Banks face closer scrutiny under beefed up audit rules
Posted by admin in Risk & Regs on Tue, 13/04/2010 - 22:35
The financial statements of UK banks are going to be more closely examined from now on as the Financial Reporting Council clamps down on potential fraud.
The board's audit inspection unit s has typically selected a sample of "major" audits from across sectors each year for in-depth checks in the past, but this process would leave many banks free from scrutiny if they were not among the chosen few.
In the 2008-09 financial year the unit checked approximately 100 major audits of which 30% were from the financial services sector. Banks will now be regarded as a category for audit in their own right.
Essentially the decision by the the Financial Reporting Council's Professional Oversight Board means that any and all banks incorporated in Britain potentially face an in-depth review of their accounts for the business year just ended. The scope of its inspections has now been widened to include entities with a group turnover greater than £500 million or a turnover in excess of £100 million and external long term debt in excess of £250 million.
“The board continues to have regard to the level of public interest involved and has determined that the level of current public interest in banks means that these should be included as a separate category," said Barbara Mills, chair of the Oversight Board. "The challenges of the recession still present heightened audit risks in a number of areas and the audit inspection unit will continue to have particular regard during 2010/11 to those risks.”
Under the new audit framework, the Board will examine revenue recognition and fraud. fair value accounting and compliance with ethical standards.
The Bottom Line:If Mr Cable has his way...
"If Mr Cable had his way, all the big banks would be broken up and bonuses would be virtually eliminated - a sure-fire way in my view of guaranteeing an end to the UK’s ability to compete as an international financial centre. Let’s not forget that this is a man who is on record as saying that everyone who works in a bank has an ‘aristocratic lifestyle’ clearly demonstrating his lack of understanding of the sector." A tough line on bankers’ bonuses could make a brain drain of financial talent a distinct possibility, warns Paul Marsden. Read more