Basel issues best practice in audit function

The Basel Committee on Banking Supervision has issued a best practice paper on the need for co-ordination between banks, their internal and external auditors, and supervisors that highlights the responsibility board directors have with regard to risk management, internal controls, and legal and regulatory compliance.

The paper, based around 20 principles, addresses wide-ranging issues related to the internal audit functions of banks, the supervisor’s relationship with auditors and the duties of audit committees.

Basel Committee chairman William McDonough said: "I am pleased that the Committee is issuing a sound practice paper in this important area. A strong culture of internal and external audit is the foundation for ensuring the integrity of a bank’s financial statements. Transparency and the investor confidence necessary for the efficient operation of financial markets and rational allocation of capital depend largely on the accuracy of published financial statements."

The paper, available at www.bis.org, was prepared by the Basel Committee’s task force on accounting issues and was formulated after a consultation period subsequent to a preliminary paper published last year.