The Internal Audit Function

Basel Committee
on Banking Supervision


June 2012

This publication is available on the BIS website (www.bis.org).

© Bank for International Settlements 2012. All rights reserved. Brief excerpts may be reproduced or
translated provided the source is cited.

ISBN 92-9131- 140-5 (print)
ISBN 92-9197- 140-5 (online)

Contents
Introduction...............................................................................................................................1
Overview of the principles.........................................................................................................2
A.

Supervisory expectations relevant to the internal audit function .....................................3
1.
2.

Key features of the internal audit function..............................................................4

3.

The internal audit charter .......................................................................................7

4.

Scope of activity .....................................................................................................7

5.

Corporate governance considerations...................................................................9

6.

Internal audit within a group or holding company structure ..................................13

7.
B.

The internal audit function ......................................................................................4

Outsourcing of internal audit activities .................................................................14

The relationship of thesupervisory authority with the internal audit function ................14
1.
2.

C.

Benefits of enhanced communication between the supervisory authority and the
internal audit function ...........................................................................................15
Potential topics for discussion between supervisors and internal audit ...............16

Supervisory assessment ofthe internal audit function ..................................................17
1.

Assessment of the internal audit function ............................................................17

2.

Actions to be undertaken by the supervisory authority ........................................18

Annex 1: Internal audit function's communication channels...................................................19
Annex 2: Responsibilities of a bank's audit committee ...........................................................21

The internal audit function in banks

i

Members of the Accounting Task Force’s Audit Subgroup
of the Basel Committee on Banking Supervision
Chairman:
Mr Marc Pickeur
National Bank of Belgium
Representatives in italics provided drafting support

Officeof the Superintendent of Financial Institutions, Canada

Ms Laural Ross
Ms Ruby Garg

Bank of France

Ms Nathalie Boutin

Prudential Supervisory Authority, France

Ms Sylvie Marchal

Deutsche Bundesbank, Germany

Ms Dragomira Berberova

Bundesanstalt für Finanzdienstleistungsaufsicht, Germany

Ms Stefanie Jessen

Banca d’Italia, Italy

Ms Lidja Schiavo

Bank of Japan

MrHiroyuki Yoshida
Ms Keiko Sumida

Financial Services Agency, Japan

Mr Tadashi Tsumori

Commission de Surveillance du Secteur Financier,
Luxembourg

Ms Martine Wagner

De Nederlandsche Bank, The Netherlands

Mr Nic van der Ende

Banco de España, Spain

Ms Barbara Olivares

Financial Services Authority, United Kingdom

Ms Patricia Sucher
Mr Robert Konowalchuk
Ms Veenu MittalBoard of Governors of the Federal Reserve System, United
States

Mr Terrill Garrison

Office of the Comptroller of the Currency, United States

Mr Robert Riordan

Federal Deposit Insurance Corporation, United States

Mr Harrison Greene

Secretariat
Secretariat of the Basel Committee on Banking Supervision

ii

Mr Xavier-Yves Zanota

The internal audit function in banks...