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Daily Insurance Industry News
Tuesday 21st of November 2017
February 11, 2011

FSA proposes new role for auditors

by Gill Montia

Story link: FSA proposes new role for auditors

The Financial Services Authority (FSA) wants its supervisory work to be better informed and has published a draft code of practice aimed at improving the dialogue between the regulator and auditors.

The code has been drawn up following joint work with the Bank of England and stresses the importance of the role auditors play in the supervisory process, given that the financial statements they audit form the basis of the prudential information used by the FSA.

The proposed scheme involves auditors and FSA supervisors working together in a way that will “enhance the ability of the FSA to scrutinise specific accounting practices and related judgements in order to understand fully their implications and to highlight emerging problems”.

In return, auditors can expect “valuable insights” that will support their work.

The principles set out in the code cover the nature of the relationship between the supervisor of a regulated firm and the firm’s external auditor, including how often and in what form they should be communicating and the way information should be shared.

For certain firms, the code specifies a minimum level of formal meetings between the supervisor, the external auditor and the firm.

Executive director of the Bank of England, Andrew Bailey, says: “With its emphasis on the importance of an open and constructive relationship, we are very pleased to be able to publish this draft code today as an important first step in redefining the nature of the auditor’s role in the new regulatory framework.”

The FSA’s auditing and accounting sector leader, Richard Thorpe, adds: “The code announced today … makes it more likely that auditors will identify issues and risks that relate to our objectives of market confidence and financial stability.”

 

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