China Boardroom Update - Greater expectations on the internal audit function - new regulatory guidance

China Boardroom Update Greater expectations on the internal audit function – new regulatory guidance for banks November 2009 ADVISORY Regulators globally are increasing their focus on, and expectations of, banks' Internal Audit Functions (IAFs). The global financial crisis has highlighted the importance of banks having effective risk management and strong internal controls, for example in the areas of enterprise risk management and enhanced valuation techniques, and the importance of having strong and independent IAFs to help management monitor and assess the effectiveness of these risk activities and related controls. The China Banking Regulatory Commission (CBRC) issued guidelines on the positioning, organisation and responsibilities of IAFs in banks in June 2006 to set out the principles relating to independence, objectivity, professional competence and work methods, which are in line with the Basel Committee’s principal guidelines. ry expectations with The Hong Kong Monetary Authority (HKMA) recently released a detailed paper on regulato respect to Internal Audit [Supervisory Policy Manual – Module IC-2] (the Guidance), which has been developed with reference to international standards set by the Basel Committee as well as the HKMA’s own supervisory experiences and practices. This Guidance, while intended primarily for banks in Hong Kong, can also serve as a useful guide to banks in mainland China and elsewhere ...