Definition of Internal Audit

An independent and objective activity with the aim of adding benefit to the management and improving its operations to achieve its objectives by evaluating and improving the effectiveness of operations and control .

Internal audit is a more comprehensive role than external audit, as it performs more work and competencies than verifying the validity of financial statements, such as verifying operational operations and compliance with company policies, and the internal audit helps the external auditor during his implementation of the audit and reduces the burden required to perform the audit process to reassure the external auditor of the existence of internal control systems activated by the presence of an internal audit department, and that is only the case that the internal audit report on the financial statements does not contain important and influential observations.

1. Financial review, which is a review to verify the validity of financial and accounting statements by verifying the accuracy, classification, evaluation and completeness of transactions and the existence and ownership of balances .

2. Operational audit, which is the review of operations by examining and evaluating the performance of the company's business as a whole to verify efficiency (which is the establishment of control systems at the lowest cost and the best return) and effectiveness (the implementation of those systems as redescribed)

1.The role of the internal auditor is to reach reasonable confirmation of the implementation of the internal systems and not 100% certainty, whatever the control system in any entity, because there are three inherent risks that can occur in any internal control system, namely:

1- Skipping the existing control systems by senior management.

2- The existence of collusion between the employees of more than one department to manipulate the assets of the facility.

4. Human errors

Internal control is an element that is developed by senior management and department managers so that major objectives are achieved in any facility, namely:

1 Efficiency and effectiveness of the operational process

2. Relying on the figures in the financial reports

3. Compliance with external laws and legislations and internal policies

4. Preserving the assets of the establishment from waste and embezzlement

One of the types of internal control is preventive control, which is the most important, but it may sometimes be expensive, revealing control and corrective control.

The internal audit is the one who evaluates the internal control elements to verify their efficiency and make recommendations to solve any weakness within them and then verify the effectiveness of those elements.

FRA Board Resolution No. 164 of 2018 and No. 61 of 2020 Regarding the Executive Rules of Corporate Governance:

Internal Audit Department:

1- The company must have a department specialized in internal audit to develop control procedures within the company and evaluate them to verify their effectiveness.

2- The Director of the Internal Audit Department shall present the scope of his work, plans, programs and reports to the Internal Audit Committee to attend its meetings.

3- The appointment and dismissal of the Director of the Internal Audit Department and the determination of his financial treatment shall be by a decision of the Board of Directors of the company and after the approval of the Audit Committee, and the Board of Directors shall issue a decision specifying the objectives, tasks and powers of the Internal Audit Department and the names of its managers and assistants.

4- The Director of the Internal Audit Department shall submit a quarterly report to the Audit Committee on the extent of the company's compliance with the provisions of the laws and rules governing its activity, as well as on the extent of its commitment to the rules of governance, in coordination with the Internal Controller.

5- Internal control systems and procedures are developed based on a study of the risks facing the company, and the opinions and reports of the Board of Directors, auditors and managers of the company are used, and the follow-up and evaluation of these risks are updated periodically.

Audit Committee:

1- The Board of Directors shall form an audit committee whose number of members shall not be less than three, and that they shall be among the non-executive and independent members of the Board of Directors on three, and they shall be among the non-executive and independent members of the Board of Directors on three, and they shall be among the non-executive and independent members of the Board of Directors, provided that among them shall be an independent member with experience in financial and accounting affairs, and the Committee may seek the assistance of the auditor or whoever it deems appropriate to attend its meetings without its members.

3. The Audit Committee shall have at least the following competencies:

1- Studying the internal control system and preparing a written report with its observations and recommendations and proposing any amendments it deems necessary to ensure its efficiency and effectiveness

2- Studying internal audit reports and developing corrective actions.

3- Submitting proposals to the Board of Directors regarding the appointment and dismissal of the auditor, determining his fees, and setting controls that ensure his independence and the continuity of this independence.

4- Studying the scope of the audit with the auditor and submitting its observations on it and submitting an opinion in assigning any other work to him other than reviewing the company's accounts and proposing his fees for these works in a manner that does not conflict with the Egyptian auditing standards and without prejudice to his independence.

5- Studying the draft interim financial statements before presenting them to the Board of Directors in preparation for sending them to the auditor.

6- Studying the auditor's report on the financial statements, discussing the observations and reservations contained therein, following up on what has been done in this regard, and working to resolve differences in views between the company's management and the auditor.

7- Preparing a periodic report every three months on the results of the Committee's work and presenting it.

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