31 July 2017

GPPC: The auditor’s response to the risks of material misstatement posed by estimates of expected credit losses under IFRS 9

The paper is addressed primarily to the audit committees of systemically-important banks, although much of its content will be relevant to other banks and financial institutions, and aims to promote the implementation of accounting for expected credit losses to a high standard.

The introduction of new requirements for the accounting of expected credit losses in IFRS 9 Financial Instruments will be a significant change to the financial reporting of banks when required in 2018, and auditors will be challenged to apply ISA 5403 to estimates of expected credit losses. 

The work of auditors surroundingbanks’ accounting for expected credit losses will be of interest to many stakeholders, including investors,regulators and analysts. Given the importance of banks in the global capital markets and the wider economy, high quality audits of banks’ estimates of expected credit losses have the potential to benefit many.

Given the introduction of potentially new risks of material misstatement, the GPPC hopes the paper will help those charged with governance to effectively evaluate the quality of the auditor’s response to the risks of material misstatement posed by estimates of expected credit losses.

Deloitte´s press release

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