Session
Information Systems and Security
Description
Internal control involves everything that controls risks to a bank. The objectives of internal control as a system relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. The objectives of internal control at a specific transaction level refer to the actions taken to achieve the target within the allowed limit of risk. An effective internal control system reduces process variation, leading to more predictable outcomes. There are some important documents for regulating the internal control system as such: The Directive 2006/43/EC “On statutory audits of annual accounts and consolidated accounts”, published by the European Commission in 2006; 8th Company Law Directive of the European Union, Article 41; “The internal audit function in banks,” Basel Committee on Banking Supervision, 2012; “Corporate Governance Principles for Banks” Basel Committee on Banking Supervision, 2015. It should be noted that Albania, an EU candidate country, is approaching the EU directives and Basel principles via legislation and regulation framework. Related to bank’s internal control system, its structure and responsibilities, Albania has taken periodically the way of accommodating the requirements of EU directives and Basel principles within the law no. 9662, dated 18.12.2006 “On Banks on the Republic of Albania”, amended; regulation no. 63, dated 14.11.2012 and lately the new regulation, dated on 02.09.2015 “On Internal Control System”. This last one, has given the minimum requirements for setting up an effective internal control system and supporting arrangements by the three lines of defence model; a strong internal control system, including an independent and effective internal audit functions, as part of sound corporate governance; the findings of internal audit to be followed and bank’s management to take appropriate and timely corrective action in response to internal control weaknesses; the internal audit to provide vital assurance to bank’s board of directors and supervisors with whom should be an enhanced two-way communication for discussing the risk areas identified, measures received, etc. This paper aims to inform bankers, researchers, and other stakeholders with some principles of internal control system regulated in Albania as well as raising some other related issues to be considerate for ensuring the efficiency and effectiveness of internal control system of banks in Albanian.
Keywords:
internal control system; internal audit function; governance; lines of defence; risk management
Proceedings Editor
Edmond Hajrizi
ISBN
978-9951-550-14-7
First Page
226
Last Page
231
Location
Durres, Albania
Start Date
7-11-2015 9:00 AM
End Date
7-11-2015 5:00 PM
DOI
10.33107/ubt-ic.2015.115
Recommended Citation
Ribaj, Artur, "Some Principles for Banks’ Internal Control System in Albania" (2015). UBT International Conference. 115.
https://knowledgecenter.ubt-uni.net/conference/2015/all-events/115
Some Principles for Banks’ Internal Control System in Albania
Durres, Albania
Internal control involves everything that controls risks to a bank. The objectives of internal control as a system relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. The objectives of internal control at a specific transaction level refer to the actions taken to achieve the target within the allowed limit of risk. An effective internal control system reduces process variation, leading to more predictable outcomes. There are some important documents for regulating the internal control system as such: The Directive 2006/43/EC “On statutory audits of annual accounts and consolidated accounts”, published by the European Commission in 2006; 8th Company Law Directive of the European Union, Article 41; “The internal audit function in banks,” Basel Committee on Banking Supervision, 2012; “Corporate Governance Principles for Banks” Basel Committee on Banking Supervision, 2015. It should be noted that Albania, an EU candidate country, is approaching the EU directives and Basel principles via legislation and regulation framework. Related to bank’s internal control system, its structure and responsibilities, Albania has taken periodically the way of accommodating the requirements of EU directives and Basel principles within the law no. 9662, dated 18.12.2006 “On Banks on the Republic of Albania”, amended; regulation no. 63, dated 14.11.2012 and lately the new regulation, dated on 02.09.2015 “On Internal Control System”. This last one, has given the minimum requirements for setting up an effective internal control system and supporting arrangements by the three lines of defence model; a strong internal control system, including an independent and effective internal audit functions, as part of sound corporate governance; the findings of internal audit to be followed and bank’s management to take appropriate and timely corrective action in response to internal control weaknesses; the internal audit to provide vital assurance to bank’s board of directors and supervisors with whom should be an enhanced two-way communication for discussing the risk areas identified, measures received, etc. This paper aims to inform bankers, researchers, and other stakeholders with some principles of internal control system regulated in Albania as well as raising some other related issues to be considerate for ensuring the efficiency and effectiveness of internal control system of banks in Albanian.