Abstract
Thisarticledevelopsapracticalframeworkforauditingtheeffectivenessoffinancialcovenantapplicationinthe riskmanagementsystemofcommercialbanksinKazakhstan.Financialcovenantsaretreatedasearly-warning contractualtools that allow creditor intervention before payment default occurs. The study combines Basel credit risk principles, IFRS 9 impairment logic, Kazakhstan’s banking regulation, official ARDFM and National Bank statistics, and the findings of the regular Asset Quality Review. The paper argues that covenant auditing shouldgobeyondformaldocumentcheckingandtestwhethercovenantsareproperlyintegratedintoborrower monitoring, escalation, waiver control, staging under IFRS 9, and provisioning. The evidence shows that the Kazakhstanbankingsectorremainedprofitableandwellcapitalizedin2022–2025,butportfolioconcentration, strong retail credit growth, and the gap between NPL90+ and broader credit deterioration indicators increase the value of covenant-based early intervention, especially in corporate lending. A weighted audit matrix is proposed for internal audit units, supervisory reviewers, and audit committees to assess coverage, trigger quality, data integrity, timeliness, remedial actions,and provisioning linkage