RESOLUTION OF BOARD OF CENTRAL BANK OF THE REPUBLIC OF UZBEKISTAN

of March 13, 2004 No. 6/12

About modification and amendments in the Provision "About Requirements of the Central Bank to Internal Audit of Commercial Banks"

Based on Articles 3, of 7, "About the Central bank of the Republic of Uzbekistan", for the purpose of reduction of system of internal audit in commercial banks in compliance with international standards of audit and recommendations of Basel Committee on Banking Supervision, and also further enhancement of requirements imposed to internal audit, the Board of the Central bank of the Republic of Uzbekistan decides 17 and 51 Laws of the Republic of Uzbekistan:

1. Make changes and additions to the Provision "About Requirements of the Central Bank to Internal Audit of Commercial Banks" (reg. N992 of December 22, 2000), having approved its new edition according to appendix.

2. Enact this Resolution after ten days from the date of its state registration in the Ministry of Justice of the Republic of Uzbekistan.

Approved by Board of the Central bank of the Republic of Uzbekistan on March 13, 2004 No. 571

Regulations on requirements of the Central bank to internal audit of commercial banks

This Provision is developed according to the laws of the Republic of Uzbekistan "About the Central bank to the Republic of Uzbekistan", "About banks and banking activity", "About auditor activities", "About financial accounting", other acts of the legislation and establishes requirements of the Central bank to the organization of internal audit in commercial banks.

1. General provisions

1. Internal audit - the independent examination founded in bank on permanent basis for check and assessment of its activities for the purpose of assistance to bank employees in effective implementation of their obligations. Main objective of internal audit is rendering assistance to Council and Bank board in goal achievement of activities of bank by means of provision of internal audit by Service to management of bank of the objective analysis, estimates, recommendations and information on control and results of activities of bank.

2. The service of internal audit (further in the text "Service of audit") the independent structural division performing check (audit) and monitoring of condition of internal control in bank including efficiency of financial and economic activities, reliability of accounting and reliability, completeness and objectivity of the reporting, observance of acts of the bank law of the Republic of Uzbekistan, constituent and internal documents, statutory rules and procedures of banking operations, and also provides consultations to Council of the bank on increase in efficiency and reliability of transactions of bank.

3. Each bank shall create Service of internal audit, and also develop and enact "Provision on Service of internal audit", "Procedure and procedures of carrying out internal audit", "The job description of the main internal auditor", approved by Council of the bank.

2. Auditing committee

4. For the purpose of the organization and maintenance of the corresponding internal control system the Council of the bank shall create Auditing committee which part members of council of bank shall be only.

5. The chairman and members of Auditing committee affirm Council of the bank according to the recommendation of the chairman of the board of bank. Auditing committee at least three members of council of bank shall be included. The members of council of bank who are part of Auditing committee shall not be appointed members of other committees of Council which are responsible for activities of bank.

6. Members of Auditing committee shall have the higher education and work experience corresponding to tasks and activities of Service of audit. At least, one member of Auditing committee shall have qualification on creation of the financial reporting, to be specialist in financial accounting or audit.

7. The main objectives of Auditing committee are:

studying of the reports of Service of audit submitted on carrying out each internal audit;

studying of quarterly reports on internal audit and representation to their Council of the bank;

rendering assistance to Council of the bank in development of specifications for external auditors;

rendering assistance to Council of the bank in evaluating proposals of the external auditor, preparation of recommendations to Council of the bank about selection of the external auditor;

coordination of work on process control of implementation of recommendations of Service of internal audit and external auditors with the chairman of the board of bank;

consideration of reports of external auditors, including the letter directed to management and representation to their Council of the bank;

control over elimination of the problems and shortcomings revealed in the course of audit inspection of external and internal audit, and also accomplishment of recommendations of auditors from Bank board;

ensuring independence and non-admission of intervention from board members and other division managers of bank in activities of Service of audit, and also on content and amounts of checks.

3. Purposes, tasks and functions of Service of audit

8. The service of audit of bank is created for the purpose of implementation of monitoring of internal control and assistance of bank to governing bodies in ensuring effective functioning of bank by means of provision to management of bank of the objective analysis, estimates, recommendations and information on control and results of activities of bank.

9. The following tasks are assigned to Service of audit:

providing Council of the bank with reliable and independent information about real condition of bank and the system effectiveness of internal control based on results of the booked internal audit;

the analysis and efficiency evaluation and adequacy of internal control system and effectiveness of the adopted procedures for carrying out internal audit;

the overview of efficiency of ministerial and operational procedures for goal achievement of activities of bank;

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