss 
concrete improvement measures, which, once decided by the board, 
will be immediately implemented under the supervision of the 
board of supervisors.
An internal auditor shall produce an accurate and detailed audit 
report. A report on general audit shall disclose at least the 
following information: 
1. The scope of audit, financial status, business performance, 
   asset quality, operational control and internal management 
   for respective business, information management, status of 
   self-inspection; and deficiencies in regulatory compliance, 
   and evaluation thereof.
2. A status report on improvement actions taken by each business 
   unit in response to the examination opinions of or 
   deficiencies found by financial supervisory agency or 
   financial examination agency commissioned by the central 
   competent authority, or Agricultural Bank of Taiwan, or 
   internal auditor or self-inspection personnel.
Farmers’ and fishermen’s associations shall submit written 
reports under Paragraph 1 hereof to the competent authority 
with a copy sent to the Agricultural Bank of Taiwan.
Internal audit reports and related working papers shall be 
retained for at least five years.

Article 18
Internal auditors shall pay attention to ethics and be free of 
the following situations: 
1. Engaging in conduct exceeding the bounds of audit authority 
   or other illicit activities.
2. Disclosing privileged information to others, or disclosing 
   privileged information for personal gain or damaging the 
   interests of the credit department.
3. Not withdrawing from audit cases involving business he or 
   she used to perform or is having an interest in.
4. Accepting unjustified entertainment or gratuity or other 
   illicit benefits from employees or customers. 

Article 19
For internal auditors who have a breach of duty or violate the 
provisions of the Act, the competent authority may, in view of 
the severity of the situation, order the farmers’ or 
fishermen’s association to transfer the auditor to a different
job or take disciplinary action against the auditor in 
accordance with the Regulations Governing Personnel Management 
of Farmers’ or Fishermen’s Associations.  

Article 20
When an internal auditor learns any material omission, violation 
of rules or regulations or other situations that may lead to 
significant loss of the credit department, he or she should 
promptly report to the secretary-general, executive supervisor 
and chairman for further actions. If the aforementioned officers 
fail to take any action, the internal auditor should immediately 
file a report with the competent authority with a copy sent to 
the financial supervisory agency or financial examination agency 
commissioned by the central competent authority, the 
Agricultural Bank of Taiwan and the Central Deposit 
Insurance Corporation.
Farmers’ and fishermen’s associations should commend internal 
auditors who discovered fraud.
When a credit department is found to have a material omission 
or fraud, it shall make full disclosure in its internal audit 
report personnel responsible for the major omission.

Article 21
A credit department should establish a self-inspection system to 
step up internal controls and thereby prevent the occurrence of 
fraud.
Credit business related units shall conduct at least a general 
self-inspection semiannually; at least a special 
self-inspection every month. The head of the unit should assign 
a person other than the original handling staff to conduct the 
inspection and keep the inspection activity confidential 
beforehand. In the month where general self-inspection or 
general audit by the internal auditor has been conducted, the 
special self-inspection may be exempted in that month.
The self-inspection report shall be stamped with the seal of the 
unit head and then submitted to the internal auditor for report 
to the secretary-general. In case of regulatory violation or
other deficiencies revealed in the self-inspection report, the 
secretary-general should report to the board of directors for 
discussion of concrete improvement measures, which, once decided 
by the board, will be immediately implemented by the board under 
the supervision of the board of supervisors.
Farmers’ and fishermen’s associations should provide the 
self-inspection personnel with proper training. The internal 
auditor will supervise the self-inspection work conducted by 
respective unit.

Article 22
Internal auditors shall, before the end of January and July each 
year, submit a report on the types, frequency and contents of 
self-inspection conducted in the previous half year to the 
competent authority for record, with a copy sent to the 
Agricultural Bank of Taiwan.

Article 23
If a credit department conceals the fact about its poor internal 
management or lack of internal controls, inadequate 
implementation of its internal audit system by internal 
auditors, or its internal auditor conceals the audit findings 
that results in material fraud, relevant personnel involved 
shall take the responsibility for negligence of duties.

Article 24
These Regulations shall be implemented on the date of 
promulgation.