The Internal Audit Division was established in 1995 to assist the management in accomplishing organisational objectives by independently reviewing and evaluating the effectiveness of risk management, control and governance processes, and advising on opportunities for improvement. The role, mission and authority of the Division are defined in the Internal Audit Charter granted by the Chief Executive of the HKMA. The Charter is available at the HKMA website. The Division reports directly to the Chief Executive of the HKMA and the EFAC Audit Sub-Committee.

The Division continued to operate independently and effectively in 2006. Co-ordinated by the Division, line management of all business units updated their risk assessment reports, which identify and assess risks and corresponding controls in their operations. Based on the risk profiles of individual business units, the Division prepared an audit plan covering all the significant risks. The Division also analysed the results of the assessments to facilitate review by the Risk Committee.

Internal audit assignments carried out by the Division covered monetary operations, reserves management, monitoring and supervision of clearing systems, settlement operations, budgetary control, financial management reporting, operations and security of the data centre, security and contingency arrangements of critical IT systems and the business continuity plans of business units. The Division also advised on IT system development projects and performed ad hoc reviews at the request of the senior management. The results of the audits conducted in 2006 were satisfactory. Recommendations for improvement put forward by the Division were accepted and implemented by the management.

The Division attaches great importance to keeping abreast of developments in internal auditing standards and the practices adopted by other central banks. During 2006 staff of the Division attended an international conference of heads of internal audit of central banks organised by the Bank for International Settlements. They also visited and received internal auditors of other central banks to exchange views and share experience in risk management and internal auditing. Training courses and seminars on risk management, audit techniques, management and language skills were arranged for staff of the Division.