Practice Guide: Auditing Credit Risk Management
Credit risk has always been considered a key risk for financial services organizations and, for a good number of organizations, maybe the most critical risk. This guidance provides internal auditors with a baseline skill set that allows them to test and evaluate the effectiveness of their organization’s credit risk management framework and processes.
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Regulators across the globe are focused on financial services organizations’ credit risk management activities. Moreover, regulators and supervisors consider managing credit risk one of the pillars required to maintain a robust and solvent financial sector, which in turn encourages a steady economic condition.
Given the complexity and importance of managing credit risk within a financial services organization, this guidance will focus on credit risk arising from a financial services firm’s lending practices.
After reading this guidance, internal auditors will:
- Understand the importance of credit risk in a financial services context.
- Understand the regulatory environment and requirements related to credit risk.
- Understand the risk governance and risk management processes surrounding credit risk.
- Describe the nature and basis of measurement of the probability of default.
- Design an audit engagement that assesses the appropriateness and effectiveness of the credit risk management framework and the adequacy of the institution’s credit profile.
- Be able to apply IPPF and risk-based internal audit techniques to assess and audit credit risk in their organization.
Item Number: 10.1325.dl