FSA, Bank of England Up for Better Dialogue Between Auditors, Firms
The Financial Services Authority (FSA) and the Bank of England has come up with a draft code aimed at improving the effectiveness of audit and informing the supervisors about the challenges facing the firms they regulate.
The draft code comes after the Bank of England has set up a joint team working with the FSA in September 2010 headed by Alan Ball, a senior advisor in the Bank’s Financial Stability Directorate. As in the same agreement that the FSA and the Financial Reporting Council (FRC) has come up with last January 17, the joint group aims to improve the relationship and information exchange between the auditors and the supervisor.
The Memorandum of Agreement between the FSA and FRC aims to oversee the audits of key players in the accounting industry. Specifically, the agreement “underpins the increased dialogue between the FSA and FRC on accounting and disclosure issues that have been in place since 2005.”
The draft code specifically enables auditors and supervisors to work closely in an “open and collaborative way” to allow for the FSA to evaluate the existing audit practices and decisions made in connection with the challenges facing the companies concerned.
“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,” said Andrew Bailey, Executive Director of the Bank of England.
Under the draft code, auditors and supervisors have principles to follow when dealing with the regulated firms such as the frequency of their communication and in what form they should exchange information.
However, in certain regulated firms the auditors and supervisors have a minimum level of formal meetings. Some informal ways of discussions are also allowed by the draft code “to help both supervisors and auditors fulfill their responsibilities towards regulated firms and enhance the effectiveness of the supervisory and audit process.”
Meanwhile, the Financial Reporting Council said in a press release that it welcomes the draft code.
“The draft code, which is subject to consultation, will provide a framework to enable regulators and audit firms to work together in an open and collaborative way,” the FRC added.