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BRPD Circular-11: Requirements for Audit Committee in Banks

The Board of Directors (BoD) of a bank in Bangladesh is responsible for ensuring effective internal control and risk management. One of the key requirements is to establish an audit committee, which plays a crucial role in overseeing the bank’s financial reporting, internal controls, and compliance with laws and regulations.

Responsibilities of the Board of Directors

The BoD should:

  • Ensure effective internal control and risk management.
  • Conduct an annual review meeting on the effectiveness of internal control processes and report to shareholders.
  • Hold meetings with interested parties, such as senior management, internal auditors, external auditors, and the audit committee.

Structure and Responsibilities of the Audit Committee

The audit committee should comprise 5 members, with at least 2 independent directors. Members may be appointed for a 3-year term, and the company secretary will act as the secretary of the audit committee.

Qualification of Audit Committee Members

Audit committee members should possess the following qualities:

  • Integrity, dedication, and spare time are essential.
  • Each member should have an adequate understanding of the bank’s business, operations, and risks.
  • Professionally experienced persons in banking or finance will be preferred.

Roles and Responsibilities of the Audit Committee

The audit committee is responsible for:

  • Internal Control: Evaluating management’s actions on internal control, computerization, MIS, and risk management.
  • Financial Reporting: Reviewing financial statements for accuracy and completeness.
  • Internal Audit: Monitoring independence, organizational structure, efficiency, and effectiveness of internal audit.
  • External Audit: Reviewing performance of external auditors and their reports.
  • Compliance with Laws and Regulations: Reviewing compliance with regulatory authorities’ laws and internal regulations.

Meetings

The audit committee should hold at least 4 meetings in a year. The committee may invite the CEO, Head of internal audit, or other officers to its meetings.