The Reserve Bank of India (RBI) has issued a circular, asking banks to align their internal audit function with International Internal Audit Standards, as issued by the Basel Committee on Banking Supervision (BCBS) and the Institute of Internal Auditors (IIA).
RBI has specified certain norms on ‘authority, stature and independence’, ‘competence’, ‘staff rotation’, ‘tenor for appointment of head of internal audit’, ‘reporting line’ and ‘remuneration,’ to bring uniformity in approach followed by the banks, as also to align the expectations on internal audit function with the best practices.
RBI further said the internal audit function should not be outsourced. However, where required, experts, including former employees, could be hired on contractual basis subject to the Audit Committee of the Board of Directors (ACB) being assured that such expertise does not exist within the audit function of the bank, it said.
It has also mentioned that banks must ensure and demonstrate through proper documentation that their Risk Based Internal Audit (RBIA) framework captures all the significant criteria / principles suited for their organisational structure, the business model and the risks.