The Basel Committee on Banking Supervision is calling on banks to beef up their internal audit functions as a way of improving governance.
The international group of bank regulators issued final supervisory guidance Thursday on the internal audit function in banks, which is built around 20 principles that revise and update guidance that was originally issued in 2001. The committee says that the revised guidance reflects lessons learned from the financial crisis, and subsequent developments in both supervisory practices and within banking organizations.
The guidance addresses regulators’ expectations for the internal audit function, and the supervisory assessment of that function. It encourages banks’ internal auditors to comply with national and international professional standards on internal auditing. Finally, it promotes due consideration of prudential issues by internal auditors.
“An internal audit function, independent from management and composed of competent auditors, is a key component of a bank’s sound governance framework. The committee’s document lays out expectations that should help banks and their supervisors strengthen professional practices in this area,” said Stefan Ingves, chairman of the Basel Committee and governor of Sweden’s central bank