Internal Audit Structure and Fraud Risk Assessment From a Regulatory Perspective: An Insight Into the Turkish Financial Services Sector

Internal Audit Structure and Fraud Risk Assessment From a Regulatory Perspective: An Insight Into the Turkish Financial Services Sector

Lale Aslan (Istanbul Yeni Yuzyil University, Turkey)
Copyright: © 2019 |Pages: 31
DOI: 10.4018/978-1-5225-7356-2.ch015

Abstract

This chapter aims to depict the role of internal audit in Turkish capital markets by comparing the internal audit structure and its role in detecting fraud in financial institutions and developing a framework for assessing fraud risk in intermediary institutions. The newly constructed regulations concerning banks, intermediary institutions, and portfolio management companies are compared to a global benchmark by using a conceptual and descriptive approach. According to the results of this comparison, it is clear that Turkish legislation needs to be improved in critical areas. “Integrity” should be incorporated as a founding concept of the internal audit function. Certification of internal auditors needs to be encouraged, and internal audit standards need to be adapted. As a result, a fraud risk assessment template influenced by the new regulatory framework is developed for intermediary institutions.
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Background

Internal audit acts like insurance against the pitfalls in corporations. Thus trustworthy internal audit departments are perceived as the go-to department for fraud related precautions and workflow. The structure and foundations of an internal audit department are crucial to success in the prevention of fraud. Thus, in this section, the internal audit structures in Turkish finance sector will be presented.

Key Terms in this Chapter

Fraud Risk: The possibility of the organization being subject to fraudulent activity.

Financial Services Regulation: Legislation penned by regulators in capital markets.

Fraud Prevention: Precautions taken by management towards preventing employees or other related parties in taking place in fraudulent activities.

Intermediary Institutions: According to Capital Market Law No. 6263 Brokerage Houses and Banks established in Turkey are called Intermediary Institutions.

Risk Management: Managing the uncertainty of components in such a way that either they are eliminated or reduced.

Chinese Walls: Physical separation of departments in intermediary institutions.

Risk Assessment: Evaluation of components that have uncertainty in organizational activities.

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