of internal auditors'professional standards focus on adding value by meeting the needs of management and the board. internal auditors add value by being effective independent assessors of the quality of the internal control framework and processes. auditors lose their independence when they perform management consulting roles for which they later will have to render an opinion. internal audit is one of the few corporate functions that has both the ability and the responsibility to look across all of the management silos within the corporation and make sure that the system of internal controls has no gaps and that the control framework is continually reviewed to keep up with corporate strategic initiatives, reorganizations, and process changes. when an auditor becomes part of management, the independent view is lost. external audit let's turn to the topic of quality assurance in the external audit process. as supervisors, we must take steps to encourage a high standard of professionalism among auditors. in some cases, this may mean undertaking an enforcement action against an accountant. the agencies are finalizing the accountant debarment rule, which will be one more tool we can use to correct errant behavior. however, before we do that, we should look at the lessons learned from some recent audit failures. the typical fact pattern in these failures indicates that some auditors are focusing on the form rather than the substance of transactions when making critical audit judgments. moreover, when looking at assurance services, such as the fdicia 112 auditor attestations, some auditors have a tendency to gloss over internal control deficiencies or simply ignore significant control deficiencies because they are " immaterial. " it is not meaningful for auditors to apply a financial statement concept of materiality to an attestation engagement on internal controls. from a supervisory perspective, we would consider the existence of a series of such immaterial deficiencies to be useful information in assessing the quality of the internal and external audit process. we need to change this mindset in the auditing community. some of this can be done through dialogue with the american institute of certified public accountants and the public company accounting oversight board, which we are doing. once auditors start to routinely report known deficiencies in internal controls, we should begin to eliminate the gap between what we expect an audit or attestation engagement to include and actual services provided by auditors. however, if we continue to find significant internal control deficiencies in safety and soundness examinations that the auditor knows about but fails to disclose, because they are judged to be

challenge in the years ahead. i believe the key solution here lies in productivity increases in agriculture and energy in the medium term. regarding agriculture, this necessity is much more evident in emerging markets – in order to keep up with the demand growth, considering the higher share of food in the consumption basket. rapid employment shift from agriculture to manufacturing & services, and the labor - intensive structure of production necessitates a reformation in this sector. likewise, a similar productivity improvement is inevitable for energy both in emerging and developed economies. however, given the limited supply of resources, efficient energy use gains a crucial role at this point. according to the international energy agency, improved energy efficiency in buildings, industrial processes and transportation could reduce the world ’ s energy needs in 2050 by one third ( sophie hebden : “ invest in clean technology says iea report ”, 2006 ). in this context, energy efficiency together with renewable energy, energy obtained from natural resources, are said to be the twin pillars of sustainable energy policy. bis central bankers ’ speeches dear participants, against this backdrop, in the remaining part of my speech, i would like to share our experience in dealing with commodity price volatility, especially in the context of monetary and fiscal policy. volatility in oil and other commodity prices has both direct and indirect effects on inflation. in this manner, there is a debate in the literature on how a central bank should respond to the changes in commodity prices. since oil and other commodity - based products are an important component of consumption basket, it is impossible to avoid the so called “ firstround effects ” of commodity prices, which in turn translates itself into inflation volatility. however, temporary movements in commodity prices do not affect the mediumterm inflation trend, as long as they do not disrupt the general pricing behavior. therefore, central banks acting on a medium - term perspective, typically do not give sharp policy responses to these primary effects as doing so may have strong negative impacts on the social welfare. on the other hand, a persistent increase in commodity prices may adversely affect inflation expectations and therefore pricing behavior of economic agents. this may entail prolonged increases in general price level and, accordingly, high costs associated with increasing inflation. therefore, it is important for central banks to pay close attention to the evolution of inflation and inflation expectations in order to contain the second - round effects of the increases in commodity prices. at the central bank of turkey, we frequently state that we will not react