Internal Audit Service
The Internal Audit Service (IAS) reports and is accountable to KMG’s Board of Directors and supervised by the Audit Committee of KMG’s Board of Directors. The activities of the IAS are governed by Kazakhstan’s laws, KMG’s internal documents and the International Standards for the Professional Practice of Internal Auditing.
The IAS focuses on providing the Board of Directors with independent and objective information to ensure the effective management of KMG and its subsidiaries and associates by employing a systematic approach towards improving risk management, internal control and corporate governance processes.
To perform its activities in accordance with the annual audit plan, the IAS:
- assesses the reliability and effectiveness of applicable internal controls and risk management;
- assesses the reliability, completeness and objectivity of the accounting policy as well as financial statements of KMG and its subsidiaries and associates based on such policies;
- assesses the efficiency of resource management at KMG and its subsidiaries and associates and the methods used to ensure asset integrity;
- monitors compliance with Kazakhstan’s laws, corporate operational, investment and financial rules and regulations.
The IAS uses audit results to make recommendations on improving KMG’s operations. The IAS consistently monitors and oversees the development and execution of measures to implement its recommendations.
Internal audits are carried out by KMG’s Internal Audit Service.
The activities of the IAS are governed by: Kazakhstan’s laws; KMG’s Charter; decisions of KMG’s governing bodies; internal documents regulating the IAS activities; Regulations on KMG’s Internal Audit Service and Guidelines for KMG’s Internal Audits.
The annual Internal Audit Plan is developed from a consideration of the principal risks confronting KMG, the audit testing cycle and management requests. The Internal Audit Plan also accommodates ad hoc requests from the Audit Committee and Management.
The Audit Committee not only monitors the IAS’ performance but also facilitates professional development of the IAS employees and the management of its talent pool. These issues are covered by the IAS reports and reviewed by the Audit Committee on a quarterly basis. The quarterly reports detail the progress made by the IAS against a number of objectives including obtaining certificates, completing trainings/seminars budgeted within the IAS training and upskilling programme.
The high professional level of the IAS employees is a key performance driver for KMG’s internal audit function; therefore training and upskilling are prioritised.
Internal audit issues reviewed by the Audit Committee at its meetings include:
- IAS annual performance report;
- KMG Internal Audit Service’s quarterly reports, including reviews of any material findings identified in audit reports and follow-up on the implementation of internal audit recommendations;
- Annual audit plan and amendments thereto;
- KPI scorecards of the IAS head and staff;
- IAS Strategic Plan;
- IAS budget;
- HR management within the IAS.
Assessments of the external and internal audit process performance
The IAS conducts regular surveys among members of the Audit Committee and units of JSC NC KazMunayGas interacting with the external auditor to facilitate an assessment of the external auditor’s performance. The assessment is based on the results of a completed questionnaire and a specific discussion between members of the Audit Committee with input from the relevant senior management. The assessment results were reviewed at an Audit Committee meeting and communicated to the external auditor.
As required by the quality assurance and improvement programme for KMG’ Internal Audit Service, following each audit, the audited entity is required to complete a form assessing the IAS’ performance. Results of these assessments are consolidated into the IAS annual performance reports approved by the Audit Committee.
An independent external assessment of the Internal Audit Service was performed in 2020 in accordance with International Standards for the Professional Practice of Internal Auditing. KPMG Tax and Advisory LLP, one of the “big four” companies, won the public tender and was awarded a contract for conducting an external assessment of the IAS’ performance.
In 2020 an independent external assessment of the IAS’ compliance with the International Standards for the Professional Practice of Internal Auditing, international best practices, KMG’s Regulations on the Internal Audit Service, the Company’s code of ethics and other applicable external and internal regulations governing internal audit functions found 100% compliance with the Standards. Therefore, the activities of the IAS were found to be fully compliant with the requirements of the Standards.