Audits—a word that can make even the strongest buckle. The banking sector is no stranger to audits and the auditing process. As we all know, bank audits are routine, common procedures affecting institutions of all sizes. But what is important to remember is regardless of whether you are in management, the Audit department or a business unit of a bank, everyone needs to gain clarity about what bank audits are, and what to expect during the process.
Bank audits are a routine, formal process where the institution’s operations, controls, records and risk management are reviewed for accuracy, legitimacy, safety and efficiency. Regardless of whether a bank chooses to have an external auditing firm perform audits, or whether they are assigned internally to an audit team, or whether the bank uses technology and software solutions to assist in the implementation of internal auditing programs, all financial institutions should have an audit framework to stay abreast of their internal controls and compliance management oversight. To facilitate a consistent approach across the organization, the Board of Directors should ensure that the bank has its own audit framework, that is held accountable to the bank’s board through reporting, and that its audit function performs audit activities of a sufficient scope to enable the Board to satisfy its fiduciary and legal responsibilities. This audit function, whether internal or external, is essential to the overall information security and compliance management systems. So, monitoring and assuring that, overall, the bank’s assets are secured and safeguarded is the key concern.
Risk management oversight and high-impact reporting will assist financial institutions to be proactive in their document collection to improve regulatory compliance. It will enhance cybersecurity monitoring to prevent attacks, consumer, and bank harm, and ultimately, losses. Audits, when scoped successfully, will provide a comprehensive analysis of compliance management, continuity plans, information security, and oversight into vendor management risks. Reviews of bank policy and procedures reduce further risks and provide for comprehensive risk assessments. But the endgame to a successful audit is improve efficiencies and executions through formalized Board reporting.
A key feature to achieve the above expectations is independence and objectivity—both have specific meanings within the internal audit environment. Independence is freedom from conditions that threaten the ability of the audit activity to carry out audit responsibilities in an unbiased manner, while objectivity is an unbiased mental attitude that allows internal auditors to perform engagements so that they believe their work product provides no quality compromises. Additionally, professional competence, due professional care and auditor integrity are imperative to a successful examination and evaluation of internal or external audit findings.
Ways to ensure a successful audit function is to develop an audit charter or policy that articulates the purpose, standing and authority of the audit function within the bank to promise effective internal and compliance controls. Every activity, including those outsourced, and every business unit of the bank should fall within the scope of the audit function being completed or outsourced. The bank’s risk management processes should act towards supporting and reflecting its adherence to regulatory provisions and safety and soundness, which is why it is crucial it appear within audit’s scope.
Whether done internally or externally, it is important to not forget this function within an institution and the interconnectedness it has with the bank’s overall success at mitigating risks. It will help identify and provide solutions for risks and ensure compliance with laws and regulations that ultimately protect the bank’s assets and consumers. Do not fear the audit—embrace it!