This Charter defines and identifies the mission, objectives, scope, authority and accountability of the Internal Audit Division (IAD).
The IAD's mission is to assist the EFAC Audit Sub Committee (ASC) and the management in protecting the HKMA, and its reputation, by independently and objectively evaluating the effectiveness of internal controls, risk management and governance process. In so doing, IAD seeks to provide objective assurance services designed to add value by recommending cost effective improvements to the HKMA’s operations.
The Financial Secretary has delegated certain of his responsibilities under the Exchange Fund Ordinance to the Monetary Authority (MA). Under the Banking Ordinance, the MA has also the functions, amongst others, to promote the general stability and effective working of the banking system in Hong Kong. The MA should ensure that the responsibilities and functions entrusted to him are properly conducted.
Conduct of the responsibilities and functions of the MA is exercised through the office of the Hong Kong Monetary Authority (HKMA). The IAD of the HKMA is set up with the primary objective to assist the management of the HKMA in the effective discharge of its responsibilities and functions. This is achieved through comprehensive audit coverage sufficient to assure that assets and resources of the HKMA are appropriately safeguarded and accounted for, and that laws, regulations, policies, established procedures and guidelines are adhered to. The IAD will assess and report on the effectiveness of the internal controls and the control environment; the reliability of the financial and accounting systems as well as the management reporting systems.
The IAD will strive to be a front-end driving force helping to optimize and add value to the organization's efficiency, effectiveness and propriety, and will be proactive, constructive, and cost-effective in making recommendations to the management.
The IAD is responsible for:
The IAD will adhere to the standards of best professional practice, including the International Standards for the Professional Practice of Internal Auditing, the Definition of Internal Auditing and the Code of Ethics issued by the Institute of Internal Auditors.
Authority, Independence and Accountability
In order that the IAD can achieve its mission and objectives effectively, it is to have full, free and unrestricted access rights to all activities, information, records, properties and personnel of the HKMA in the proper performance of their duties. All staff members of the HKMA should provide the necessary assistance to, and cooperate with, staff of the IAD.
All information, records and documents accessed during the course of internal audit activities will be kept confidential and used solely for the conduct of these activities.
It is important for the IAD to maintain a neutral and independent position. Other than playing an advisory role, the IAD shall not be involved in the management or control of the operations or functions of other departments, divisions and offices of the HKMA.
The IAD shall perform its work objectively with an impartial, unbiased attitude and avoid any conflict of interest.
The IAD shall operate independently, objectively and separately from other departments, divisions and offices of the HKMA. It reports functionally to the EFAC Audit Sub-Committee and administratively to the Chief Executive of the HKMA.
In order to maintain the independence of the IAD, changes in the Head of the IAD require prior consultation with the EFAC Audit Sub-Committee.
The Head of the IAD may independently consult the EFAC Audit Sub-Committee without the presence of the Chief Executive of the HKMA.
The IAD will issue timely and constructive report following each internal audit visit to ensure quick corrective action being taken by auditees.
The IAD will provide periodic reporting to the Chief Executive of the HKMA and the EFAC Audit Sub-Committee on whether:
The effectiveness of the IAD shall be part of the accountability review process in the event of any major control failure within the HKMA.
It is the responsibility of management to design, implement and operate systems of internal controls and prepare the policies and procedures manuals to achieve the intended business objectives.
The IAD should be given the necessary resources in terms of appropriate staffing levels and adequate technical training to achieve its mission.
The IAD will perform its tasks with proficiency and due professional care. It will adopt best practice in planning, conducting, reporting reviews and following up the implementation of recommendations. It will keep abreast of new developments affecting their work and in matters affecting the HKMA's activities. Furthermore, the IAD will be responsive to the HKMA's changing needs, will strive for continuous improvement and maintain integrity in carrying out their activities.
The Head of the IAD should establish quality assurance procedures and ensure that established standards and practices are followed.
The Head of the IAD should be responsible for maintaining the charter in a current state. Amendment of the charter should be subject to the approval of the Chief Executive of the HKMA in consultation with the EFAC Audit Sub-Committee.
Success criteria should be established for IAD. The criteria include but not restricted to the following:
Reviewed this Charter on 28 January 2022.