The relationship between banking supervisors and banks' external auditors

January 2002

Introduction

This paper has been prepared in association with the International Auditing Practices Committee (IAPC) of the International Federation of Accountants, and has been approved for publication by the Basel Committee and by IAPC.

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. The separate roles of banking supervisors and external auditors are important in this regard. The growing complexity of banking makes it necessary that there be greater mutual understanding and, where appropriate, more communication between banking supervisors and external auditors.

The purpose of this paper is to provide information and guidance on how the relationship between bank auditors and supervisors can be strengthened to mutual advantage, and it takes into account the Basel Committee's Core Principles for Effective Banking Supervision. However, as the nature of this relationship varies significantly from country to country the guidance may not be applicable in its entirety to all countries. The Basel Committee and the IAPC hope, however, that it will provide useful guidance about the respective roles of the banking supervisors and external auditors in the many countries where the links are close or where the relationship is currently under study.