Auditing Key Policy Functions Of A Central Bank
Dr. W.A. Wijewardena
6: Auditing Key Policy Functions of a central bank
Financial compliance by a central bank is not enough
Central banks are subject to a financial audit either by local auditors or by international auditors or by both. The local auditors are usually those from the state audit office, the Auditor General in Sri Lanka’s case, who conduct the audit as mandated by the laws establishing central banks.
For instance, Section 42 of the Monetary Law Act or MLA under which the Central Bank of Sri Lanka has been set up requires the Auditor General to audit the “accounts of the Central Bank” and submit a report to the Minister of Finance who in turn should lay that report before Parliament.
Since this requirement is straight forward without ambiguity, John Exter who prepared the blueprint of the Central Bank has not thought it necessary to clarify this provision by a commentary in the report he submitted to the Government of Ceylon in 1949. The more recent central banking acts such as the Nepal Rastra Bank Act which was enacted in 2002 too requires the Auditor General of Nepal to conduct a financial audit of the bank as per Section 92 of the Act. However, since Section 90 requires the NRB to maintain its accounts in terms of International Accounting Standards, it implies that the financial audit to be conducted by the Auditor General should be in accordance with the international auditing standards.
Sri Lanka’s Central Bank too has informally adopted that its accounts should be maintained in accordance with international accounting standards and therefore its financial accounts are also audited in accordance with the international auditing standards.
