Auditing and Assurance Standards and Guidance

FRC Practice Notes

PN 19 (Revised) The audit of banks and building societies in the United Kingdom (March 2011)

ISA (UK and Ireland) 220: quality control for an audit of financial statements

Objective

The objective of the auditor is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that:

(a) The audit complies with professional standards and applicable legal and regulatory requirements; and

(b) The auditor's report issued is appropriate in the circumstances. (paragraph 6)

Reference should also be made to ISQC (UK and Ireland) 1 – Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements.

The engagement partner shall be satisfied that the engagement team, and any auditor's experts who are not part of the engagement team, collectively have the appropriate competence and capabilities to:

(a) Perform the audit engagement in accordance with professional standards and applicable legal and regulatory requirements; and

(b) Enable an auditor's report that is appropriate in the circumstances to be issued. (paragraph 14)

39.

The nature of banking business is one of rapidly changing and evolving markets. Often new products and practices are developed which require specialised auditing and accounting responses. It is therefore important that the auditor is familiar with current practice. Audit firms organise training in these specialist areas where necessary and keep audit staff up to date with knowledge of relevant regulations.

40.

As well as ensuring that the engagement team has an appropriate level of knowledge of the industry and its corresponding products, the engagement partner also satisfies himself that the members of the engagement team have sufficient knowledge of the regulatory framework within which the entity operates commensurate with their roles on the engagement.

41.

Under ISQC (UK and Ireland) 1, an audit firm is required to establish a process to monitor the audit firm's quality control policies and procedures²¹. This process is required to include, on a cyclical basis, inspection of at least one completed engagement for each engagement partner. In order to perform an effective review of a completed audit of a bank or building society, those undertaking the review will need an appropriate level of knowledge of the types of banking business undertaken by the entity and the applicable regulatory framework.

²¹ ISQC (UK and Ireland) 1, paragraph 48.