SOUTH AFRICAN RESERVE BANKBANK SUPERVISION DEPARTMENT ANNUAL REPORT 1996Issued by Authority MISSIONTO 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-orientated 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 INTERNAL AUDITORSAlthough the role of the internal auditors, together with that of the audit committee, was highlighted in the Department's 1994 Annual Report, several highly publicised bank failures in recent years have once again underscored the need for effective internal controls and an effective internal audit function, as well as the crucial role played by internal auditors in the management of risk: "As major institutions fall victim to control failures, and others take stock of their defenses, we see a new reality: risks are swift, sudden and relentless.To fortify themselves against the onslaught, senior management and boards of directors rely on internal audit. The internal audit function is their 'superego', the voice of conscience, the mechanism to spot whether controls are sufficient to manage risks and uncertainties. That's a tremendous responsibility, and over the years, the internal audit function has largely lived up to the challenge.Of course internal audit does not, cannot, bear this responsibility alone. Internal audit's function is simply one of the elements of an institution's overall fabric of corporate governance ... Yet internal audit has long since been the focal point, the court of first and last resort and the function most often turned to when controls falter." Internal audit in leading financial institutions: a worldwide study of the changing landscape, New York, NY: Deloitte Touche Tohmatsu International, 1995, p. 2.