On December 2, the Basel Committee on Banking Supervision released a paper, “External Audit Quality and Banking Supervision,” that is intended to guide regulators as they seek to enhance the benefits and reduce the risks of external audits. While the paper may not strike U.S. banking organizations, which already are subject to statutory and regulatory requirements for external audits (12 USC 1831m; 12 CFR part 363), as breaking much new ground, the paper addresses four issues:
- The increased reliance by both banking organizations and their regulators on external audits.
- The ability of high-quality audits to enhance market confidence.
- The ways in which external audits can complement bank supervision.
- The lack of transparency at external audit firms.