Internal Audit Quality Assessment is an assurance service provided by an independent auditor. It involves examining and assessing the internal audit function within business entities to ensure compliance with regulatory requirements and International Professional Practices Framework. This service is intended to verify that the internal audit function within the organization is effectively and properly performing its role, in alignment with professional standards, thereby enhancing governance and control mechanisms.
Performance assessment of internal audit function is termed by the Institute of Internal Auditors (IIA) as a “Quality Assurance and Improvement Program (QAIP)”, which enables an evaluation of the internal audit activity’s conformance with the Definition of Internal Auditing and the International Standards for the Professional Practice of Internal Auditing (Standards) and an evaluation of whether internal auditors apply the Code of Ethics. The program also assesses the efficiency and effectiveness of the internal audit activity and identifies opportunities for improvement.
What is the purpose of internal audit (department/ office/ unit) quality assessment?
The Framework for Quality Assurance issued by the Institute of Internal Auditors (IIA) indicates that the purpose of engaging an external auditor by business entities to evaluate the performance of internal audit function is to provide the stakeholders with assurance that the internal audit activity is performed in accordance with the relevant international standards of internal auditing, and that the internal auditors comply with the code of ethics.
What is the standard mandate regarding External Assessments?
IIA Standard 1312 – External Assessments requires that an external assessment of an internal audit activities be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organization. The objective of the external assessment is to evaluate an internal audit activity’s conformance with the Standards and the Code of Ethics.
Is the performance quality assessment of internal audit function (department/ office/ unit) a mandate by regulatory bodies in Kuwait?
Central Bank of Kuwait has not required the business entities supervised by it to conduct a review and evaluation of the internal audit function. However, some banks perform such evaluations voluntarily.
With respect to Capital Markets Authority, as the regulator of licensed persons and listed companies, the Executive Bylaws of Law No. 7 of 2010 concerning the Establishment of Capital Markets Authority and Regulation of Securities Activity set forth in Module 15 – Corporate Governance, Article 6-9, as follows:
An independent audit firm shall be engaged to evaluate and review the internal control systems and prepare a report in this regard (Internal Control Report), which shall be submitted to CMA on annual basis. Furthermore, another audit firm shall review and assess the performance of the internal audit department/office/ unit periodically every three years; provided that a copy of such report shall be submitted to the internal audit committee and the Board of Directors.
What is the effective date of Article 6-9 of Module 15, based on which the three-year period is computed?
Pursuant to Appendix (3) Transitional Provisions to Decision No. 72 of 2015 dated 9 November 2015 regarding issuance of Executive Regulations of Law No. 7 of 2010, Article 6-9 of Module 15 of the said Executive Regulations shall come into effect from 30 June 2016. Furthermore, based on the Reminder issued by Capital Markets Authority on 18 October 2018, which sets the deadline of 30 June 2019 for preparing the first report on the review and assessment of the internal audit department/ office/ unit.
Thus, the listed and licensed companies have submitted the report on the review and assessment of the internal audit function’s performance to the Internal Audit Committee and Board of Directors not later than 30 June 2019, then they shall follow it with subsequent reports every three years.
Who can conduct the internal audit quality assessment?
As per Capital Markets Authority mandates, the internal audit quality assessment shall be carried out by a licensed auditor who was not appointed for auditing the financial statements nor conducting an annual internal control review.
What legislation and international standards does the independent auditor adopt in preparing the Internal Audit Quality Assessment Report?
- Capital Markets Authority legislation and regulations
- International Professional Practices Framework (IPPF) issued by IIA
Are there any specific conditions for engaging the auditor to prepare the above report?
There are no specific conditions for engaging the auditor as the Reminder issued by Capital Markets Authority on 18 October 2018, states that the auditor shall be engaged to prepare the aforesaid report whether or not they are registered on the Auditors Register with CMA.
What is the added value to business entities from conducting Internal Audit Quality Assessment?
- Comply with laws, regulations, resolutions, and instructions issued by Capital Markets Authority.
- Identify the efficiency of the internal audit department/ office/ unit performance in carrying out their roles and responsibilities.
- Enhance the performance efficiency of the internal audit department/ office/ unit and the business entity as a whole by identifying strengths and weaknesses and defining performance improvement opportunities.
Why Baker Tilly?
- Baker Tilly in Kuwait is a member of Baker Tilly International network based in the UK, ranked amongst the top 10 global accounting networks.
- Auditors in Baker Tilly Kuwait are licensed by Ministry of Commerce and Industry and are registered with the regulatory authorities, e.g., Central Bank of Kuwait, Capital Markets Authority and Insurance Regulatory Unit.
- Extensive experience in providing Internal Audit Quality Assessment service to companies operating across various business sectors in the State of Kuwait.
- Highly experienced bilingual team with specialized academic qualifications and professional certifications.
- Commitment to performing Internal Audit Quality Assessment engagements according to predefined timelines, with no delays and responsiveness to client requirements.
What are the services offered by Baker Tilly Kuwait?
Assurance Report on Internal Audit Quality Assessment