Banks were pushed by two U.K. financial regulators to empower internal auditors to stand up to senior decision makers within the firm and oversee risk taking.
Regulators expect banks to have internal auditors that can provide a challenge to management, “to help protect the assets, reputation and sustainability of the organization,” Andrew Bailey, the Bank of England’s top banking supervisor, said in an e-mailed statement.
Bailey’s comments support guidelines published today by the Chartered Institute of Internal Auditors that seek to improve governance within banks. Internal auditors assess whether organizations are managing risk properly and warn members of the firm’s board if they anticipate problems.
The guidance “makes clear internal auditors must have the power and confidence to examine thoroughly that products and services are in line with the interests of customers,” Martin Wheatley, chief executive officer of the Financial Conduct Authority, said in the statement.
The new code creates industry-specific benchmarks that can be checked by regulators, the CIIA said in a separate statement. It also calls for internal auditors to report to the chair of a company’s audit committee.
“The new code gives internal audit the potential to play a much more significant role in supporting better management of risk in financial services organizations,” said Ian Peters, the CEO of the CIIA. “The importance of this role is recognized by the Banking Standards Commission and others, including the financial services regulators, who see the need to strengthen internal audit’s independence, role and scope.”
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