I.  Objectives

Internal Audit provides independent and objective assurance and advisory services aiming to provide assistance to National Water Company (the Company’s) Board of Directors (the Board), the Audit Committee, and Executive Management in carrying out their responsibilities with the highest degree of efficiency and effectiveness.

 II.  Independency and Authority

1.  Internal Audit Function works under the supervision of the Audit Committee which is a Committee appointed by the Board of Directors, and is independent of Executive Management.  Internal Audit has full authority and unrestricted access to the entire company’s records, information, properties, data, correspondents, other materials and employees as required to perform its role.

2. Internal Audit has neither direct responsibility nor any authority over any of the Departments of the Company subject to Internal Audit or other review. Internal Audit Function’s personnel must not develop or design any policies and procedures, nor engage in activities and functions audited/reviewed by Internal Audit Department. This has no contradiction in providing recommendations to the other auditee by Internal Audit which is considered to be important to address any weaknesses relevant to the activities of the Department being audited

 III.  Responsibilities

Internal Audit key responsibilities include all the activities which enable it to achieve its objectives including:

1.   Preparation of the Risk based Internal Audit Strategy & Plan of Internal Audit Function and submitting it to the Audit Committee which shall submit its recommendations to the Company’s Board for their review and approval. A copy shall be provided to the company’s Chief Executive Officer (CEO).

2. Execute Internal Audit Work in accordance with the approval annual Internal Audit Plan.

3. Submitted Internal Audit Reports to the Audit Committee which shall provide its recommendation to the Board for their review and approval. A copy shall be provided to the company’s CEO.

4. Identifying strategical, compliance, financial, operational, and Information Technology risks; as well as cooperating with management to suggest effective control and monitoring control/measures with a reasonable cost to mitigate the effect of those risks and detect them as soon as they occur.

5. Recruit, manage, motivate, and develop Internal Audit Team to maintain an adequate level of competency.

6.  Development of Internal Audit Function’s policies and procedures (Internal Audit Manual) in accordance with leading professional practices.

7. Planning and managing the budget of Internal Audit Function in order to ensure most efficient use of resources.

8.Build strong working relationships between the Company’s various departments and Internal Audit Function.

9. Continuous improvement of Internal Audit Methodology to increase efficiency and effectiveness of Internal Audit activities.

10.Participation in professional awareness leverage of Internal Audit, on both internal and external corporate domains.

11.  Coordination between the various departments of the company and external regulatory parties, including the External Auditor, General Auditing Bureau, Ministry of Water & Electricity and other regulatory bodies.

 IV. Scope of Work

1.   To achieve its objectives, Internal Audit Function shall adopt systematic and disciplined approach to evaluate and improve the effectiveness of internal controls, risk management, and the Company’s governance structure which enables the Company to achieve its objectives, safeguard its assets and add value.

2.   In general, the scope of work of Internal Audit includes the review of the sufficiency and effectiveness of internal controls and quality of performance of the corporate individuals and organizational units after assuming their designated responsibilities in order to ascertain whether systems provide reasonable assurance to achieve the Company’s objectives effectively and efficiently. Reasonable assurance is achieved when cost-effective actions are taken in order to restrict violations and errors, detect them promptly, and having the employees detects and rectifies misconduct when performing their duties in a timely manner.

3. Internal Audit function scope in particular includes the following:

·  Periodic inspection of the Company’s various Departments including the internal control  and risk management systems of the Company after regular intervals to determine whether the administrative, accounting, and monitoring tasks and processes are implemented effectively  in accordance with the approved policies & procedures, instructions adopted  by the Company, in line with its objectives, and the leading management practices including the following:

o Means and methods used to safeguard the company’s assets, including information assets, from risk of theft, damage, destruction, misuse, neglect, inefficiency, improper business practices, inadequate disclosure, or corruption.

o The extent of reliability on, integrity and security of financial and operational information/data generated within the Company, as well as all means used to identify, measure, classify, and report such information.

oThe existing systems to ensure compliance with policies, plans, and procedures which have an effect on the company.

o The effectiveness and efficiency in the utilization of resources on a cost-effective basis.

4. Report results of Internal Audit review conducted and suggest and agree recommendations to authorized management personnel to ensure that appropriate actions are taken with respect to any deficiency noted.

5. Evaluate plans and procedures developed and implemented by relevant Departments to address the observations and recommendations contained in the Internal Audit Report. If the actions taken are deemed insufficient, the matter is discussed with the authorized management to ensure the sufficiency of actions taken.

6.  Assist in the planning, designing, and developing the information systems to ensure the availability of adequate control systems, and all systems examination procedures are performed in a timely manner.

7. Provide consultancy services at the request of the Company’s Board of Directors, Audit Committee, or Executive Management to help improving the effectiveness and efficiency of the corporate businesses.

8. Carry out investigation for cases of fraud, corruption, or any special check-ups at the request of the Company’s Board of Directors, Audit Committee, or Executive Management, or if Internal Audit Function find sufficient evidences for the potential existence of similar cases.

9. Develop a Risk Based Internal Audit Plan for the Departments to be audited which will be prepared on the basis of the Company’s wide key business risk assessment.

 V. Internal Audit Reports

1.   Internal Audit Function shall prepare and issue written Internal Audit Report after the completion of each audit engagement. The Internal Audit report includes the objectives, scope of the audit process, and the identified findings and relevant recommendation. The report shall be distributed to the concerned parties; a copy is also forwarded to the company’s CEO and to the Audit Committee.

2.  Departments’ and functions’ manager who receives the Internal Audit Report must reply in writing indicating the corrective actions which have been or will be taken to address the observations and recommendations contained in the Internal Audit Report as well as the estimated time for completion.

3. The Internal Audit Function shall present to the Audit Committee an Annual Internal Audit Performance Report which will include the activities performed by the Internal Audit Function and their results.