HSBC's Flint: "Important role for modern internal audit function"

ONE OF THE UK’s most senior accountants and bankers has welcomed recommendations to codify the position of internal audit within the governance of financial services organisations.

HSBC chairman Douglas Flint, in a speech for the Chartered Institute of Internal Auditors last night (pictured), held at Guildhall, London, said there was an “important and growing role for a modern internal audit function”.

The Parliamentary Commission on Banking Standards’ report, which issued wide-ranging recommendations to improve the banking system, called on extra board access and accountability for internal audit up to the board, preserve internal audit’s independence, and provide those staff the status to challenge front-line employees effectively.

“Hopefully these characteristics are already in place in most organisation as they represent best practice, but it is good to see their being stressed in such a high level report,” he said.

Flint added that the institute played a “critical role” in helping to design a system that should help “preserve [an] organisation’s right to self-determination” through controls and challenge.

Flint, who had previously served as HSBC’s group finance director and as former audit committee chairman of BP, spoke “sadly from experience of having to face up to failures” caused by different controls and internal audit framework standards “calibrated” to local regulation and requirements.

“Had we applied best in class everywhere it is at least arguable that many or at least some of the failings we suffered would have been prevented.

“And here lies a huge challenge for the internal audit function in a global group – how to build assurance around global standards yet respect locally distinctive rules and regulation, understand and adjust for the impact of cultural differences and local business norms and manage audit quality consistency between centralised and distributed audit teams.”