Summary of Audit Committee Charter
In accordance with establishment of “Corporate Governance” in Bank Sepah, based on regulations of Central Bank of Iran, and in order to implement the directives of Basel Banking Supervision Committee, internal audit committee charter was approved by the bank Board of Directors in January 2017 which came into force as of the said date.
1.To help the performance of supervisory responsibility of the Board of Directors and its improvement to obtain a reasonable assurance of the below-mentioned items:
- Effectiveness of steering system and internal controls processes.
- Soundness of financial reporting.
- Effectiveness of internal auditing.
- Independency and Effectiveness of independent auditors.
- Compliance of rules, regulations and requirements.
2-The bank Board of Directors authorizes the audit committee within its responsibilities to carry out its activities within the scope of the audit committee.
Number of members and meetings
- The audit committee consists of 5 members that are selected by the bank Board of Directors for a 2-year period.
- The meetings are held at least once in a month.
- The audit committee is responsible to present report regarding performance of internal audit unit as well as independent audit to the Board of Directors per fiscal year.
The main responsibilities of audit committee in different fields are as follows:
4.The main responsibilities of audit committee regarding financial reporting are as follows:
- Supervising important subjects in financial reporting, general judgments and estimations, major accounting procedures, manner of disclosure, selection and alteration of any item and disclosing transactions with related persons in (report) of the company financial statements.
- Obtaining reasonable assurance regarding reliability and timeliness of the bank financial statement.
- Submitting annual report regarding performance of internal audit unit and independent audit to the bank Board of Director
b. Internal Control
5.The main responsibilities of the audit committee regarding internal controls are as follows:
- Monitoring effectiveness of internal control systems of the bank including controlling information technology and preserving their security.
- Obtaining reasonable assurance regarding adequacy of internal auditors’ scope of inspection from the bank internal controls system.
- Investigating evaluation of internal audit regarding internal controls and independent auditor comments regarding internal controls.
- To follow-up executing suggestions and remove weak points of internal controls that are reported to the committee by the internal or independent auditors.
- presenting internal controls report to the Board of Directors including evaluation and commenting regarding internal controls of affiliated companies.
c. Internal Audit
6.The important responsibilities of the audit committee regarding internal audit, is as follows:
- Investigating charter and organizational structure of internal audit and feeling assurance of adequacy of the said structure and its independency in order to perform duties and responsibilities of internal audit.
- Investigating and approving the annual program of internal audit and adequacy of its required resources.
- Observing the effectiveness of internal audit.
- Obtaining reasonable assurance regarding compliance of internal audit with pertinent national and international standards.
- Submitting proposal to the Board of Directors regarding appointment, dismissal, and determination of salary, benefits and remuneration for the internal audit manager.
d. Independent Auditor
7.The important responsibilities of the audit committee regarding independent audit, is as follows:
- Investigating capacity, experience and independency of auditor and acquiring reasonable assurance of the consistency of their capacity.
- Submitting proposal regarding selection or alteration of independent auditor to general assembly or Board of Directors.
Compliance of rules, regulations and requirements
8.The main responsibilities of the audit committee regarding compliance of rules, regulations and requirements, and acquiring reasonable assurance respecting the below-mentioned items:
- Compliance of rules, regulations and requirements in the bank.
- Existence of strategic plan and following-up the optimal performance of the bank strategic plans to achieve the overall and operational objectives.
- Existence of organizational ethical charter and adherence of the management and the staff to it.
- To follow up received reports regarding non-compliance of rules, regulations and requirements including Board of Directors approvals.
Summary of Internal Audit Unit Activities
In accordance with establishment of “Corporate Governance” in Bank Sepah, based on regulations of Central Bank of Iran, and in order to implement the directive of Basel Banking Supervision Committee, internal audit committee charter was approved by the bank board of directors in January 2017 which came into force as of the said date.
Mission and Scope of Activities
1.Internal Audit, this section is designed to assure and give independent and unbiased advisory services to create added value and improve operations.
2.As per approval No.523 dated 24.08.2015 of the bank board of directors, the internal audit unit works under the supervision of the board of directors and is administered by the bank managing director.
3.The internal audit manager is proposed by the audit committee and is appointed by the bank managing director and reports to the bank board of directors, managing director and audit committee. Reports to the bank board of directors are sent by the audit committee.
4.Mission of the internal audit unit is to assure and give independent and unbiased advisory services to add value and improve the bank operations. Internal Audit helps the bank to create a regulated and methodological framework in a way that:
- Risks are recognized and managed in a proper manner.
- Important financial, administrative and operational information of the bank are duly prepared and presented in a reliable and unbiased manner.
- The continuous improvement of the bank controlling processes is encouraged.
- Acquisition of resources is economical, and effective and functional resources are used and maintained properly.
5.The activity scope of internal audit includes all activities and risks of the bank as well as its affiliated companies.
6.The bank internal audit unit adheres to the professional standards of internal auditors to carry out its assigned duties, The regulations that are the basis of internal auditors’ jobs are as follows:
- International framework of professional procedures of internal auditors association.
- Basel committee approvals related to internal audit of banks and the relationship between supervisors and auditors.
- Circular No. 1172/Mb dated 22.09.2007 of Central Bank of Iran regarding effective system of internal audit in credit institutions.
- Internal Audit unit performs its operations based on defined principles in the aforesaid regulations and other laws and regulations related to internal audit function (including local rules and regulations for the bank branches abroad and its group companies existing abroad).
7.Board of Directors fully authorizes the internal audit unit within its responsibilities framework, the below-mentioned powers:
- have access to audit committee.
- the possibility to have access to all documents of the bank and its affiliated companies.
8.The results of investigations and following-up to improve methods of internal controls system is reported to audit committee, managing director and board of directors.
9.Regular reporting is made to audit committee regarding modern effective subjects in order to perform internal audit properly.
10.The main responsibilities of internal audit unit are as follows:
- preparation of flexible annual internal audit program as per activities prioritized in accordance with risk, including any type of risk or controlling considerations proposed by the bank management and presenting it to the audit committee to be investigated (prior to the approval by the board of directors)
- Preparation of internal audit instruction.
- Executing cases referred to, by the bank managing director, board of directors and audit committee.
- Sound communication and cooperation with independent auditors to perform their responsibilities.
- To build culture through proper information dissemination to bank staff in respect of its internal audit and its value-adding nature.
Independency and impartiality
11.Internal audit should render a reliable service which is unbiased, independent, and based on International professional standards, prepared in accordance with professional code of conduct. To meet this end, internal auditors should possess appropriate organizational stand and to be capable of conducting their activities based on professional standards. Audit committee continuously evaluates the effect of these two factors on the independency of auditors. In case of any harm, they report the matter to the board of directors.
The Structure of Internal Audit Manual
1.The internal audit manual framework guides internal auditors in performing the related duties, which result in optimal manipulation of resources, creating coordination in performance of operations, preparation and presentation of the audit report. Moreover, the present manual led to integrity in the performance of audit process and preventing from making personal biased judgments, within different stages of audit process.
2.Manual consists of:
- Methodology of executing internal audit mission based on internal auditing standards, COSO framework and optimal performance patterns.
- Practical directives to execute ordinary auditing missions of all the bank processes including strategic, operational, back-office and information technology processes.
- Describing performance of special missions’ process.
- Enabling internal auditors to respond to necessary and special events.
3.This deed governs all operations of the internal audit department and is a practical guidance, appropriate to perform auditing operations, circles and organizational department.
4.All phase of internal audit including planning to final reporting and following-up performance of audit advices are in compliance with the principles proposed in this deed.
In order to present an overall vision of internal audit procedure to all members of audit teams, this directive explains the objectives of execution for the target phase at the beginning of each of the four internal audit phases. At the same time, it displays an algorithm of the executive actions to carry out that phase and all information and incoming evidences and products which are to be issued as output.