The Monetary Board, the policy-making body of the BSP, is scheduled to discuss the proposed policy this month as the BSP continues to tighten its preventive measures against fraud involving banks.
"What we want is that we will be advised of any major negative findings in the course of their audit," BSP Deputy Governor Alberto V. Reyes said yesterday.
The BSP has a list of accredited audit firms authorized to audit banks and although these firms are required to report to the banks that hired them, Reyes said the BSP also wanted to be advised of any negative findings that might have a "material effect" on banks’ solvency or profitability.
He said BSP-accredited corporate auditors will be required to furnish the BSP with copies of the audit reports submitted to the bank’s management.
These reports detail their observations about a firm’s accounting practices, including adverse findings, that are often not included in the version made available to the general public.
Reyes, who also heads the BSP’s supervision and examination sector, said the policy will help foster "closer coordination" among the BSP, auditors, and the banks.
Reyes said that under existing rules, auditing firms are not required to inform the BSP of any anomalous transactions. This has allowed erring banks to cover their tracks before they could be apprehended by BSP examiners.
If audit companies are required to report to the BSP, Reyes said it would allow monetary officials to act on developing problems in real time instead of being primarily reactive.
Once informed of potential problems in a bank’s financial accounts, Reyes said the Monetary Board could authorize a special examination to validate the initial finding.
At present, regulators only accept banks’ financial statements audited by SGV & Co., Joaquin Cunanan PricewaterhouseCoopers, Laya Mananghaya KPMG; Punongbayan & Araullo; Guzman, Bocaling and Associates and Conchita L. Manabat and Associates.
Under BSP guidelines, banks are also required to switch between a firm’s audit partners every five years to prevent them from developing "cozy relationships" that may affect the objectivity of the audit report.