The paper, prepared by the Basel Committee's Task Force on Accounting Issues, calls for independent internal audit functions with professional competence in banks. It notes that every activity and every entity of a bank should fall within the scope of internal audit. The transparency that is necessary for the efficient operation of financial markets and rational allocation of capital depends largely on the accuracy of published financial statements. Moreover, bank supervisors also rely upon the accuracy of banks' financial records and data in carrying out our responsibilities to ensure the safe and sound operation of the banking industry. The role of the internal auditors in banks' internal capital assessment process is also of interest to banking supervisors.
Some banks outsource different parts of their internal audit function.
The consultative paper released today emphasises that even when outsourcing is used, the board of directors and senior management remain responsible for the functioning of the system of internal control, including the internal audit function. The Basel Committee on Banking Supervision is a committee of banking supervisory authorities which was established by the central bank Governors of the Group of Ten countries in 1975. It consists of senior representatives of bank supervisory authorities and central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States. Its current chairman is William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York. The Basel Committee's Task Force on Accounting Issues has the lead responsibility in the Committee's consideration of accounting and auditing issues.