Changing role of

internal auditors
in banks
Presented by Group 5

01 IARM | Group 5
 Today's agenda
Introduction Evolution
Role of Auditors Changes through the years
Functionality Primary role of internal auditors
Other Functions Risk Based Audit Plan
Role of Auditors in banks Responsibilities
Internal Control Impact

 03

Introduction
The banking sector has been facing changes at a very fast
rate in the last decade or so. There has been a change in
the rate and the volume of the businesses, which means
that businesses face a high level of risk to, due to the
expansion of their operations. The circulatory
requirements, and the intervention of technology has
created not only new opportunities but also a variety of
risks.

IARM | Group 5
04

Role of
Auditors
is to evaluate and examine
whether the internal audit of
the company is effective in
finding problems and
addressing them along with
management of different
kinds of risks and governance
as a whole.
05 Reliable, effective, integrity

Identification of risk

Functionality compliance of all activities

Protecting assets

Data protection
 Other functions
RISK MANAGEMENT REGULATORY REPORTING

evaluate the risk The internal auditors need to evaluate all

management
procedures of the
company to make sure
sound practices are
being used.
systems at regular intervals to give time
bound reports to the management on
whether the systems are accurate or not.
This would also include public
disclosures
1 07
Keeping an eye on the
financial reporting process&
Reviewing financial
judgements
2
Role of
auditors in
Making sure the accounting
policies of the bank are up to
date as well looking at the
qualitative aspect of it banks
3
Monitoring the correctness of
bank’s financial statements
and their financial
performance
 Internal Control
Make certain that the management maintains proper financial control
of the system and processes.

INTERNAL AUDIT ETHICAL REQUIREMENTS REMEDIAL ACTIONS

Reviewing the effectiveness of the bank’s
internal financial controls
Giving approval for the budget and audit
plan
Reviewing any cases of fraud or improper
usage of funds
Assessing the performance of the heads
of departments including the audit
department.
Approving the appointment/re-
appointment of the head of the audit
committee
Keeping in check the
independent state of auditors
Reviewing the effectiveness of
the audit process
Approving the fees charged for
the audit process
Make sure the upper
management takes proper
actions when any irregularity is
found and reaches an
appropriate conclusion.
Looking into weak controls as
well as non-compliance issues.
Ensuring action based on issues
found are taken action on by the
management in a time-bound
manner.
 09

Evolved In ways which not only enhance operational

efficiency of the form and the financial institution but also
is compliant with the internal controls present which
enables value preservation and creation of the banks

Magerial support became essential, lack of which caused

auditors to be out of the loop in strategic initiatives.

Skill set required changed and grew to it being more than

just accounting and finance but also focused on
relationship building, having in depth industry knowledge,
exellent communicators and critical thinkers

The internal auditors now identify opportunities and

requirements along with threats and risk, they also
understand the performance compliance and the impact
that they would have on the banking and financial
Evolution
institution along with the other elements
IARM| Group 5 10

Changes through the years

11
Advantages of a risk based approach
• Appropriately defining the audit
universe and auditable units
• Management in identification of
appropriate risk factors
• It develops a format for evaluating risk
factors
• It helps in developing an appropriate
audit coverage plan
• It conveys the result in a process-
oriented audit for effective risk
management on a bank-wide basis
Increased focus on risk based
supervision
Certain principles pronounced by
Basel Committee on Banking
Supervision are also required to
followed by the internal audit
department
International Capital Adequacy
Framework proposed a risk
management perspective of the
operations wherein the banks which
have a better and increased risk
mitigation strategies which get a
reward with lower capital requirement
against the high risk bank which will
have a stringent capital requirement
12

Simple illustration for

the primary role of
internal auditors
 AUDIT UNIVERSE

PRIORITY

TYPE OF THE INTERNAL AUDIT ASSIGNMENT

Risk based audit plan FREQUENCY

EXTENT OF TEXTING

RESOURCE REQUIREMENTS

SUBMISSION OF THE INTERNAL AUDIT PLAN

14
RISK CULTURE

RISK APETITE

FINANCIAL CRIME CHALLENGE

Additional TECHNOLOGY
Responsibilites RECOVERY AND RESOLUTION PLAN
(RRP)

CONDUCT RISK

IARM | Group 5
CONFLICTS OF INTEREST
 Impact
Value Moving More skills Reduced Overall
Creation beyond and risk frauds performance
monitoring resources
role
 Thank you
Presented by

Aakash Bhardwaj - 200102001

Aditi Chhikara - 200102005
Aditya Kumar - 200102006
Akshit Agrawal - 200102009
Bishal Bagaria - 200102018