Report on the Observance of Standards & Codes (ROSC) Accounting & Auditing (A&A)

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Report on the Observance of Standards & Codes (ROSC) Accounting & Auditing (A&A) Public Disclosure Authorized MODULE B: INSTITUTIONAL FRAMEWORK FOR CORPORATE FINANCIAL REPORTING B.3 FINANCIAL SECTOR BANKING Public Disclosure Authorized

2 TABLE OF CONTENTS INTRODUCTION TO THE QUESTIONNAIRE 3 A. OVERVIEW OF THE BANKING SECTOR 4 B. FINANCIAL REPORTING REQUIREMENTS FOR BANKS 5 C. STATUTORY AUDIT AND OTHER FORMS OF INDEPENDENT ASSURANCE 7 d. AUDIT COMMITTEES 10 E. FILING/ PUBLICATION OF FINANCIAL STATEMENTS 10 F. MONITORING AND ENFORCEMENT FINANCIAL REPORTING 11 G. CORPORATE GOVERNANCE 13 Additional INFORMATION International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC Telephone: Internet: This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: ; pubrights@worldbank.org 2

3 INTRODUCTION TO THE QUESTIONNAIRE The purpose of this questionnaire is to gain an understanding of the financial reporting requirements for the banks in a jurisdiction in addition to or instead of the requirements for commercial enterprises 1 in general. The term bank in this assessment is used to refer to institutions authorized to receive deposits and to lend money as defined by the legal framework in the jurisdiction. There are also questions in relation to the monitoring and enforcement capacity of the local banking supervisor in respect of financial reporting of banks specifically. Questions are based on the internationally-recognized Core Principles for Effective Banking supervision issued by the Basel Committee on Banking Supervision, in particular Principle 27 Financial reporting and external audit. The questionnaire is structured as follows: A. Overview of the banking sector B. Financial reporting requirements for banks C. Statutory audit and other forms of independent assurance D. Audit committees E. Filing/publication of financial statements F. Monitoring and enforcement - financial reporting G. Corporate Governance How should the questionnaire be completed? This questionnaire should be completed by counterparts from the banking supervisor. Where the response to a question is the same for banks as for commercial enterprises or for listed companies 2, please state this. If there are additional requirements or expected good practices for banks specifically, state the legal instrument or code that establishes the requirement and the date of enactment. 1 Refer to responses provided in Module B Institutional Framework B.1 Commercial Enterprises 2 Refer to responses provided in Module B Institutional Framework B.2 Listed Companies 3

4 Please provide the following information when completing this questionnaire. Country Organization Date of preparation Telephone number Individual(s) responsible for preparation Address Job Title(s) A. OVERVIEW OF THE BANKING SECTOR 1. Please provide the following information on the banking sector in the jurisdiction. a. Number of banks 3 b. Total assets c. Please state the number or proportion of banks which are: i. foreign-owned ii. domestic, privately-owned iii. state-owned/controlled d. Are there domestic banks listed on the stock exchange (locally or overseas)? If so, please indicate the number of listed banks and the stock exchanges. Comments 2. Name the banking supervisor and describe its authority (e.g., comprehensive inspection, compliance and enforcement powers), indicating the law or other instrument which establishes its authority. 3. Briefly describe the key responsibilities of the banking supervisor in respect of financial reporting for banks (e.g., development of prudential standards or contribution to accounting standards, audit oversight etc.). 3 Please indicate numbers for each type of banking institution as defined by the legal framework in the jurisdiction. 4

5 4. Please indicate the source(s) of funding of the banking supervisor, noting the percentage contribution from each source. 5. Is the banking supervisor required to report on its activities (e.g., issue an annual report)? If so, please indicate the law or other instrument which establishes the requirement and whether this report is made available to the public. Provide a copy of the report or link to the website if the report is available online. B. FINANCIAL REPORTING REQUIREMENTS FOR BANKS 6. Describe the specific financial reporting requirements for banks in addition to, and/or in lieu of, those applicable to commercial enterprises and/or listed companies. Where requirements only apply to a category of banks (e.g., listed banks) or there are exemptions, please indicate this. In all instances, please state the law or regulation that establishes a requirement (use the Additional Information page at the end of this questionnaire if necessary). a. Are IFRS required for the general purpose 4 consolidated financial statements of banks? If not, please indicate: i. which accounting standards are required ii. if IFRS is permitted b. Are IFRS required for the legal entity financial statements of banks? If not, please indicate: i. which accounting standards are required ii. if IFRS is permitted c. Where IFRS are required, please indicate whether it is the full and current version of the standards as issued by the IASB or indicate the version and year. 4 General purpose financial statements are those prepared to meet the needs of a variety of users of financial statements as opposed to those prepared for regulatory or other purposes e.g., prudential reporting required by the banking supervisor. 5

6 d. Where IFRS are not required, are there specific financial reporting requirements for the financial statements of banks? If so, briefly describe these (e.g., specific disclosures in respect of impairment of assets) e. Are general purpose financial statements required to follow a specific presentation (e.g. standardized format, chart of accounts)? If so, please describe. f. Please indicate the deadline for submitting annual financial statements and indicate to whom they are submitted. g. Are banks required to prepare a management report/ management discussion and analysis? If so, please briefly describe the requirements. h. For banks which are part of a group, are all material entities in the group structure required to be disclosed? i. Are interim or other periodic financial statements required? If so, please describe: i. the requirements (for both legal entity and consolidated statements where applicable) ii. the filing/publishing deadlines iii. whether an audit or limited review must be conducted iv. whether the statements are publicly disclosed. 7. If the record-keeping and data integrity requirements for banks differ from those of other commercial enterprises, please explain briefly what the differences are. 6

7 8. Please indicate whether the reporting guidelines for regulatory/prudential reporting for banks are in addition to or instead of the accounting standards used for the general purpose financial statements. 9. Are banks required to disclose significant differences between general purpose financial statements and prudential/regulatory reporting, particularly those relating to differences in valuation practices? 10. Are there any inconsistencies between banking regulations covering financial reporting requirements, and the provisions of other laws and regulations in the country? If so, please describe the inconsistencies and indicate which regulation(s) or requirement(s) take precedence. C. STATUTORY AUDIT AND OTHER FORMS OF INDEPENDENT ASSURANCE Note that throughout the diagnostic tool, the term audit refers to a statutory audit of financial statements which is defined here as an independent audit of general purpose financial statements mandated by law or regulations issued by an institution with the legal authority to establish such requirements. In this regard, auditors are individuals or firms which are licensed or certified to perform statutory audits. 11. Are the financial statements of banks subject to statutory audit on an annual basis? If so, please indicate the legal instrument or regulation that establishes this requirement. 12. Please indicate which body sets the auditing standards used in the audits of banks. 7

8 13. Are full and current International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board (IAASB) adopted in the jurisdiction and required to be followed for the audits of banks? If not, please indicate which auditing standards are used. 14. If ISA have not been adopted, please indicate whether the local auditing standards or banking regulations require that audits of banks cover the following 5. Select all that apply and briefly describe the requirements. Loan portfolio Requirements Loan loss provisions Non-performing assets Asset valuations Trading and other securities activities Derivatives Asset securitizations Adequacy of controls over financial reporting Consolidation of and other involvement with off-balance sheet vehicles 15. Please complete the following table, in respect of requirements regarding the tenure of auditors of banks. For each requirement, state the applicable/law regulation which establishes the requirement. Requirements a. Is rotation of the audit partner required? If so, state the frequency of rotation. b. Is rotation of the audit firm required? If so, state the frequency of rotation. c. Is a cooling-off period for the auditor (partner or firm) required? If so, state the length of time. 5 These areas are required to be covered according to Essential Criterion 5 of BCP 27: Financial reporting and external audit. 8

9 d. Describe any other requirements in respect of the tenure of auditors of banks. 16. Further to the requirements for auditing commercial enterprises in general, are there additional requirements/ conditions from the banking supervisor to audit a bank? If so, please describe. 17. Is there a list of approved auditors of banks? 18. Do auditors face any restrictions on providing non-audit services to banks they audit? 19. Indicate the powers of the following with regard to auditor appointments and terminations. Requirements Annual general meeting of shareholders Audit committee Board of directors Other (please explain) 20. Does the banking supervisor have the power to reject the appointment of an auditor or terminate the appointment of an auditor of a bank? 21. Does the resignation/termination of the auditor need to be reported to the banking supervisor? If so, please describe the procedure. 9

10 d. AUDIT COMMITTEES 22. Please describe the requirements for banks, indicating the applicable law or regulation which establishes the requirement. a. Is there a requirement to have an audit committee? b. Does the law, other regulation or code, prescribe requirements for the composition of the audit committee (e.g., number of independent directors etc.)? Please briefly describe. c. Please briefly describe the key responsibilities of the audit committee in respect of financial reporting. d. Please describe the competences required in order to serve as an audit committee member (e.g., experience/ knowledge of financial reporting) E. FILING/ PUBLICATION OF FINANCIAL STATEMENTS 23. Are banks required to make their financial statements and other relevant reports available to the public? If yes, please indicate what is made publicly available from the list below. Select all that apply. Statement of Financial Position (or balance sheet) Statement of cash flows Notes and disclosures Income statement (or profit and loss statement) Statement of changes in equity Auditor s report Management discussion and analysis (or management report) Other (please explain) Exemptions (please explain) Deadline for publication 10

11 24. Please indicate where financial statements of banks can be accessed by the public. Select all that apply. If there is a cost for accessing financial statements, please indicate the cost. Internet (please indicate where e.g. banking supervisor s website, bank s website) In person at the companies registry (please explain) Newspaper Official gazette Other (please explain) F. MONITORING AND ENFORCEMENT FINANCIAL REPORTING 25. Does the banking supervisor review financial statements of banks? If so, please complete the following table: a. Is there a dedicated unit with responsibility for reviewing the financial statements (e.g., checking if financial reporting and disclosure requirements are met, reviewing auditor s reports, etc.)? b. Name of the monitoring unit(s) Comments c. The number of staff dedicated to the monitoring activities and the required competences (e.g., financial reporting expertise) d. A brief description of the monitoring mechanisms 26. If the banking supervisor performs a review of financial statements of banks, describe the supervisory measures and sanctions where violations of financial reporting requirements occur. Please indicate all possible supervisory measures (e.g. fines, loss of licenses etc.) and sanctions (administrative, civil and criminal), as they may relate to the bank itself, its directors, managers, and auditors. 11

12 27. Please list major cases where enforcement action has been taken over the past five years, if any, for breaches of financial reporting requirements by banks. 28. Are auditors of banks required to inform the banking supervisor ex-ante if they do not intend to issue a clean (i.e. unqualified) audit opinion 29. What supervisory measures (if any) are triggered on the part of the banking supervisor if a bank receives anything other than an unqualified audit opinion (e.g., qualified audit opinion, disclaimer, adverse opinion, and matter of emphasis)? 30. Please complete the following table in relation to the powers of the banking supervisor and auditors of banks, indicating the law or other regulation which establishes the requirement: Requirements a. Are there protocols in place for the banking supervisor to engage with y auditors of banks, either directly or indirectly? b. How often does the supervisor meet with the auditors? c. Does the supervisor have the power to establish the scope of external audits? d. Does the supervisor have the power to require production of any documents relating to the regulated bank from the auditor (e.g., management letter)? 12

13 G. CORPORATE GOVERNANCE 31. Is there a code of corporate governance 6 or similar with which banks are required or encouraged to comply? If so, is compliance with the code voluntary or on a comply or explain basis? 32. In addition to the financial reporting requirements established by law or regulation as described in the previous sections, does the code of corporate governance require or encourage further/different financial reporting practices (including audit requirements) for banks? If so, briefly describe. 33. What are the consequences (if any) for non-compliance with the code? 6 Note that the code of corporate governance here refers both to a separate statutory code or regulation issued or recognized by the banking supervisor. 13

14 Additional information Please indicate the corresponding section and question number if using this page to provide additional information. 14