The process of internal audit in non-life insurance companies and a proposal

Insurance is a type of service, which interests all segments of the society and offers economic and social facilities such as loan ensuring, capital saving and protection against risks. An effective audit system is required to provide secure and financially reliable insurance transactions. The stages of the audit system consist of internal audit, external audit and public inspection. This study emphasizes the internal audit system, which should be considered as the first step of control and assurance for other audit systems.The internal audit function of an insurance company assures the compliance of the transactions with the legal regulations or the policies and strategies set by the board of directors, protection of the assets, accuracy of the accounting system and other records. In addition, thanks to their knowledge and experience, auditors provide a consultancy service for managers to develop the effectiveness of company activities.In the harmonization process of Turkish legislation with the European Union legislation, ?The Insurance Law? no. 5684 and in relation to the law, ?The Regulation on Internal Systems of Insurance, Reinsurance and Pension Companies? are enacted and the provisions related to internal audit is organized in this regulation. In the Regulation, the provisions of article 17, on the second paragraph, insurance companies internal audit procedures are designated as unit base and this structure formed the basis for determining the boundaries and content. In this study, the concept of internal auditing process in the insurance companies have been studied in line with ?The International Standards for the Professional Practice? and control points are revealed for each of the main business units. The information about the organizational structure of the insurance companies, which have been helpful to analyze the audit process, were requested and maintained directly from the insurance companies. Within the structure formed by the data obtained through electronic and face to face correspondence, units which are more significant and which carry out activities that are more relevant to sector, are specifically investigated. While forming the control points, working papers which are prepared during the routine audits are utilized, as there is not sufficient academic study found in that area. As a result of the study, some recommendations are made to develop internal audit functions of the insurance sector. It is mentioned that, conduction of process-oriented auditing techniques, which provides development of business processes and to take necessary measures against disturbances, will increase benefits of internal auditing. In addition, increasing the effectiveness of internal control system is supported and need for general principles and standards about the international framework of internal audit in the insurance sector is emphasized. As a result of the increasing complexity of the insurance activities, the necessity of specialization according to audit fields is emphasized. IT Audit should be conducted within the framework of the generally accepted COBIT standards and the regulation should be integrated in to the insurance legislation.