The internal audit function at banks lacks clout, if an ASIC report on the sector's audit process is any guide. ASIC found that more than four in five audits by banks of client's files were "ineffective" or only "partially effective". The regulator also accused banks of long delays in notifying breaches, a view inconsistent with the claims of good behaviour of many banks.In the report, "Financial advice: Review of how large institutions oversee their advisers", the Australian Securities and Investments Commission sets out key findings from its Wealth Management Project, which has been inspired, in part, by the many scandals of recent years.With this report following Thursday's release by ASIC of a review of broker commissions, sector managers are in receipt of a pair of harsh report cards from a key regulator."From our assessment, we found that the audit process [in financial advice] was effective in 18 per cent of the sample files," ASIC said. Its review focused on the conduct of the financial advice arms of ANZ, CBA, NAB and Westpac as well as AMP. It excluded Macquarie."Where we found the adviser audit process to be ineffective, or partially effective, we formed the view that some form of corrective action (often referred to as 'consequence management') should have occurred in 127 out of 131 cases. "We observed that the licensees' auditors recorded that corrective action was only required in 80 out of these 131 cases." ASIC said. The compensation arising from the "non-compliant conduct" identified within the scope of this project and paid by end 2016 was around A$30 million, ASIC said.This was paid across the institutions to approximately 1,347 customers who had suffered loss or detriment by 97 high-risk advisers whose conduct occurred between 1 January 2009 and 30 June 2015.In contrast to the tale repeated by the big bank CEOs before parliament early this month, ASIC said reports of breaches took time."There was often a considerable delay between the institution first becoming aware of the suspected non-compliant conduct and the breach report being lodged with ASIC."ASIC's and banks' work has uncovered 85 financial advisers "to be considered for further regulatory or enforcement action." ASIC said. As at December 2016, it had banned 26 of these advisers and had ongoing investigation or surveillance activities in relation to 75 advisers.