BASEL - The Basel Committee has this week published a new paper on the quality of external audit and banking supervision. It is the 16th paper released by the Bank for International Settlements (BIS) - responsible for the Basel II capital accord - so far this year.
The Committee says there has been an increase in banking and supervisory reliance on audited information and a change in the nature of external audit over the past few years, while recent events have increased the importance attached to external audit.
The paper flags increased concerns over the risk of audit failures since the global expansion of the larger auditors, paralleled by increasing complexity of accounting standards and financial instruments. The Committee says high-quality audits must match high-quality supervision.
On the amplified importance of fair value estimation processes in the current crisis (the subject of the Committee's previous paper released in November), the Committee again underscores the importance of high-quality audit and indicates key steps to take in response to challenges to valuation, such as governance, the use of reliable inputs and diverse information sources.
The Committee emphasises that transparency through clear and reliable information, supported by quality auditing, is needed to rebuild market confidence, and in this capacity promises close future involvement.
The BIS will continue its focus on audits through group support and liaising with external auditors, promoting enhanced and sound audit guidance, practices and standards, and calling for enhanced transparency over the financial positions and structure of global auditing businesses.
The paper can be downloaded in full from here.