Auditors to be obliged to warn

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The Independent Online
AUDITORS are to be required to warn regulatory authorities when they discover something they suspect is relevant to the regulation of a bank, building society, insurance group or financial services company.

Professional audit bodies, such as the Institute of Chartered Accountants in England and Wales, already impose such a responsibility on their members.

But in his October report into the collapse of the Bank of Credit and Commerce International, Lord Justice Bingham suggested that this duty on bank auditors should become a statutory one.

The Government has now taken the first steps towards implementing his recommendation, widening its scope to include most forms of financial organisation.

Yesterday the Treasury and the Department of Trade and Industry jointly issued a consultation document on the subject. It contains draft regulations that will apply to the auditors of banks, building societies, friendly societies, insurance companies and those authorised under the Financial Services Act.

'The advantage of this approach is that it will, as far as possible, avoid different duties being placed on auditors of businesses in the various regulated areas,' the document says.

Those who fail to meet their statutory responsibilities risk being sued in the civil courts by anyone who suffers as a result.

Auditors said the statutory duty would make little difference to existing practice. 'We have no problems with it, since auditors already have a professional duty to report any suspicions,' said a spokesperson for Price Waterhouse, one of the biggest accounting firms and BCCI's auditors. 'As far as we are concerned it won't change the existing situation.'

Lord Justice Bingham in his report accepted: 'It does not appear that any formal or professional impediment to communciation between auditors and the Bank had any influence on the course of events in this case but it is desirable that the position should be made very plain for the future.'

Accountancy, page 26