Internal Audit Consulting Services

Internal audit is defined as:

An independent and objective assurance and consulting activity designed to add value to and improve an organization’s operations and help it achieve its objectives by providing a structured and disciplined methodology to evaluate and improve the effectiveness of risk management, control and governance processes.

(Source: The Institute of Internal Auditors)

Given the critical role of the internal audit function, the regulators, e.g., Central Bank of Kuwait, Capital Markets Authority, and Insurance Regulatory Unit, stressed the requirement to set up an organizational unit to be in charge of internal audit and form an audit committee to monitor the internal audit activities and present the reports and findings to the Board of Directors.

Are there different methods for implementing the internal audit function within business entities?

Yes, there are different methods for implementing the internal audit function, as outlined below.

1. Establishing an organizational unit for the internal audit function

   Under this method, a business entity establishes an independent organizational unit for internal audit function, creates a job structure, and develops management systems for it. Such an organizational unit performs all roles and activities of the internal audit function.

2. Engaging a consulting firm specialized in internal audit on an outsourcing basis to perform the duties of a CMA-registered position.

   Under this method, the consulting firm will be responsible for implementing the internal audit activities, presenting its reports to the Audit Committee, and preparing all responses related to the internal audit activity to the Capital Markets Authority.

   Does the Capital Markets Authority allow licensed companies to outsource the Internal Audit Activity?

   Yes, the Capital Markets Authority allows this as the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and the Regulating Securities Activities in Module 5, Chapter 3, Article 3-2-8 sets forth the following:

   A licensed person may engage an external firm to perform the tasks of the registered jobs as follows:

   An external firm may be engaged to perform the following tasks of the registered positions:

   1. • …………
      • Internal Audit Officer
      • …………..

   What are the tasks and duties assigned to the Internal Audit Officer as per the Capital Markets Authority Bylaws?

   This role involves two parts, i.e., the administrative duties and tasks, and the technical duties and tasks.

   The administrative duties include performing all necessary activities for managing the internal audit function in terms of maintaining reports and records, submitting the reports to the audit committee and following up the required procedures in this respect.

   The technical duties and tasks include the following:

   • Preparing the internal audit plan
   • Implementing the internal audit plan
   • Preparing the internal audit reports based on the internal audit plan
   • Following up on the findings raised in the reports

   What are the advantages of outsourcing the function of the Internal Audit Officer?

   Here are the key advantages that business entities gain from outsourcing the Internal Audit Officer function:

   • Access to specialized knowledge and expertise possessed by the external firm providing outsourced Internal Audit services.
   • Cost saving compared to maintaining an in-house Internal Audit team.
   • Enable the business entity to focus on its core activities, strategic initiatives, and revenue-generating operations.
   • Limit the liability of the business entity and obtain Internal Audit services according to the changing needs of the business.
   • Ensure compliance with the latest standards and practices in Internal Audit.
   • Provide objectivity in the Internal Audit process, as the external firm is not influenced by internal factors within the business entity.

3. Engaging a specialized consulting firm on an outsourcing basis

   Under this method, the business entity will have an internal audit officer while the Audit Committee is willing to engage a consulting firm to perform the entire internal audit activities to ensure the independence thereof.

   Such activities include the following:

   • Preparing the internal audit plan
   • Implementing the internal audit plan
   • Preparing the internal audit reports based on the internal audit plan
   • Following up the findings raised in the reports

What are the other internal audit consulting services provided to business entities?

1. Implementing all corrective actions that arise from internal audit reports

   Assisting business entities in addressing the findings reported in the internal audit reports through implementing all agreed corrective actions and ensuring that gaps in internal controls are bridged.

2. Attending meetings with the Audit and Risk Committee to present periodic internal audit reports

   Delivering presentations to the business entity’s Audit and Risk Committee to highlight the contents of periodic internal audit reports and provide responses and explanations to any questions or inquiries raised by the Audit and Risk Committee in this respect.

3. Setting up Internal Audit Unit/ Office/ Department

   • Preparing Policies, Policies and Procedures Manuals
   • Preparing the job structure based on the Audit Committee’s insights on creating the internal audit function
   • Preparing job descriptions for the internal audit function
   • Preparing the monthly report template for the internal audit function

4. Setting up Audit Committee

   • Preparing Audit Committee Charter
   • Preparing the job descriptions for the Audit Committee members

What are the methodologies used to provide internal audit consulting services?

There are several globally proven methodologies that are employed in internal audit consulting to help business entities achieve internal audit objectives, including but not limited to the following:

1. International Professional Practices Framework (IPPF) issued by the Institute of Internal Auditors (IIA)
2. Standards issued by Information Systems Audit and Control Association (ISACA)
3. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework.

What is the added value to business entities from Internal Audit Services?

1. Ensure compliance with the applicable legal and regulatory requirements in the State of Kuwait.
2. Identify the efficiency and effectiveness of the internal controls in place within the business entity through additions or updates to ensure sustainable updates.
3. Enhance the business entity’s performance efficiency and competitive capabilities by having the ability to face unforeseen changes in the market and define the causes of failure to implement internal controls.
4. Enhance transparency and accountability by following up on activities and reports.

What are the Services offered by Baker Tilly Kuwait?

1. Outsourced Internal Audit Officer function as per CMA requirements

2. Internal Audit Consulting, which comprises the following services:

   • Performing internal audit activities
   • Implementing all corrective actions that arise from internal audit reports
   • Attending meetings with Risk Audit and Risk Committee to present periodic internal audit reports
   • Setting up Internal Audit Unit/ Office/ Department
   • Setting up the Audit Committee