bank which operates well by any standard may soon find itself boggled with a serious liquidity issue arising from some external shock. if it is unable to raise funds quickly to meet liquidity, it will face a general bank - run forcing it to plead for assistance from other banks, authorities etc. the recent liquidity crunch due to the sub - prime issue is a case in point. it had been reported that one such bank that had faced this liquidity crunch severely had boasted of itself in august that it was indeed a well - run robust bank. to its much embarrassment, just one month later, it had to swallow its pride when it had to plead with authorities for assistance. this points to the fact that the internal auditor has to develop risk assessment and mitigation systems in a bank and take effective measures to give advance warning in the event of an impending risk crisis. the significance of systems and governance principles given the gigantic nature of the risks faced by banks and the inability to foresee the delivery of external shocks, the life of the internal auditor is made miserable today. he has to function as an effective watchdog. but, he does not possess a set of well tested paraphernalia to do this job. he may be an honest, genuine and committed worker. but, the rest in the organization may not be so to the same degree. hence, any mishap can occur without warning or the knowledge of the internal auditor. if it so occurs, the internal auditor himself is driven to a serious quandary. the way to overcome this risk is to develop and place in place suitable and effective systems, processes and methods across the organization at all levels. the internal auditor could just monitor and ensure that the systems are genuinely and effectively followed by all. an important element which also helps him to perform his job effectively is to introduce and follow to the letter the good governance principles in the organization. these governance principles would bind all in the organization by a common code of ethics. the absence of proper governance will lead to misuse of the resources to the detriment of outside stakeholders. the internal auditor cannot keep a watchful eye on everything that happens in a bank. a good deal of discipline that should be inculcated throughout the bank comes from self - discipline and there again, through the strict adherence to governance principles. it is, therefore, in the interest of the internal auditor to promote governance to facilitate his job in a bank. the need for continuous learning these new challenges

that are faced by internal auditors require them to acquire the necessary skills and competencies on a continuous basis. this makes it necessary for them to place them on a learning path so that they could update themselves with new developments. as i mentioned earlier, the internal auditor should be an all - rounder. he should know all aspects of banking in order to perform an effective job as an internal auditor. in this respect, the work done by the institute of internal auditors in developing a wholesome internal auditor is laudable. in addition to providing professional qualifications, it conducts regular seminars, lectures and short - term training programmes to keep its membership continuously updated of the new developments. in the modern world where human knowledge is subject to the fastest depreciation and obsolescence, the cry by any professional should be learning, learning and learning. i hope that this seminar will fulfill that task. conclusion the functions of internal auditors have expanded substantially over the years due to the expansion of business, addition of new risk elements and adoption of advanced technology. yet, the basic character of the auditors remains the same. they should function only as extended ears, eyes and arms of the top management and owners. they may point at irregularities, but would not act as penal authorities. hence, the auditor, including the internal auditor, is still a watchdog and not a bloodhound.