In recent years, great developments have been made in the methods of modern urban management and ruling frameworks. The audit system of municipalities, because of its direct relation to administrative health, efficient and effective function, as well as the satisfaction of citizens, has great significance and validity. For the same reason, it is very important to have a comprehensive, efficient, clear, and responsive audit system. The initial step to achieve an efficient municipal audit system in accordance with local requirements of municipalities of Iranian metropolises is to set up regulations for comprehensive audit system in order to explain scientifically and practically the auditing nature, role, responsibility, situation, and authority in municipalities and the general lines of activities of internal audit scope. Reviewing the theoretical bases of audit and supervision, wide comparative studies on regulations, structures, and functions of auditing in a dozens of successful municipalities in the world, reviewing the functions of supervisory organizations and the Iranian supervision and audit upstream documents, assessment of the strengths and weaknesses of municipal audit system of Iranian metropolises, and scientific and specialized analyses constitute the principles for compilation of the proposed regulations the process of which has been discussed in the present article.