Internal Audit Services

Internal Audit Services

Internal Audit Services

Definition of Internal Audit

Internal audit is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
(Source: The Institute of Internal Auditors)

The above definition establishes basic cornerstones of internal audit to be objective consulting activity focusing on risks and governance.

The internal audit is a detective tool employed to ensure that the internal controls as approved by the board of directors are in place. It is worth mentioning that the objectives of internal audit and internal control are matching and interrelated.

The Internal Audit activity in Kuwait is a mandatory requirement for listed companies and companies licensed by the Capital Markets Authority (the “CMA”) and for banks, finance companies and exchange companies regulated by Central Bank of Kuwait. However, the internal audit is optional for other entities than those mentioned above.

Law No. 7 of 2010 and its Executive Regulations, Module 15 – Corporate Governance sets forth the relevant requirements for listed companies and companies licensed by Capital Markets Authority.

The organizational framework for the internal audit activity in accordance with CMA instructions is as follows:


Article 5-7The authorities and responsibilities of the Audit Committee are as follows:
  1. Technically supervise the Internal Audit function of the company to verify its effectiveness in performing the activities and assignments as defined by the board of directors.
  2. Recommend the appointment, transfer and termination of Internal Audit Manager, appraise their performance and assess the Internal Audit function performance.
  3. Review and approve the audit plan proposed by the internal auditor and provide feedback thereon.
  4. Review the findings set out in the internal audit reports and ensure that the necessary corrective actions have been taken with respect to the findings stated in the reports.
Article 6-7The Company shall set up an internal audit department/ office/ unit, which will have complete technical independence as per the following:
  1. The IA function shall report to the Audit Committee and accordingly the board of directors.
  2. The Internal Audit function’s Manager shall be directly appointed by the board of directors based on the Audit Committee’s nomination.
  3. The board of directors shall determine the roles and responsibilities of the Internal Audit function.

The technical framework for the internal audit activity in accordance with CMA instructions is as follows:

Article 6-8The internal audit department/ office/ unit shall prepare a report including review and evaluation of the internal control systems in place in the Company. Such report shall include the following:
  1. The procedures for control and supervision of the efficiency and effectiveness of internal control systems required to safeguard the Company’s assets and ensure authenticity of financial statements and efficiency of its management, financial and accounting operations.
  2. Comparison of risk factors development within the Company and the systems in place to assess efficiency of the Company’s day-to-day activities and address unforeseen changes in the market.
  3. Assessment of the executive management’s performance in implementing the internal control systems.
  4. Causes of failure in implementing internal controls, implementation weaknesses or emergencies that affected or may affect the Company’s financial performance, and the action adopted by the Company to address the failure in implementing the internal control.
Article 6-9Further, another audit firm shall review and assess the performance of internal audit department/ office/ unit regularly every three years. Copy of such report shall be submitted to the Internal Audit Committee and the board of directors.

Added value to business entities from engagement of Internal Audit Services in Kuwait

  1. Comply with laws, regulations, resolutions and instructions issued by Capital Markets Authority.
  2. Identify efficiency and effectiveness of the internal control systems in place in the business entity through addition or updates to ensure sustainable updates.
  3. Enhance the business entity’s performance efficiency and competitive capabilities through having the ability to face unforeseen changes in the market and define the causes of failure to implement the internal control systems.

Internal Audit Services in Kuwait provided by Baker Tilly

  1. Provision of internal audit services to listed and licensed companies on annual basis including the preparation of all required reports.
  2. Develop the internal control systems manual for listed and CMA licensed companies.
  3. Implement the corrective actions that arise from internal control review and internal audit reports.
  4. Internal auditors’ secondment to assist businesses with performing the internal audit activities.

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