11 June 2011

ECIIA: EU recognises the importance of internal audit to corporate governance

Following the EU Green Paper on corporate governance in financial institutions, upon which ECIIA provided commentary in 2010, the European Parliament adopted a resolution on the 11th of May 2011. ECIIA presents the full version of resolution specifically regarding internal audit.

• the Parliament calls for the establishment in all financial institutions of an effective governance system, with adequate risk management, compliance, internal audit functions (and, in the case of insurers, actuarial functions), strategies, policies, processes and procedures;
• the Parliament believes that an enhanced three-way dialogue between supervisors, auditors (both internal and external) and institutions would improve the likelihood of substantial or systemic risk being detected at an early stage; encourages supervisors, the European Systemic Risk Board, auditors and institutions to engage in open discussions and to increase the frequency of meetings in order to facilitate prudential supervision; further recommends that bilateral meetings take place between auditors and supervisors of major financial institutions; believes that it is the board and Internal Auditor's responsibility to ensure that necessary internal controls are in place to detect systemic risks and to establish a procedure for informing the board and supervisors of these risks in order to avoid negative consequences.

© ECIIA