Assurance
The Audit Committee of the Central Bank of Malta was established by the Board of Directors in March 2001. Article 13 of the Central Bank of Malta Act Cap 204 gives power to the Board of Directors to establish an Audit Committee to assist it in fulfilling its responsibilities in matters related to the internal and external audit process, to the system of risk management and internal control, and to the financial reporting process.
The Committee is composed of three non-executive Board members, one of whom is designated by the Board to act as chairperson. The Audit Committee's role encompasses the oversight of financial issues and external reporting, internal audit and control, external audit, risk management and ethics. The tasks of the Audit Committee are governed by its Audit Committee Charter as approved by the Board of Directors. The broad objectives of the Committee are to:
- monitor the integrity of the financial statements, and any formal announcements relating to the financial performance of the Bank;
- monitor and review the effectiveness of the internal audit function and strengthen its independence;
- improve the quality of risk management, internal control, audit and financial control;
- implement policy on the engagement of the external auditors including non-audit services;
- monitor and review the external auditor’s independence, objectivity and effectiveness;
- make recommendations to the Board in relation to the appointment and removal of the external auditors;
- improve communication between Board Directors, internal and external auditors and management; and
- monitor the implementation of the principles of auditing ethical practices.
The Committee regulates its own procedures but, as a minimum, it is required to report to the Board four times a year and to meet with the external auditors at least two times a year.
The Internal Audit function falls under the direct responsibility of the Bank's Board of Directors through the Audit Committee. The mandate of the Internal Audit function is defined both in the Bank's Internal Audit Charter and in the Eurosystem/European System of Central Banks (ESCB) and Single Supervisory Mechanism (SSM) Audit Charter with regards to its wider European responsibilities. The two Charters are established on the basis of professional, internationally-recognised standards, in particular those of the Institute of Internal Auditors (IIA), and are approved by the Bank's Board of Directors and the Governing Council of the European Central Bank (ECB), respectively.
Internal Audit operates as an independent and objective assurance and consulting function, designed to add value and improve operations. It helps to achieve organisational objectives through a systematic and disciplined approach designed to evaluate and improve the effectiveness of the risk management, control and governance processes, including the efficient use of resources.
Thus, the Internal Auditors provide reasonable assurances to the Bank's management and, through the Internal Auditors Committee, to the ECB decision-making bodies including, where relevant, the Supervisory Board, on the adequacy and effectiveness of the Bank's governance as well as the operational, control and monitoring frameworks. Furthermore, through its recommendations, the Bank's Internal Audit activity seeks to protect and enhance organisational value by instigating beneficial change while nurturing a risk-sensitive culture complemented by a cost conscious and socially aware operational regime.
In terms of article 20 of the Central Bank of Malta Act, Cap 204, the accounts of the Central Bank of Malta are audited by independent external auditors appointed by the Board of Directors on the recommendation of the European Central Bank (ECB) and approved by the Council of the European Union according to article 27.1 of the European System of Central Banks and the ECB Statute.
The independent auditor's report is published as part of the Bank’s Annual Report.