Public sector consists of the entities, which are completely or partially financing their business by using public money. Therefore, it is of a public interest to conduct analysis, controls and audits of their business. Public sector internal audit with financial management and controls is a part of public sector internal financial control system. This unit assists user of a budget in achieving his objectives, by using systematic and disciplinary approach to the evaluation and improvement of risk management, controls and governing process' effectiveness. Primary tasks of public sector internal audit unit are evaluation of financial management and controls effectiveness and providing the top management with expert, independent and objective opinions, as well as consulting the top management. For the conducted activities, auditors report directly to the top management, with an objective to add value and improve budget users' business. The objective of this thesis is to give a review of how public sector internal audit is composed in selected countries, that is, to review challenges various governments have regarding the topic. This paper covers case studies of developing countries, that is, Georgia and Nigeria. On the other side, Australia will be used as a better practice example of organising public sector internal audit. The paper will also cover European Commission's guidelines for public internal financial controls, which EU candidate countries, as well as Croatia are obliged to follow.