An Analysis of the Internal Audit and Internal Control Systems of Banks in TRNC

This research investigates the internal audit and internal control systems of banks in TRNC. Internal audit is one of the most important units of a bank. It includes checking and assessing overall accuracy and consistency of banks’ operations. During the last three decades the bank management and operations of banks have evolved due to financial liberalization, globalization and technological innovation which also increased operational risks. Banks are required to develop their internal control systems to protect themselves against increasing operational risks. Basel introduced a framework on internal audit in 2012. The Basel criteria on internal audit became the most commonly used world standard in the banking sector. This research was conducted in two phases. First I compared the banking law of TRNC with the Turkish standards and Basel standards on internal auditing to find out whether the banking law of TRNC was in line with Turkey or Basel standards. Second, I developed a structured questionnaire and surveyed the majority of banks in TRNC in order to establish facts on how the internal audit and control systems work in the banking sector of TRNC. The findings indicated that there are major weaknesses in the existing auditing and control systems of banks in TRNC. Keywords: Internal auditing, internal control, TRNC, Basel, Turkey.