21 January 2016

FEE responds to EBA’s consultation on communication between competent authorities supervising credit institutions and statutory auditors

FEE supports the EBA's draft Guidelines to improve the communication between competent authorities supervising credit institutions and statutory auditors of those institutions. The Guidelines set the basis for a common and timely understanding of developments relevant for the statutory audit.

FEE welcomes the CP and expresses its support for the efforts to establish guidelines for an open, effective and efficient dialogue between the competent authorities supervising credit institutions (supervisors) and the statutory auditors as required in Article 12(2) of Audit Regulation (EU) 537/2014.

This is especially critical as it indicates that going forward, in addition to currently being statutory auditors of the financial statements of credit institutions, the involvement of auditors with regulatory and supervisory reporting for credit institutions is expected to become more and more important. In this respect, FEE appreciates the reference to the Basel Committee on Banking Supervision (BCBS) guidance ‘External audits of banks’ issued in March 2014 with which the EBA Guidelines should preferably be in line, as we believe that global consistency would enhance the quality of the audit of credit institutions. In addition, we would like to point out that the current framework for the statutory audit of financial statements of credit institutions in 25 out of the 28 EU member states is the ISAs as issued by the IAASB. As these high quality standards should be considered as the starting point for any communication between supervisors and auditors it would be worth referring to them for consistency.

FEE would like to stress the divergence that currently exists in terms of the scope of audit of credit institutions across different European jurisdictions and therefore the difference in interaction (and communication) between the supervisors and the external auditors. In September 2015, FEE published the results of its survey on the Scope of Audit of Banks demonstrating the different requirements and practices across Europe. This survey reveals that apart from the statutory audit of financial statements, the scope of audit and the involvement of the (statutory) auditor or audit firm on providing assurance on regulatory reporting of credit institutions for national supervisors varies from country to country.

In addition, FEE would also like to emphasize the importance of the fundamental principle of confidentiality of the auditor which is included in the auditors’ professional ethical standards. Any information obtained by the auditor in the course of an audit of financial statements cannot be disclosed to other parties (including supervisors), unless it is permitted or required by law. The legal requirements on professional secrecy and on exchange of information between auditors and financial regulators vary across Europe and therefore FEE strongly suggests that EBA coordinates with the national competent authorities and the European Central Bank to identify those differences and assess whether or not, those differences would impose any obstacles to an effective and efficient communication between the auditor and the supervisor. 

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