Kevin Reed, Accountancy Age, Thursday 3 June 2010 at 11:42:00

Financial services auditors could see a wider role, plus more communicationwith regulators

External auditors could have their role expanded in the financial servicesindustry, according to theEuropeanCommission.

The EC'sgreenpaper "Corporate governance in financial institutions andremuneration policies" flags up potentially expanding the reporting scheme bywhich auditors alert the board and supervisory authorities of any substantialrisks they discover in the performance of their duties.

Greater co-operation between auditors and regulatory authorities is required,and expanding the type of data they validate within a financial services clientwould go hand in hand with increasing the range of their reporting scheme.

The paper also looks at expanding the role and importance of the chief riskofficer, as the EC attempts to put safeguards in place to prevent anotherfinancial crisis.

While theICAEWwelcomes the paper and questions posed of the audit industry, it warns againstcreating an "expectation gap" between what an auditor does and their ability toprovide assurance on future economic events.

"More may need to be done to explain what the audit process entails and whatgoes on behind the final audit report, including the discussions betweenauditors and audit committees," said Iain Coke, head of the ICAEW FinancialServices Faculty.

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