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Internal Audit Focused Areas in the Financial Industry



The role of internal audit in the financial services industry always comes under the spotlight when auditors use a proper supervisory approach and changes the methods to inspect and assess the complete cybersecurity audit finance priorities. Internal audit also plays a perfect role in ensuring internal and external stakeholder compliance and operational controls within the businesses. The internal audit function is not only expected to monitor compliance and transactions but also build an integrated view of existing and emerging risks and threats that can impact on business operations and financial performance.

As developments in the macroeconomic environment, systematic threats and risk factors, etc. have made internal audit functions more imperative, so Auditory functions have the added responsibilities to inspect and analyze the effects of external factors and systematic risks on the organization. If an auditor effectively focuses on the specific financial areas then uses of auditory functions can help in businesses to provide an independent and objective view on both; the first (business operations), & second related to risk and regulatory compliance. So, let’s have a look at major areas that are necessary to be focused by internal auditors in the field of financial services.

Asset Quality

Managing and deteriorating levels of credit quality within the banking and non-banking finance companies determine a significant systematic risk to the financial system. A weak macroeconomic atmosphere and environment has weakened corporate balance, consolidated financial statements, thereby, impairing their ability and performance to service bank debt in an effective manner. The resultant stress and financial issues can be seen in the form of non-performing assets within the banking system. Complete applications and effectiveness of the policies in accounting to measure financial assets as well as the implications of dynamic provisioning should be the major focus of cybersecurity audit. It is important for internal audit to identify and assess inconsistencies in the application of policies and evaluation of processes and control related to asset quality analysis.

Data Integrity & Analytics

It is necessary for any banking and financial institution to roll out accounting framework and internal auditory policies to address emerging risks related to their financial performance. Due to lack of proper and effective internal audit control and accounting protocols, banks face significant challenges to get enough information and data and to make them available to the regulators on time. Auditors help to understand the importance of risk factors assessment and regulatory compliance to govern and regulate banking information systems effectively and manage data integrity and analytics effectively.

Risk management Models

The role of internal audit is to evaluate the major focus area of risk management factors and models. As risk models are the key and integral part of business decision making, capital computations and risk analysis. The role of internal audit is to analyse the integrity of risk models and address those risks associated with them. It also helps the banking sector to understand and rectify monetary manipulations, incorrect statistical assumptions and wrong application of risk model outcomes. Internal Auditors provide values in these areas in order to mitigate such risks and develop the requisite competence to encourage financial success factors.

Capital & Liquidity

Capital adequacy and liquidity have become the key focus areas for financial institutions like banks where an auditor needs to prepare himself to manage the transactions to the next phase of the financial services. The objective to establish internal audit functions within the organisation is to manage the internal capital a and complete the process of capital planning, enterprise risk assessment and risk parameter measurement. In banks, Audit functions is to be in the position to investigate and validate the ICAAP documentation and rectify the efficacy of risk factors in the bank.

Closing Thoughts

The importance of internal audit functions is expected to be more proactive and advanced. At the same time, the auditor should notice the right point of investigating all accounting documents to validate the necessity of risk and regulatory audit finance and compliance assurance. Auditory functions are also essential to rationalize the points of re-auditing and manage the requirement to change the approach towards two aspects: technique to recognise the emerging risks and second the manner in which the auditor can understand the points of assurance synchronized and leveraged with risk assessment factors.

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