Proposals could see Bank of England fine firms for breaches

THE BANK OF ENGLAND will be able to fine accountancy firms for breaching rules while auditors will be required to file annual reports on the UK’s largest deposit-takers with the central bank, under new plans.

The bank’s Prudential Regulation Authority said firms will be required to provide it with reports every year in the run-up to full audits of the biggest banks so as to grant supervisors more consistent and well-rounded information.

Andrew Bailey, head of the PRA, said: “We need the relationship between external auditors and supervisors to work effectively.

“This needs to be supported by high quality, thorough audits which can help mitigate emerging issues and risks that can threaten both the safety and soundness of individual firms and financial stability more broadly.

“Where auditors and actuaries fail to provide us with the information that we need to supervise firms effectively, we now have disciplinary powers which allow us to take action to rectify this.”

But while the measures may appear more stringent, the ICAEW believes the decision will make auditors “more relevant”.

“By far the most radical proposal is for the regulator to require a written report from auditors to supervisors – an interesting expansion of their dialogue,” said Iain Coke, head of ICAEW’s Financial Services Faculty.

“Auditors will still need to make their own judgements on the key audit risks and the work they must do to address those risks.

“It may be that supervisors make different assessments given that they have a different focus. While the new reports are not intended to involve supervisors commissioning new audit work, it is almost inevitable that sometimes auditors in practice will perform additional work so they are able to provide good answers to their exam questions. That is not necessarily a bad thing if it makes the work of auditors more useful for bank supervisors.”