Subject of this paper is the internal audit organization in public sector. The main goal of this paper is to present the position of internal audit in the public sector of the Republic of Croatia. The importance of internal audit as a profession which contributes to the positive developments in both public and private sector has been emphasized. The most important factors affecting the development of the internal audit as a profession have been described, as well as the influence of the positioning of the internal revision department in the overall organizational structure on the work of the internal auditors. Legislative framework an internal revision reporting entities in the public sector must abide to has been included and the phases of internal audit implementation have been presented. The paper shows that the internal audit in the public sector can be organized as an independent unit for internal audit, as a joint unit for internal audit and as an agreement on internal audit practice. Types of the organization of internal audit in the public sector have been corroborated with examples. The following methods have been used in the course of writing this paper: inductive, deductive, method of abstraction, analysis and synthesis, as well as the method of compilation and systematization. Implementation of the mentioned methods has led to the conclusion that internal audit considerably eases the achievement of business goals, minimizes the expenses, shows the weaknesses appearing in the business and gives the concrete solutions. In the public sector of the Republic of Croatia, internal auditors still encounter difficulties when performing their duties, and organizing the internal audit in one of the three ways proscribed by the law still presents a great problem for the internal audit reporting entities.