Auditing guide on banks

BANKING: Auditors of banks have been issued with guidance notes to help them decide when they should report matters of concern to the Central Bank. Similar practice notes from the Auditing Practices Board will be issued for the auditing of insurers and investment businesses.

The note points out that matters raised with the banks by the Central Bank in recent times include:financial sanctions against the Taliban;money laundering relating to the euro changeover; changes in lending and mortgage practices;and exposure to particular sectors, such as telecommunications or vehicle finance.

"The determination of whether a matter is likely to be of material significance inevitably requires auditors to exercise their judgment," the note states. "In making judgments, consideration is given to the Central Bank's communication of areas of concern to the banks."

The guidance note is designed to help auditors ensure they are meeting their legal obligations to report to the Central Bank matters they discover that they deem are of "material significance". Material significance is defined as a matter or a group of matters that, due either to its nature or its potential financial impact, is likely to require investigation by the Central Bank.

Publication of the note comes after the Review Group on Auditing concluded there was scope for the Central Bank to get more information arising from auditors so it could use this data in its supervisory process. A new liaison group has been established between the Central Bank and the accountancy profession.

Mr Brian Walsh, chief executive of the Institute of Chartered Accountants in Ireland, said there was a clear difference between the roles of the Central Bank, as regulator, and auditors. Auditors' duties focus on providing shareholders with a report on banks' annual accounts and whether they give a true and fair view.