Banking supervisors consider liquidity to be a pillar of a robust and solvent financial sector. Supervisory principles hold boards accountable for an organization's liquidity adequacy assessment. Those principles advocate a relevant and active internal audit role in assessing an organization's liquidity risk management (LRM) process.
This practice guide gives an overview of international standards and best practices of LRM, including the use of an LRM framework. It describes the organizational roles and responsibilities related to liquidity governance, risk management, control, and monitoring processes. These include the internal audit activity's role as the provider of independent assurance over the quality and effectiveness of those processes. Due to the complexity of the subject, internal auditors should review whether they have the necessary knowledge, skills, and experience to undertake LRM audit activities, as noted in the Competency Rule of Conduct in The IIA’s code of Ethics.
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