Bank of Albania and external auditors

Transcription

1 Bank of Albania and external auditors Requirements and approach 26 November

2 Structure of presentation Law requirements Regulatory requirements Communication 26 November

3 Law on banks - General criteria on appoiting the external auditor The external Auditor is appointed and dismissed by The Shareholder s Assembly of the bank. The branch of the foriegn bank is checked by the external auditor of the foreign bank or by the external auditor that is approved by Bank of Albania. Bank of Albania determines the criteria for the external auditor, individual; or company, to be selected by the bank The functioning of the external auditor is regulated by Bank of Albania regulations. The maximum period that an external auditor can audit a bank is 7 years and it can re-audit the same bank after a period of 2 years (at the end of 7 years). The key audit partner, being also a certified accountant, can not hold an administrator position in the bank whithin a period of 2 years after his dismissal from the audit company. An external auditor can not audit more than 5 banks in one fiscal year. Bank of Albania has the right to exclude an external auditor from auditing banks activites for period of 5 years. 26 November

4 Law on banks - Audits performed by the External Auditor The external auditor shall check and evaluate compliance of financial reports of the bank or branch of the foreign bank with the Law On accounting and financial reports and international accounting standards in force. The external auditor checks and evaluates: a) profit and loss account (income and expenditures sheets), b) balance sheet, c) capital changes, d) cash-flow statement, e) implementation of writte-off policies, f) consolidated reports, g) internal control function, h) accounting registration, i) information systems, j) accuracy and adequacy of reports submitted to the Bank of Albania, k) adequacy of accounting procedures and regulatory compliance, l) notes attached to financial reports. 26 November

5 Law on banks - The external auditor reports to Bank of Albania Serious breaches of the law, regulations or conditions upon which the license was granted to the bank or branch of the bank or other internal rules that specifically regulate the exercise of banking or financial activities; Deception, theft, money laundering or financing of terrorism; Significant changes in the financial result; Breaches of the statute and internal by-laws of the bank or branch of the foreign bank; Cause for refusal of accounts certification or submission of his objections; Issues which may pose a threat to the sustainability of the activity of the bank or branch of foreign bank; Any deceitful act of any of the officers of the bank or branch of foreign bank as well as irregularities or failures in management or transactions resulting in loss to the bank. 26 November

6 Regulation - Audits performed for Bank of Albania intentions The auditing of financial statements and reports accordingly to the stipulations of reporting and content methodology of financial statements, set out in the by-laws of the Bank of Albania; Evaluation of compliance with risk management rules; Evaluation of internal audit system; Evaluation of the state and management of information systems; Check and evaluation of the bank s reports at the Bank of Albania for frequency, adequacy, completeness and objectivity of the financial position as layed out in the regulatory requirements and in Law On Banks. 26 November

7 Regulation - Evaluation of compliance with risk management regulations The external auditor should evaluate the level of bank s risks management systems (credit risk, liquidity risk, market risk, etc) based on the assessment of: Compliance with the requirements for the organizational structures with regard to the management of any individual risk; Policies and procedures on management of any individual risk and their implementation; Adequacy of identification, measurement and monitoring of any individual risk; Adequacy and efficiency of internal control system regarding the management of any individual risk. 26 November

8 Regulation - Evaluation of internal control system The external auditor shall carry out a special evaluation of the bank s internal audit system. The external auditor shall evaluate if: The bank has established a secure and efficient internal audit system, in compliance with the requirements of the Law On banks and respective by-laws; The bank has established an internal control system which avoids any conflict of interests; Bank has provided a sufficient personnel, having the right qualifications and experience, on the functioning of the internal audit system, proportionally with the size, type, volume and complexity to its activities; The bank has established the internal control unit, as an independent unit in functional and organizational terms from the other organizational units of the bank, which it audits; The internal control unit shall function in compliance with the stipulations of the Law On banks and the respective implemented by-laws, and whether annual control plans of this unit are adequate and/or sufficient. 26 November

9 Regulation - Evaluation of Management Information System The external auditor shall carry out a special evaluation of the state and adequacy of management information system. For this purpose, the statutory auditor should: set out in advance the purpose and the depth of the risk-based evaluation; make sure on the implementation the methods and procedures of this risk-based evaluation; verify the compliance of management information system with the requirements/stipulations of the Law On banks and/or the by-laws. Based on the evaluation of the management information system, the external auditor shall set out the main risks against which the bank is exposed. 26 November

10 Regulation - Communication with the external auditor Individual meetings with the every single audit company prior to the change of regulation in order to lay out Bank of Albania expectations of audit outcome. Letters to each individual audit company were sent containing the shortcomings of certain bank examinations. Non-frequent meetings are organized with audit companies: for issues related to a special bank prior or during on-site examinations to share concerns for issues related to system as a whole: on certain accounting issues, on certain prudential concerns A forum with focus on external auditing to be organized in the near future. Potential improvements of relationship Organization of frequent joint meetings to share concerns Frequent Exchange of information a written form 26 November

11 Thank you for your attention! 26 November

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