Regulators Support Basel Guidance on External Audits for Largest Banks

The FDIC, OCC and Federal Reserve today issued a joint advisory supporting the Basel Committee’s March 2014 external audit guidance for large, internationally active banks and offering recommendations for addressing the differences between U.S. standards and practices and those specified by the Basel guidance. The guidance applies to institutions with over $250 billion in assets or those with on-balance sheet foreign exposure exceeding $10 billion.

The regulators encouraged affected banks to ensure that their audit committees have policies in place that address the criteria for putting an external audit contract out for bid; ensure that the external auditors consider regulatory capital ratios in planning and performing the audit and understand how the external auditors factored those ratios in their materiality assessments; and request that the external auditor provide written feedback on the bank’s internal audit function.