The effect of internal auditing in reducing operational risks in Islamic banks (A field study in the Kurdistan International Islamic Bank for Investment and Development for the period 2019-2020)

Abstract

Banking activity exposes to many risks that require banks to take appropriate actions and procedures to manage and control these risks in accordance with international best practices in order to reduce or avoid potential losses. Operational risks are considered one of the most important banking risks, especially in the era of development in continuous technology, globalization and the abolition of restrictions in the practice of banking activities. Therefore, this research aims to demonstrate the extent of the internal audit's contribution to reduce the operational risks that Islamic banks are exposed to in order to protect them and make them to continue their operations. To achieve the objectives of the research, the questionnaire form was formed and distributed to a number of employees working in the Kurdistan International Islamic Bank for Investment and Development in the year 2019 and the use of the (spss) program to analyze the data and interpretation of the result, which included the activities carried out by the Internal Audit Department and contribute to reduce operational risks. The conclusions reached by the research are:
1. Internal auditing is capable of facing operational risks in Islamic banks from the worker point of view in the banking sector and employees in the internal audit department in those banks.
2. The internal auditors are aware of the importance of operational risks and they relies the need to improve internal control systems
Therefore research recommends:
1. The need for the administrative authorities in Islamic banks to pay attention to the internal audit activity, which helps to develop the job and provide the necessary capabilities to strengthen its position within the banks.
2. The necessity for Islamic banks to organize training courses for the internal auditors and qualify them in the use of operational risk management methods and how to face and evaluate them, as well as pay attention to provide courses to gain familiarity with Islamic financing forms that the bank works with to develop internal audit functions.