SOUTH AFRICAN RESERVE BANKBANK SUPERVISION DEPARTMENT ANNUAL REPORT1994Issued by Authority MISSION TO PROMOTE THE SOUNDNESS OF BANKS THROUGH EFFECTIVE SUPERVISION PHILOSOPHYMarket principles underlie all activities and decisions, and we strive to project an image of professionalism, integrity, credibility and impartiality at all times. We subscribe to a service-oriented approach, which entails accessibility and availability, and a high premium is placed on ethical behaviour at all levels of activity. A relationship of mutual trust between this Department and all other key players is regarded as essential and is built up through regular open communication. ROLE OF THE AUDIT COMMITTEE AND THE INTERNAL AUDITORS Following on the quotation in the 1993 Annual Report regarding the role of management, we wish to highlight the importance of the audit committee and the internal auditors, respectively: "The role of the audit committee is to assist the Board of directors with discharging its responsibility to:safeguard the company's assets;maintain adequate accounting records; anddevelop and maintain effective systems of internal control.The overall objective of an audit committee is to see that management has created and maintained an effective control environment in the organisation, and that management demonstrates and stimulates the necessary respect of the internal control structure amongst all parties" - The King Report on Corporate Governance, [Johannesburg], 29 November 1994, Appendix V pp. 51."The internal audit function is an independent appraisal function established within a company to examine and evaluate the company's activities. The objective of internal auditing is to assist members of executive management in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with analyses, appraisals, recommendations, counsel, and information concerning the activities reviewed" Ibid, pp. 22. SOUTH AFRICAN RESERVE BANK BANK SUPERVISION DEPARTMENTAnnual report for the calendar year ended 31 December 1994 in terms of section 10 of the Banks Act, 1990, and section 8 of the Mutual Banks Act, 1993. PURPOSE OF THE REPORT The purpose of this report is to present an overview of the objectives and activities of the Bank Supervision Department of the South African Reserve Bank, with particular reference to the period 1 January 1994 to 31 December 1994.