The latest policy statement replaced an earlier one issued in 1957 and is based on GAO's experiences in the development and practices of internal auditing since 1960. It also responds to Congressional interest in establishing strong internal audit systems in the Federal Government. As auditing concepts have evolved from a detailed examination of all transactions to a pattern of testing internal control systems, the role of internal auditing has gradually expanded. Since the 1945 legislation which provided for GAO auditing of Federal corporations, this agency has always reviewed the effectiveness of the audited organization's system of management controls in order to determine how much detailed audit work was necessary. This approach is evident in reports issued on the Reconstruction Finance Corporation and the Maritime Commission in the late 1940's. The Second Hoover Commission's report in 1955 observed that although internal auditing organizations had been created in many agencies, most were still in the pioneer stage and not really effective. The 1957 GAO statement on internal auditing was widely used by Federal agencies to develop their internal audit systems and training programs. The 1968 revision reflects experiences gained from vastly increased federal funded programs and places a much stronger emphasis on the value of a single centralized internal audit organization within a Federal department or agency. It also specifies that the internal auditor must be independent, located at the highest practical administrative level, and report to the agency head or a principal official. The internal auditor is still given a broad scope of operations, but in reality, management considerations and technical problems may curtail investigative activities. The revised statement supports the use of third party auditing, particularly in grant and loan programs. Auditor training and qualifications are expanded to include statistical sampling, electronic computers, management information systems, economics, and operations research. Reporting requirements and responsibility for following up audit findings are clarified. In a 1969 report to Congress, the Comptroller General stated that GAO reviews indicated that significant progress had been made toward achieving effective internal audit systems in Federal agencies. Footnotes are included.