In the light of recent events, I might add that directors have the further responsibility to periodically consider whether their initial assessment of management’s integrity remains correct. BIS Review 55/2002  3  Interagency policy holds boards of directors responsible for ensuring that their organizations have an effective audit process and internal controls that are adequate for the nature and scope of their businesses.
The reporting lines of the internal audit function should be such that the information that directors receive is impartial and not unduly influenced by management. Internal audit is a key element of management’s responsibility to validate the strength of a bank’s internal controls.