Study On The Internal Auditing Of The Local Commercial Banks

After thirty years of reform and opening up to the outside world, finance has become the core of the modern economy, and banking sector is an important part of finance. China’s banks now are focusing on preventing risks and maximizing enterprise value. In recent years, with the rapid development of China’s economy and the deepening reform of the financial system, banks are growing in size and business scope. However, banks are also facing the increasing operational risks, and there are various cases causing serious damage and even institutional collapse. Because of the weaknesses in financial strength, business scope, financing capability and risk control, the local commercial banks, with small size, fewer staff and weak strength, can hardly compete with the national financial institutions and large joint-stock banks. In addition, with the unqualified staff, poor management and weak internal control, banks are usually troubled by devastating cases, such as the illegal fund transfer and embezzlement. Especially in recent years, deepening reform of the financial system leads to the market-oriented interest rate and decreasing spreads, consequently, banks are faced with more fierce competition, and the era of high spread has gone. Facing the cut-throat competition with the national banks and joint-stock banks, in order to acquire a certain market share, local commercial banks would takes risks to make rule-breaking operations, which leads to the frequent occurrence of banking risks. Insiders of banking industry believe that a series of ruling-breaking cases can be attributed to the lack of the effective internal oversight. Faced with new circumstances and rapid development, local commercial banks should ensure the’ realization of the enterprise value, constantly expand the business scope, promote the internal audit and supervision, improve the internal audit mechanism, and establish the risk-preventing"firewall", and these efforts aim to protect the interests of SMEs and residents, and maintain the stable social and economic development. Therefore, it is of great significance to establish the standardized and systematical internal control for the local commercial banks to effectively prevent operational risks and promote the development of banks.As the by-product of China’s financial industry, the local commercial banks are taking shape during the process of the economic reform, which aims at dealing with the financial service demand caused by the diverse economic structure. And now, local commercial banks are significant forces for regional economy. However, few experts and scholars pay attention to the development potential of local commercial banks due to their short developing history, weak foundation and poor risk-resisting ability. As a result, there is no sufficient information about local commercial banks’internal auditing. The author works for a local commercial bank in various departments, so the author is familiar with the banking business. Based on the knowledge about banking business and relevant theories, as well as the practical working experience, the author hopes to discuss the existing problems of bank’s internal auditing. This paper takes Z city commercial bank as as example to conduct research on its internal auditing. And this paper also gives a detailed discussion from the perspectives of internal auditing structure, system, auditors’ qualification and auditing methods. Based on the analysis on the existing problems, this paper also makes recommendations to improve bank’s internal auditing, which can help to strengthen bank’s internal management, enhance the efficiency of the internal auditing, improve the asset quality and return, prevent and combat banking risks, and offer references for risk regulation of the banking supervision departments.