AUDITORS in banks should have greater power to challenge bosses about excessive risks in any part of the business, as well as about threats to the institution’s reputation and stability under proposed guidelines published today.
In a drive to shake up the profession and prevent a repeat of the failings in the run up to the financial crisis, the Chartered Institute of Internal Auditors (CIIA) has launched a consultation on the new code of conduct.
The oversight staff will get new powers – and responsibilities – to assess the risk appetite of the firm, from the establishment of parameters by the board through to the controls used to monitor the risks being taken and the adherence of the firm to them.
Those powers should extend right through to monitoring the culture of bank employees and how they are paid, the CIIA said.
The financial watchdogs welcomed the proposals.
“The expectations of internal audit functions within financial services firms have hitherto been set too low,” said Andrew Bailey, who will head the new Prudential Regulation Authority.
“The regulatory authorities expect firms to have robust internal audit functions capable of providing genuine challenge to management and driving improved governance, risk management and internal controls. I hope that this guidance will help internal audit functions position themselves to achieve that.”