Critical factors of a capital markets internal audit function within the South African banking sector
Date
2014-12-12
Authors
Ndwandwe, Nomusa
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Abstract
The success of the South African economy is dependent on the performance of the financial services sector. This sector contributes approximately 10,5% to the country’s gross domestic product (GDP) with assets worth over R6 trillion, over 50% of which are owned by the banking sector. Several factors linked to the 2007-2009 global financial crisis threatened the profitability of this sector.
A review of the 2007-2009 global financial crisis is pivotal to this study because South Africa is not immune to global conditions as it relies on foreign trade to supplement its economy. Capital markets are a key driver of the economy and even though the crisis did not directly impact the domestic markets, it is important to remain vigilant of any threats that may destabilise the system.
Changes in the financial services sector that were triggered by the financial crisis and other financial disasters have led to an increased focus on the internal audit function. This function is relied upon by the board and audit committee to ensure that the internal controls of an organisation are robust enough to withstand any adverse effects. As a result, knowing what the key success criteria are for this function is crucial. With this in mind, the purpose of this study was to identify the key success factors of performing internal audit reviews of capital markets business areas within South African banks. Specifically, capital markets business units within the ‘big four’ South African banks were selected based on their profitability and the diversity of trading products they offer compared to other local banks. In-depth interviews were conducted with internal auditors, risk managers and traders. The responses were assessed based on the key success factors generated from the literature review. Although the study focused on capital markets, the results can set a precedent for other areas within a bank and the recommendations can also be adopted by interested parties from non-financial institutions.
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Banks and banking , Capital market , Financial institutions -- South Africa