RBI has issued circular for Risk Based Internal Audit Framework

Jan 08, 2021 | by Avantis RegTech Legal Research Team

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Finance & Taxation Compliance

The Reserve Bank of India (RBI) on January 07, 2021 has issued a notification for the Risk Based Internal Audit Framework (RBIA). All the banks have been advised to inculcate RBIA in their internal control framework with a well-defined policy for internal audit.

The following guidelines shall be followed by the Banks: 

• The internal audit function must have sufficient authority, stature, independence, and resources within the bank, thereby enabling internal auditors to carry out their assignments with objectivity.

• Requisite professional competence, knowledge and experience of each internal auditor is essential for the effectiveness of the bank's internal audit function.

• Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the Board should prescribe a minimum period of service for staff in the Internal Audit function. 

• Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the HIA shall be appointed for a reasonably long period, preferably for a minimum of three years.

• The HIA shall directly report to either the Audit Committee of the Board (ACB) / MD & CEO or Whole Time Director (WTD). Should the Board of Directors decide to allow the MD & CEO or a WTD to be the ‘reporting authority’ of the HIA, then the ‘reviewing authority’ shall be with the ACB and the ‘accepting authority’ shall be with the Board in matters of performance appraisal of the HIA.

• The independence and objectivity of the internal audit function could be undermined if the remuneration of internal audit staff is linked to the financial performance of the business lines for which they exercise audit responsibilities. 

[Notification No. DoS.CO.PPG./SEC.04/11.01.005/2020-21]

 


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