Meeting the requirements of the Sarbanes-Oxley Act is the challenge of the moment according to Alan R. Thompson, president and chief executive officer of the Bank of Butterfield.

The Sarbanes-Oxley Act requires a sign off from the chief executive officer and the chief financial officer of any SEC registered company on all financial statements.

As a result, Mr... Thompson says that internal audit has become a "strategic imperative," as important as technology and marketing for the success of a corporation.

He predicts that there will be more similar legislation to come from both Europe and the US and companies must make sure that they are strategically positioned to handle the new challenges.

Even though the Bank of Butterfield is not presently listed on a US exchange, he said that he will implement corporate accountability processes to match those required of SEC registered companies.

`We're going to dry run it on a quarterly basis."

Mr. Thompson says that the growing demand for greater corporate accountability requires a proactive approach.

Shareholders are already punishing companies who do not improve their corporate governance; at the merest whiff of accounting misdeeds, the share price can take a pounding.

Mr. Thompson gave a presentation to the new Bermuda Chapter of the Institute of Internal Auditors (IIA) yesterday with the evolution of internal audit as his subject.

He said that he actually places more reliance on internal audit than on external audit because, generally speaking, an internal auditor has time to go into more detail within an organisation. However in relation to assessing board directors, he qualified, external auditors would be more effective.

Along with risk management, the Bank of Butterfield is increasingly going to rely on internal audit to know whether they are in compliance with their regulatory framework. "I can't be everywhere" he says.

Mr. Thompson says that a particular area for internal auditors of a bank to focus on is operational risk. Pointing out that the problems at Allied Irish stemmed from this division, he says "It's a difficult area."

The tightening of regulatory controls is not something that companies should resent, continues Mr. Thompson:

"The reality is that this is the environment and we've brought it upon ourselves."