Many companies in Oman only start thinking seriously about internal audit once something has already gone wrong: a control failure surfaces during an external audit, a regulator asks a question the board cannot answer confidently, or a fraud investigation reveals gaps that should have been caught months earlier. Building an internal audit function that Oman regulators and stakeholders will recognise as credible before that point, rather than reacting to it, is what separates companies with genuine oversight from those simply hoping their controls hold up. At MFN Auditing, we regularly help boards and finance leadership in Oman design and stand up internal audit functions from scratch, so this guide walks through the process in the order it actually needs to happen, from the initial mandate through to ongoing quality assurance.
Why Internal Audit Matters in Oman’s Regulatory Environment
Internal audit requirements in Oman are not simply a good governance idea. For public joint stock companies (SAOGs) listed on the Muscat Securities Market, it is a binding requirement under the Capital Market Authority’s Code of Corporate Governance, which obliges listed companies to maintain an internal audit function that reports to an independent audit committee. That audit committee must meet at least four times a year, hear from internal audit without management present at least once annually, and oversee the function’s independence from day-to-day operations.
Banks and financial institutions face similar expectations under Central Bank of Oman requirements, and even privately held companies increasingly set up internal audit voluntarily, often at the request of lenders, investors, or a parent company abroad that expects a certain baseline of internal control assurance. Whatever the trigger, the process of actually building the function follows a fairly consistent path.
Step 1: Secure a Clear Mandate from the Board
Internal audit only works if it has genuine authority behind it, and that authority has to come from the top. Before any hiring or planning happens, the board, or the audit committee acting on the board’s behalf, needs to formally establish why the function exists and what it is expected to do.
This mandate is typically documented in an internal audit charter, which should cover the function’s purpose, its scope of authority across the organisation, its reporting line, and its independence from the activities it audits. Without this document in place first, an internal audit function tends to struggle for access to information and cooperation from other departments later, since there is no formal basis for management to take its requests seriously.
What the Charter Should Establish
- The function’s reporting line, typically a functional reporting line to the audit committee and an administrative reporting line to the CEO or a senior executive
- The scope of areas internal audit is authorised to review, which should generally cover the entire organisation without carve-outs
- Access rights to records, systems, personnel, and physical sites needed to perform audit work
- The frequency and format of reporting to the audit committee
- A statement of independence, confirming that internal audit does not perform management functions or take on operational responsibilities that would compromise its objectivity
Step 2: Decide on the Operating Model
Once the mandate is clear, the next decision is how the function will actually be resourced. There are three common approaches in Oman, and the right one depends on company size, risk profile, and available budget.
In-House Internal Audit Team
Larger organisations, particularly listed companies and banks, typically build a dedicated in-house team led by a Chief Internal Auditor who reports functionally to the audit committee. This gives the company deep institutional knowledge over time but requires enough scale to justify a standing team.
Co-Sourced Model
Many mid-sized companies use a co-sourced model, where an internal audit manager or small internal team is supplemented by an external firm for specialist reviews, such as IT audits, fraud investigations, or areas requiring technical expertise the in-house team does not have. This balances cost with access to specialist skills.
Fully Outsourced Internal Audit
Smaller companies, or those setting up internal audit for the first time without the scale to justify a permanent team, often turn to external internal audit services in Oman providers to run the entire function. This provides immediate access to qualified, experienced auditors and established methodology without the lead time of recruiting and training an in-house team, and it remains a common starting point for companies building internal audit from zero in Oman.
Step 3: Conduct an Enterprise-Wide Risk Assessment
Before internal audit can plan any actual audit work, it needs to understand where the organisation’s real risks sit. This means conducting a structured risk assessment across the business, typically covering financial reporting risk, operational risk, compliance risk, and, increasingly, IT and cybersecurity risk.
A few practical points make this step more effective:
- Risk assessments should involve interviews with senior management across departments, not just a desk review of existing policies
- Findings should be weighted by both likelihood and financial or reputational impact, not treated as a flat checklist
- The risk assessment should be revisited at least annually, since business risk profiles shift with new products, markets, or regulatory changes
- Sector-specific risks matter here: a company handling significant VAT transactions, cross-border payments, or Omanisation compliance obligations should weight those areas accordingly rather than applying a generic risk template
This risk assessment becomes the foundation for everything internal audit does next, so rushing it to get to “real” audit work faster usually backfires later.
Step 4: Build a Risk-Based Annual Audit Plan
With the risk assessment complete, internal audit translates it into an annual audit plan, essentially a schedule of which areas will be reviewed, in what order, and with what frequency. Higher-risk areas should be audited more frequently than lower-risk ones, and the plan should leave some flexibility for ad hoc reviews if a new risk emerges partway through the year.
The plan needs to be presented to and approved by the audit committee before execution begins. This approval step matters for two reasons: it confirms the board’s priorities are reflected in what gets audited, and it gives internal audit formal backing to proceed when a department pushes back on being reviewed.
Step 5: Establish Methodology and Standards
Internal audit work in Oman is generally expected to follow the International Standards for the Professional Practice of Internal Auditing, issued by the Institute of Internal Auditors (IIA), even for companies without a formal regulatory obligation to do so. Adopting these standards from the outset gives the function credibility with the audit committee, external auditors, and regulators, and avoids having to retrofit methodology later once gaps are noticed.
Core Elements to Put in Place
- A documented audit methodology covering planning, fieldwork, reporting, and follow-up for every engagement
- Standard workpaper templates to ensure consistency and a clear audit trail across different auditors and engagements
- A quality assurance process, even a simple one, to review completed audit work before it is finalised
- A finding classification system, typically rating issues by severity, so the audit committee can quickly see what needs urgent attention versus longer-term improvement
- A formal issue-tracking process to confirm management actually implements agreed corrective actions rather than findings being noted and forgotten
Step 6: Hire or Assign the Right People
Internal audit is only as good as the people running it. For an in-house or co-sourced model, this means recruiting individuals with a mix of audit, accounting, and, increasingly, IT and data analytics skills, since modern internal audit work leans heavily on data-driven testing rather than purely manual sampling.
Professional qualifications matter here. Certified Internal Auditor (CIA) designation, or equivalent qualifications such as ACCA or CPA with internal audit experience, signal a baseline level of competence that audit committees and regulators recognise. For companies without the scale to hire multiple specialists, this is often the clearest argument for a co-sourced model, since it is difficult for a small in-house team to cover financial, operational, IT, and compliance audit skills simultaneously. Partnering with an established internal audit firm in Oman can bridge this gap quickly while an in-house capability is still being built out.
Step 7: Run the First Audit Cycle
With the plan, methodology, and people in place, the function moves into execution. The first audit cycle is worth treating with extra care, since it sets the tone for how the rest of the organisation perceives internal audit going forward.
A typical audit engagement moves through planning (defining scope and objectives for the specific area under review), fieldwork (testing controls, interviewing process owners, and gathering evidence), reporting (documenting findings with agreed management action plans and target dates), and follow-up (confirming those actions were actually implemented). Engagements that skip the follow-up stage, treating a reported finding as resolved once management commits to fixing it, are one of the most common ways internal audit functions lose credibility over time.
Step 8: Report to the Audit Committee and Board
Regular reporting to the audit committee is both a governance requirement for listed companies and simply good practice for any organisation running internal audit seriously. Reports should summarise completed audits, outstanding high-risk findings, progress on previously agreed corrective actions, and any emerging risks identified since the last update.
For CMA-regulated companies, this reporting cadence needs to align with the minimum four audit committee meetings per year required under the Code of Corporate Governance, with at least one private session between the audit committee and internal audit without management present.
Step 9: Review and Refresh the Function Periodically
Internal audit functions are not a set-and-forget structure. A periodic external quality assessment, generally recommended every five years under IIA standards, helps confirm the function still meets professional standards and is delivering genuine value rather than becoming a compliance formality. Beyond formal assessments, the audit committee should periodically reassess whether the function’s resourcing, scope, and independence still match the organisation’s current risk profile, particularly after significant growth, a new regulatory requirement, or a change in ownership structure.
Frequently Asked Questions
Is internal audit legally required for all companies in Oman?
No. It is a binding requirement for public joint stock companies listed on the Muscat Securities Market under the CMA’s Code of Corporate Governance, and effectively required for banks under Central Bank of Oman expectations. Private companies are not legally obligated to have one, though many set it up voluntarily at the request of lenders, investors, or a parent company.
Should a small company outsource internal audit rather than hire in-house?
For most smaller organisations, yes, at least initially. A fully outsourced or co-sourced model gives access to qualified auditors and established methodology immediately, without the cost and lead time of building a permanent in-house team before there is enough scale to justify one.
How often should internal audit report to the board or audit committee?
For CMA-regulated companies, the audit committee must meet at least four times a year, with internal audit reporting at each meeting and meeting privately with the committee at least once annually without management present. Companies without this formal requirement should still aim for a similar cadence to maintain effective oversight.
What qualifications should internal audit staff hold?
A Certified Internal Auditor (CIA) designation is the most directly relevant qualification, though ACCA, CPA, or equivalent accounting qualifications combined with internal audit experience are also widely accepted. For functions covering IT or data-heavy areas, relevant technical certifications add meaningful value alongside a core audit qualification.
Establish Internal Audit With Long-Term Governance Value
Setting up an internal audit function that Oman boards and regulators will trust is not a single project with a fixed end date. It is a structured process that starts with a clear mandate from the board and builds outward through risk assessment, methodology, staffing, and ongoing reporting, with regular reassessment to keep pace with the organisation’s changing risk profile. Companies that treat each of these steps seriously, rather than rushing to tick a compliance box, end up with a function that genuinely strengthens governance rather than one that exists on paper alone. MFN Auditing works with boards and management teams across Oman to design internal audit functions that fit their specific size, sector, and regulatory obligations, whether that means building an in-house team from the ground up or providing co-sourced and outsourced support while that capability develops internally.