The Monetary Board (MB) has approved the revised guidelines for internal control and internal-audit of financial institutions regulated by the Bangko Sentral ng Pilipinas (BSP).
The new guidelines upgrade the requirements of the BSP regarding the internal-control mechanisms in financial institutions, which was previously limited only to the implementation of basic internal-control activities to promoting shared accountability of the board of directors and personnel at all levels in the internal-control process.
These internal-control activities include management oversight and control culture; risk recognition and assessment; information and communications; and monitoring activities and correcting of deficiencies.
In approving the new guidelines, the MB recognized that internal-control processes are peculiar to each financial institution, “as such, consistent with the principle of proportionality, financial institutions are expected to adopt internal- control frameworks that are suited to their size, risk profile and complexity of operations.”
The new guidelines on internal audit, meanwhile, also broaden the BSP’s expectations on the internal audit process of financial institutions.
Under the new guidelines, the qualifications of the head of the internal audit function were expanded so as to consider professionals from disciplines outside of the accounting profession. Certified public accountants or certified internal auditors are required for the head of the internal audit function of a universal/commercial bank.
On the other hand, the head of the internal audit of thrift, rural and cooperative banks may be a graduate of any accounting, business, finance or economics course, but should have the technical proficiency on the conduct of internal audit.
Financial institutions are generally allowed to outsource the internal audit function to have access to certain areas of expertise or address resource constraints, provided that the scope of audit will not include areas that are covered by existing statutes on deposit secrecy.