The Parliament of the Republic of Montenegro, at the session on April 21 st 2004 passed the Law on State Audit Institution (Official Gazette of the Republic of Montenegro № 28/2004) which defined the establishment of the State Audit Institution of the Republic of Montenegro as an institutional, external, independent, professional and impartial control of the budget expenditures and state property management in Montenegro.

State Audit Institution is an independent and autonomous state organ and it functiones in accordance with the Lima Declaration guidelines, that were adopted in October 1977 at the IX INTOSAI Conference in Lima (Peru), as the principal international document on legal organization, position and activities of the public sector audit.

Audit procedure must be carried out in accordance with the International audit standards INTOSAI adopted by the International Organization of Supreme Audit Institutions (INTOSAI). All Supreme Audit Institutions grouped in INTOSAI are obliged to ensure the consistent implementation of the Lima Declaration guidelines.

State Audit Institution is a supreme control organ of budget and state property, local government units, funds, the Central Bank of Montenegro and all other legal entities that the state has its ownership in.

The Institution independently determines the audit entities, content, volume and audit type. Once a year, the Institution  is obliged to audit the annual budget balance sheet of the Republic of Montenegro.

The State Audit Institution controls the regularity, thrift, efficacy and efficiency of   budget expenditures and the state property mamagement. The Institution informs the Parliament of the Republic of Montenegro about the audit results by submitting an annual report. The annual report has to be presented to the Patliament by the end of October.

In July 2004, the Parliament of the Republic of Montenegro  appointed the president and members of the Senate of the State Audit Institution, and that created all the formal and legal conditions for the start of the Institution.

The Board of Economy, Finances and Environmental protection of the Parliament of the Republic of Montenegro in July 2004, on the basis of a public competition, elected six state auditors.

In addition to its control and advisory function the State Audit Institution conducts administrative activities as well. The following internal acts of the Institution were adopted: Internal Rules of Proceding, Working Metodology Instructions (Official Gazette of the Republic of Montenegro, № 2 / 2005) and the Rules of Work Organisation and Job Organisational Chart.