The ICAEW has published a fuller report into the lessons to be learned for bank audits from the financial crisis.  Following on from its earlier brief paper, this produces more findings and recommendations.

There are recommendations in four key areas:

• bank reporting
• auditor reporting
• dialogue with supervisors
• support for supervision

The report is mostly concerned with one, fairly intractable question.  Just how do we peer behind the (as Fearnley put it) closed doors where audit decisions are made to help us distinguish between a well-performed audit that happened to be followed by a bad outcome and a lemon?  In that sense, the ICAEW's approach is infinitely more mature and helpful than the Prem Sikka (or even Francine McKenna) agenda, which commits the post hoc ergo propter hoc fallacy.  It's a fallacy that's easy to make, given how uninformative modern audit reports are.  The ICAEW suggests that a way out of this problem is firstly to do a much better job of explaining just what audits are.  But then, the profession should go beyond that and shine some light on the discussions between banks and their auditors.

The ICAEW has some unkind words for the FSA.  It says that the FSA simply didn't place enough value on dialogue with auditors.  This is a gentle way of pointing the finger of blame firmly at the FSA (rightly) for its role in failing to stop the crisis.

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Filed under: Auditing, Institutes, Regulation with tags banks, francine mckenna, fsa, icaew, prem sikka