Practice Guide: Auditing Liquidity Risk
The IIA has released Auditing Liquidity Risk, An Overview—the first IPPF practice guide specifically for financial auditors.
In the heavily regulated financial services industry, institutions must actively manage liquidity risk to ensure survival. Post crisis, supervisors have formalized liquidity risk management requirements within regulations and developed specific expectations of internal audit departments. In this environment, it is imperative that practitioners ensure their audit approaches are in line with international standards, regulations, and best practices.
The IIA’s new practice guide provides a historical perspective on the regulatory environment related to liquidity risk, reviews the fundamental principle for the management of liquidity risk, and explains why it is so important for a financial institution. Additionally, the guidance highlights:
- Governance of liquidity risk management.
- Liquidity risk appetite/tolerance.
- Considerations for planning a Liquidity Risk audit.
- Measurement and management of liquidity risk.
- Public disclosure requirements.
- Role of supervisors.
