March 21, 2013
The Basel Committee on Banking Supervision has today published supervisory guidance on External audits of banks for consultation along with a letter to the International Auditing and Assurance Standards Board (IAASB).
The consultative paper aims to enhance and supersede the existing guidance that was published by the Basel Committee in 2002 on the relationship between banking supervisors and banks' external auditors and in 2008 on external audit quality and banking supervision. The evolution of bank practices and the introduction of new standards and regulations over the last 10 years warranted a thorough revision of the Committee's supervisory guidance. In addition, the recent financial crisis has highlighted the need to improve the quality of external audits of banks. The proposed enhanced guidance sets out supervisory expectations of how:
- external auditors can discharge their responsibilities more effectively;
- audit committees can contribute to audit quality in their oversight of the external audit;
- an effective relationship between external auditors and supervisors can lead to regular communication of mutually useful information; and
- regular and effective dialogue between the banking supervisory authorities and relevant audit oversight bodies can enhance the quality of bank audits.
The Committee's letter to the IAASB calls for enhancing the International Standards on Auditing (ISAs) to include more authoritative guidance relating to the audit of banks. It sets out specific areas where the Committee believes the ISAs should be improved.
Commenting on today's publications, Stefan Ingves, Chairman of the Basel Committee and Governor of Sveriges Riksbank, said, "The Committee has developed guidance that builds on recent experience and will help raise the bar with regard to what supervisors expect of banks' external auditors and audit committees. We also recognise the great importance of audit standards and are keen to support the IAASB in enhancing audit quality."