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2024-05-23 | CBE2.5

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CBE Regulation Book 2.5 - Requirements For Preparing An Annual Report To Evaluate The Efficiency Of Internal Control Systems

The Central Bank of Egypt requires banks to prepare an annual internal control report using the 2013 COSO framework as a minimum standard, including evaluations of the control environment, risk assessment, control activities, information and communication, and monitoring processes. Banks must submit this report to their audit committee and board of directors for approval, and subsequently provide it to the bank's external auditors for review prior to the general assembly meeting. The regulation mandates that external auditors include their opinion on the adequacy of the internal control system in their final report to the Central Bank, with the first submission required for the fiscal year ending December 2022 by June 30, 2023.

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Chapter Five: Requirements for Preparing an Annual Report to Evaluate the Efficiency of Internal Control Systems

In the context of the Permanent Central Bank's efforts to enhance the quality of internal control systems in banks, and in implementation of the provisions of Article (125) of the Central Bank Law and the Authorized Organism Law No. 194 of 2020, which stipulates:

"The external auditors shall prepare an annual report on the review of the bank's financial statements in accordance with the law... and shall send to the Central Bank, before the holding of the general assembly, two copies of their report, accompanied by a copies of the financial statements, and a detailed report including the following: (a)... (b) the adequacy of the bank's internal control system at all its levels. (c).....

And with reference to the Internal Control Instructions issued pursuant to Circular Letter dated September 2, 2014, and subsequent circular letters, and emphasizing the coordination between the internal and external auditors of banks to ensure the continuous development of the internal control process, banks are required to comply with the following:

  1. Prepare an annual report on the bank's internal control, which shall be prepared with reference to the "2013 Internal Control Integrated Framework" as a minimum. The report may also refer to any other principles or standards, provided they are complementary to it.

  2. The report must include the following:

    • The bank's evaluation of the following key principles and standards as a minimum: (evaluation of the control environment, evaluation of risks of all types, evaluation of control activities, evaluation of information and communication systems, periodic control process) in light of the aforementioned framework.
    • Identifying deficiencies in the internal control procedures implemented in the bank - if any - and the corrective measures to be taken by setting a plan with a specific timeframe.

  3. Submitting the report to the audit committee and presenting it to the bank's Board of Directors for approval and follow-up of the implementation of the corrective plans contained in the report.

  4. Providing the bank's external auditors with the report after its approval by the Board of Directors for review and discussion, with a view to enabling the external auditors to submit a final report to the Central Bank regarding the review of the financial statements. This shall be done,

The report must be submitted to the Central Bank by the external auditors starting from their report on the bank's financial statements for the year ending December 2022. It is worth noting that the decision was made for banks - which will be unable to submit the report to the external auditors in accordance with the aforementioned - to provide the external auditors with the report for the period ending in December 2022 - to the Central Bank by March 31, 2023 at the latest.

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Circular Letter of Mr. / Deputy Governor of the Central Bank of Egypt dated August 4, 2022 1

Circular Letter of the Central Bank of Egypt dated February 2, 2023 2

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Source: Central Bank of Egypt — original document

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