The Audit function in Banking and Finance

Banks and financial institutions are increasingly exposed to various kinds of risk - both financial and non-financial. The audit function provides essential monitoring services across the enterprise which are often required to be more robust than those in other commercial organizations.

The function
The Audit function is responsible for designing and implementing internal control systems to limit risk, for ensuring compliance to policy and to statutory requirements as well as the adoption of prudential guidelines. Many financial organizations refer to the audit function as Risk Management and Compliance which more accurately describes its area of operation in the modern age.

Banking and Finance institutions have very tight regulatory and governance requirements which need to be reported on externally in addition to internal corporate reporting. As a result, the new job roles ask for skills in planning and defining effective internal controls, implementing continuous system improvements and designing testing and monitoring procedures. Risk-based audit reviews and assessments are planned and actioned at regular intervals to identify weaknesses in internal processes and to recommend suitable solutions.

The skills needed
Central to the audit role is a good understanding of risk services, internal audit methodology and enterprise risk management. A working knowledge of Sarbanes Oxley regulations is becoming increasingly important. Since risk management and audit services do not work in a vacuum, practitioners in this field require a highly developed level of inter-personal skills as they have to engage on a day-to-day basis with stakeholders and divisional heads.

The trends
Traditional ways of managing financial audits are being rapidly replaced by a more contemporary approach. Transaction-focused, passive bureaucratic checking is being phased out in favour of value-creating business processes that are based on prevention and which are time and cost efficient.

The major change is the extensive application of information technology and systems. Business processes are increasingly being automated and controls becoming less person dependant. As a result, the scope for error and wrong-doing is limited as customized tracking reports can be created for all activities. Banks and financial services organizations compete for the same skills and require a level of IT competency that may attract a premium in the market.

The Financial Services industry has become more complex, offering new products in more channels resulting in the need for scrutiny of a large amount of data and having systems to manage it. There are some IT challenges facing the industry today such as how to drive down transaction costs, expand and improve customer service whilst ensuring integrity of information. The traditional accounting-and- checking image of the audit function has since been superseded by the risk, governance and compliance roles.

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