Internal Auditing from a Regulatory Perspective in Turkish Capital Markets

Abstract

In Turkey, the contribution of finance sector to the overall state of the economy is paramount. Thus
regulation of this area is vital to have a fully functioning capital market. About this, regulators have
imposed and introduced new rules concerning finance sector actors, and internal audit plays a significant
part in the new regulations. The aim of this paper is to depict the role of internal audit in Turkish capital
markets by comparing the internal audit structure of the main financial institutions. To be able to present
the big picture; regulations concerning banks, intermediary institutions (also referred to as „brokerage
houses‟) and portfolio management companies are compared by using a conceptual and descriptive
approach. According to the results of this endeavor, it is clear that banks have a more developed internal
audit system when compared to brokerage houses and portfolio management companies in the sense that
the latter is starting to resemble the former due to the rules imposed by the new regulation. Another
finding is that internal audit regulations of Banking Regulation and Supervision Agency (BRSA) are
more demanding about internal auditor competency as opposed to Capital Markets Board of Turkey
(CMB) regulations concerning internal audit. As a result, the internal audit regulations concerning
portfolio management companies are in need of improvement.