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 5-7||The authorities and responsibilities of the Audit Committee are as follows:|
|Article 6-7||The Company shall set up an internal audit department/ office/ unit, which will have complete technical independence as per the following:|
The technical framework for the internal audit activity in accordance with CMA instructions is as follows:
|Article 6-8||The 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:|
|Article 6-9||Further, 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
- Comply with laws, regulations, resolutions and instructions issued by Capital Markets Authority.
- Identify efficiency and effectiveness of the internal control systems in place in the business entity through addition or updates to ensure sustainable updates.
- 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
- Provision of internal audit services to listed and licensed companies on annual basis including the preparation of all required reports.
- Develop the internal control systems manual for listed and CMA licensed companies.
- Implement the corrective actions that arise from internal control review and internal audit reports.
- Internal auditors’ secondment to assist businesses with performing the internal audit activities.