New guidance for financial sector internal auditors aims to improve how risks are managed
10 September 2012
New guidance for financial sector internal auditors aims to improve how risks are managed
The Chartered Institute of Internal Auditors today announced the creation of an independent, industry - led committee to recommend new practice guidance for internal auditors, whose job it is to help ensure banks and other financial institutions manage the risks faced by their organisations effectively.
The new committee is to be chaired by Roger Marshall, who is a Director of the Financial Reporting Council and chairs its Accounting Council. Roger is also chair of the audit committee of insurer, Old Mutual.
Marshall said, "Analysis of the financial crisis and more recent problems in the banks emphasises the need for internal audit to be at the heart of corporate governance. To enable this, all parties with an interest in the governance of financial institutions need more specific guidance on the role of internal audit. Our aim is to balance the interests of executives, boards and regulators in addressing the challenge of improving internal audit's contribution to how risk is managed in banks and other financial institutions."
Managing Director for Prudential Business Unit at the Financial Services Authority (FSA) , Andrew Bailey, who is set to head up the Bank of England's new Prudential Regulatory Authority when it comes into being in the Spring of 2013, believes that this initiative is a crucial contribution in the drive to improve corporate governance in the financial services sector.
He said, "Existing standards and guidelines do not set sufficiently robust expectations for internal audit functions in firms in terms of their role, scope of work, standing within the organisation and exercise of effective challenge. The Institute's initiative can go a long way to addressing these issues and help internal audit provide a better independent challenge to management's decisions and improve the effectiveness with which risk management and internal control are evaluated."
Institute chief executive, Dr Ian Peters says that the Institute's own Standards, which are used globally by 175,000 members worldwide, will form the basis of the new guidance. He said, "Institutes of internal audit around the world adhere to the same standards of professional practice, which are governed by the Global Institute of Internal Auditors. The standards are framed as high level principles, which enable room for interpretation within global territories and business sectors. The new committee will take these standards as their starting point and create guidance on their interpretation which all internal audit's stakeholders agree is appropriate for the sector."
The committee will comprise one other banking sector non-executive director, a finance director, a chief risk officer, an academic, three heads of internal audit from across the banking and insurance sector, and observers from the FSA and the Bank of England. The Committee expects to start its work in September and will be issuing a call for views early in the process.
ENDS
