IFAC Releases Bank-Audit Draft - International Federation of Accountants - Brief Article

Internal Auditor, Dec, 2000 by D. Salierno

IN RECOGNITION OF the growing complexity of banking worldwide, The International Federation of Accountants (IFAC) has released an exposure draft that offers guidance on auditing commercial banks. Developed by IFAC's International Auditing Practices Committee (IAPC), The Audit of International Commercial Banks aims to provide practical assistance to auditors and to promote good practice in applying International Standards on Auditing to bank audits.

"Banks play a vital role in economic life, and the continued strength and stability of the banking system is a matter of general public concern," says Dietz Mertin, chairman of the IAPC. "This new guidance sets out the auditor's role with respect to bank audits and considers special reporting relationships between auditors and bank supervisory and other regulatory authorities."

The exposure draft covers the various stages of the bank auditing process and provides detailed guidance on reviewing internal controls and assessing risk. The draft highlights the unique audit considerations that arise in banks, such as the particular nature of risks associated with bank transactions, the potential for serious risk exposures that could rapidly emerge as a result of the mere scope of banking operations, the effects of local regulations, and implications of the industry's heavy reliance on computerized systems.

The guidance also includes a number of illustrative appendices that provide examples of checklists for assessing bank operations; financial ratios commonly used for analyzing financial condition and performance; and exposures and other considerations in securities operations, private-sector banking, and management of financial holdings. A final appendix alerts auditors to potential indicators of fraud in banking operations.

For a copy of The Audit of International Commercial Banks, visit IFAC's Web site at www.ifac.org or call 1 (212) 286-9344.