FSA and BoE outline code to improve bank audit oversight

A CODE OF PRACTICE designed to improve communication between companies, auditors and regulators has been announced by the Financial Services Authority and the Bank of England.

The proposals are aimed at ensuring that regulators are better informed about the firms they regulate, and therefore better able to challenge them.

The code sets out principles that auditors and supervisors must follow, which cover the relationship between the regulator and the auditor of a firm, how they should communicate and the way information should be shared.

One of its suggestions is that every year, for banks building societies and some insurance companies, there should be at least one routine bilateral meeting, between the FSA and the auditors, and one routine trilateral meeting, between the FSA, the auditors and the audited body.

Richard Thorpe, the FSA's auditing and accounting sector leader, said: "The FSA and its successor organisations, as supervisors, need to have confidence in audited financial information to ensure that we are making informed judgements and the right decisions when supervising firms. The code announced today will help us to achieve this and makes it more likely that auditors will identify issues and risks that relate to our objectives of market confidence and financial stability."

Michael Izza, chief executive of ICAEW, welcomed the report. "This code of practice starts to redefine the relationship between auditors and supervisors for the better," he said.

"In setting out a clear framework for this two-way dialogue, both formal and informal, the Bank of England and FSA have demonstrated how important it is that all those who play a part in the oversight of banks and their activities should work more closely together."