kpmg

State Bank of Pakistan

Internal Audit Charter

This document contains 7 pages

Internal Audit Charter (SBP) Final.doc
 kpmg State Bank of Pakistan
Internal Audit Charter

Contents

1 INTRODUCTION 1

2 MISSION STATEMENT 1
3 OBJECTIVES AND SCOPE OF WORK 1

4 AUTHORITY 2

5 RESPONSIBILITY 3

6 ACCOUNTABILITY 4

7 INDEPENDENCE 4

8 CONTINUITY AND IMPARTIALITY 5

Internal Audit Charter (SBP) Final

 kpmg State Bank of Pakistan
Internal Audit Charter

1 INTRODUCTION
This charter primarily aims to define and establish:

?? The formal mission statement of audit department of State Bank of Pakistan (SBP).

?? The objectives and scope of audit department.

?? The audit department’s position within SBP, its access to various records, departments
and activities, its responsibility and accountability.

2 MISSION STATEMENT
To provide independent appraisal of all the activities of SBP aiming to add value, improve
operational efficiency, risk management and internal control systems.

3 OBJECTIVES AND SCOPE OF WORK

The prime objective of audit department is to examine and evaluate whether the SBP’s frame
work of risk management, control, and governance processes, is adequate and functioning
properly.

In addition, the objectives of audit department include advising and recommending senio r
management for improvements in internal control and risk management systems.

In order to fulfil its mission statement and objectives, audit department’s scope of work
includes:

?? The examination and evaluation of the adequacy and effectiveness of the internal control
systems at various operations and activities of SBP.

?? The review of the application and effectiveness of risk management procedures and risk
assessment methodologies at various operations and activities of SBP.

?? The review of the management and financial information systems, including the
electronic information system. The review of the accuracy and reliability of SBP
accounting records and financial reports.

?? The testing of both transactions and functioning of specific internal control procedures at
various SBP departments and offices.

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Internal Audit Charter

?? The evaluation of adherence to legal and regulatory requirements and approved policies
and procedures.

?? The evaluation of effectiveness of existing policies and procedures and give

recommendations for improvements.

?? Identifying opportunities for cost savings and making recommendations for improving
cost efficiencies.

?? Examining that resources are acquired economically, used efficiently and safeguarded
adequately.

?? The carrying-out of special investigations assigned by the Governor SBP/ audit

committee.

?? Precisely, every activity and every entity of SBP fall within the scope of the internal
audit for independent appraisal. The Director and staff of audit department are, however,
not allowed to:

?? Perform any operational duties for SBP out side audit department function.

?? Initiate or approve accounting transactions external to audit department.

?? Direct the activities of any SBP employee not employed by the audit department,
except to the extent such employees have been appropriately assigned to auditing
teams or to otherwise assist the internal auditors.

4 AUTHORITY
The Director and staff of audit department are authorized to:

?? Have unrestricted access to all SBP departments, offices, affiliates, activities, records,
information, properties and personnel, relevant to the performance of audit function.

?? Determine scope of work and apply the techniques required to accomplish audit
objectives.

?? Obtain the necessary assistance of personnel in various departments/ offices of SBP

where they perform audits.

?? Obtain assistance of specialists/ professionals where considered necessary from within or

out side SBP.

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Internal Audit Charter

5 RESPONSIBILITY
The Director audit department has responsibility to:

?? Formulate an annual audit plan in consultation with Audit Committee and management.

?? Implement the annual audit plan, including as appropriate any special tasks or projects
requested by the Governor SBP and the audit committee.

?? Maintain a requisite professional audit staff strength with sufficient knowledge, skills,
experience, and professional qualifications to meet the requirements of this Charter.

?? Issueperiodic reports on a timely basis to the audit committee and the Governor SBP
summarizing results of audit activities.

?? Keep the audit committee informed of emerging trends and developments in internal
auditing practices and give recommendations for necessary revisions in Internal Audit
Charter and Internal Audit Manual. Provide a list of significant measurement goals and
results to the audit committee.

?? Assist in the investigation of significant suspected fraudulent activities and notify the
Governor SBP and the audit committee of the results.

?? Ensure that the department complies with sound internal auditing principles and best
practices; seek guidance from the standards issued by the Institute of Internal Auditors,
and Information Systems Audit & Control Association, (USA).

The Director and staff of audit department have responsibility to:

?? Follow the guidelines and methodology given in the Internal Audit Manual.

?? Exercise due professional care in carrying out audit assignments.

?? Maintain integrity and objectivity.

The internal audit process, however, does not relieve departmental heads/ chief managers of
their responsibility for the maintenance and improvement of controls in their respective
areas.

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Internal Audit Charter

6 ACCOUNTABILITY
The Director audit department, in the discharge of his duties, shall be accountable to the
Governor SBP and the audit committee to:

?? Submit an assessment on the adequacy and effectiveness of the SBP’s processes for
controlling its activities and managing its risks in all the core areas of SBP operations on
six monthly basis and in non core areas on annual basis.

?? Report significant issues related to the processes for controlling the activities of SBP and
its affiliates, together with recommendations for improvements to those processes.

?? Provide information on the status and results of the annual audit plan on a quarterly
basis.

?? Coordinate with external auditors and provide oversight of other control and monitoring
functions e.g. security and legal etc.

7 INDEPENDENCE
?? To maintain the independence of audit department from other SBP departments and
offices, its personnel shall report to the Director audit department, who shall report to the
Governor SBP and audit committee.

?? Audit department shall be independent of the activities audited. The department must
also be independent from the every day internal control process.

?? Audit department shall exercise its assignment on its own initiative in all departments,
offices and functions of SBP.

?? Director audit department shall be authorised to communicate directly, and on his own
initiative, to the Governor SBP, the members of audit committee and the board.

?? The internal audit function should be subject to an independent review as and when
required. This review can be carried out by independent professionals e.g. practicing
chartered accountants.

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Internal Audit Charter

8 CONTINUITY AND IMPARTIALITY

?? Internal audit within SBP shall be a permanent function.

?? Audit department shall be objective and impartial in performing its assignment.

?? Objectivity and impartiality entails that the internal audit department itself seeks to avoid
any conflict of interest. To this end, staff assignments within audit department shall be
rotated periodically. Internally recruited auditors shall not audit activities or functions
they performed in the past two years and they will not be allowed to audit the work
earlier performed by them.

?? Impartiality requires that audit department is not involved in the operations of SBP or in
selecting or implementing internal control measures. However, audit department may
give recommendations for strengthening internal controls and can also give opinions on
specific matters related to internal control procedures as per the request of senior
management.

ISSUED UNDER THE SIGNATURE OF:

DR. ISHRAT HUSSAIN :

Governor,
State Bank of Pakistan

Dated :

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