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Revisions to IAPS 1004 Proposed International Auditing Practice Statement

Comments from the Association of Chartered Certified Accountants
May 2001

General Comments

The Scope of Revision

1. The Association of Chartered Certified Accountants (ACCA) is pleased to have the opportunity to comment on the Exposure Draft The Relationship between Banking Supervisors and Banks' External Auditors, IAPS 1004 (the proposed Statement) issued for comment by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC).
   
   
2. ACCA welcomes this revision to the proposed Statement which incorporates valuable material related to the Core Principles for Effective Banking Supervision published by the Basel Committee in September 1997. The document is now very much up-to-date including, for example a reference to the consultative package 'The New Basel Capital Accord' issued on 16 January 2001. Together with the current revision to IAPS 1006 Audit of International Commercial Banks, we believe that the proposed Statement now provides an appropriate body of knowledge to inform external auditors and those concerned with their important role in the banking sector.
   
   
3. However, despite the growth in cross-border banking, we regret that there is little in the proposed Statement to inform readers of the potential impacts of multinational audits and the relationship between banking supervisors in one country and their counterparts in other countries.
   
   Duty to Report to Banking Supervisor
   
   
4. Paragraph 52 of the proposed Statement refers to the requirement, in ISA 260 Communications of Audit Matters With Those Charged With Governance, for auditors to communicate certain matters to those charged with governance. The paragraph makes the point that certain matters of governance interest are likely to be of interest to bank supervisors: as a consequence, auditors are required to communicate such matters to the banking supervisor on a timely basis. This requirement extends to circumstances where there is no formal agreement or protocol.
   
   
5. We recognise that the public interest may be served by such reporting but do not agree that the proposed IAPS should include a requirement to report. It is important that external auditors cannot be held liable for the consequences of their disclosure, in good faith, of confidential information to the supervisory authorities. While several jurisdictions have embodied this principle in legislation, it is not universal. It is wrong to seek to impose a duty to report when there is no matching right to report. We do not believe that this concern is met by the inclusion in the last sentence of paragraph 52 of wording about 'reasons that justify not communicating'.

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