Internal and External Banking Audit

Chapter I The audit in the current Romanian banking system

The first chapter consists in approaching the elements that define the

Romanian banking system during their evolution to the transition period to the

market economy, as well as the place that the audit takes within a commercial

bank.

We have underlined the fact that the banking system, as a modern

system and for a fully international alignment, has given the necessary

attention to the controls that come with the adequate monitoring of the

activity, at the level of each banking entity as well as the level of the whole

system, by optimizing the control systems already in use, and also by

implementing new ones adjusted to the present needs. At the same time, the

need to supervise the system has acquired refinement, gaining new meanings

and deeper approaches. As an instrument in the management of any

economical entity, the audit has exceeded the imposing stage by the

surveillance authorities, proving its utility, and the complementarity of the two

3

audit forms is by itself, their meaning.

In our opinion, introducing the audit in our country during the transition

period to the market economy comes as a result of the generalised interest

caused by the adoption and/or harmonizing of the national reglementations

with the ones foreseen internationally.

The whole system is supervised by the National Bank, which has created

a lever system through which it can control and identify in due time any

phenomenon that may lead to deteriorating the system’s quality, in order to

avoid “unpleasant” events. At the same time, in order to survey the activity’s

quality, each banking entity is periodically obeyed to auditing, external and

internal, the results being the main instrument in the banking management.

Our opinion is that, due to the last progresses in the banking system, it

is for the first time one step ahead the economical and social phenomenon in

our country.

Chapter II Auditing approach through banking risks

In our opinion, the banking activity is, through its nature, an activity in

which risk is the main characteristics.

Being present at all times in the banking activity, in each transaction, in

each process, it is essential for a bank to identify the risks which it is

confronted with, the specific ones and the associated ones, generated by its

operations, to evaluate them and concentrate its forces for a correct covering of

them, for diminishing their effects. As a consequence, the risk is permanently

surveilled through instruments adjusted to each type of risk. The completion of

the instruments and their correct application are the main objectives of each

audit mission, both internal and external. If a risk is correct and in time

identified, measures for its covering being taken, the chance for it to be

materialized is substantially diminished. Therefore the optimizing of the risk’s

whole life process, is in everyone’s interest. In this way the process is more

efficient, the personnel becomes aware and responsible, and of course, the

audit’s task is more refined, by the fact that it becomes possible to strike back

in due time the effects that a risk might have over the banking activity.

We consider that it is essential the fact that eliminating and avoiding

risks means a previous accomplishment of identifying and evaluating the

4

risks and then putting away the causes which determine them, the banks

using in this way different methods, which are presented.