CCBS Handbooks

Abstract No 4 - Internal Audit in a Central Bank
By Christopher Scott

Internal audit is carried out in most major organisations. It is by no means unique to central banking. However, this Handbook has been prepared with central bankers in mind. It sets out the basic concepts, practices and standards that might be applied in a central bank.

Internal audit should be an independent function within a central bank, reporting directly to the Governor or equivalent. Its task is to identify the risks to which the bank is exposed, whether in a material or reputational sense, to advise on appropriate controls and to ensure that control systems are operated effectively.

Part of the auditor’s responsibility should be to rank risks according to the likelihood of the event of a loss or failure, and the significance of any resulting financial or reputational loss. Such rankings will guide the auditor to deploy his inevitably limited resources in the most efficient way.

The effectiveness of internal audit depends also upon good organisation and appropriate staff resources, as well as on good communication and relations (albeit at "arms-length") with other parts of the bank.

Although the Handbook reflects the professional standards of internal auditing that are applied in the United Kingdom, these standards should in broad terms be appropriate anywhere in the world.

This handbook is also available in Russian and Spanish.

Withdrawn from publication. An updated version will be released in due course.