Friday, January 21, 2011

No Contact Between Watchdogs and Auditors in the Year Before Crisis

Via Accountancy Age.
The FSA candidly states in the memorandum that contact between the regulator and auditors fell away when the regulator took over banking supervision and said it admits that was "wrong".
The FSA adds that "we established supervisory specialists in-house, supported by further in-house specialists in policy, risk and sector-specific areas. This in-house expertise was designed to reduce the need for regular reporting by auditors on supervisory matters relating to individual firms.
"One consequence was that, over time, meetings between supervisors and auditors also became less frequent. There were still cases where FSA supervisors continued to meet with the auditors at least once a year, but this happened on a less structured basis. In line with our supervisory philosophy of that time, we made less use of third parties (i.e. use of section 166 reports) and placed more reliance on what firms [banks] told us."

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