This paper contains detailed overview of the role and specifics of internal audit in insurance companies, identifies existing statutory requirements and regulatory guidelines relating to the internal audit function in insurance companies, and compares theoretical and practical aspects. Finally, the paper analyses implications of the coming regulatory changes on the internal audit function within insurance companies. The paper comprises five chapters in total. After the introduction, the second chapter covers the features of internal audit and its role in the organization’s operations, specifically improvement of business operations, and an overview of the methodological framework for internal audit activity. Furthermore the paper describes a typical internal audit process, from planning, data collection, testing and assessment of information collected during the audit, to monitoring of findings and subsequent reporting on measures proposed. The paper also identifies existing legislative and regulatory framework related to internal audit function in insurance companies, and risk assessment process followed thereby. This is followed by an example of internal audit within the organisational structure of an insurance company. Finally, the paper analyses theoretical and practical aspects of internal audit functioning through an illustrative example of Insurance Company X Inc., and assess the impact of coming changes in the regulatory framework and guidelines on the role of internal audit in insurance companies.