The Bangko Sentral ng Pilipinas (BSP) has set out new rules to guide audit firms in their dealings with local banks and companies to ensure that good corporate governance principles are observed.
In a statement on Friday, the BSP said that the policy-making Monetary Board and the member-agencies of the Financial Sector Forum (FSF) approved the guiding principles on the “Bangko Sentral ng Pilipinas’ (BSP) Expectations for an Effective External Audit Function” in its recent meeting.
The FSF is a voluntary inter-agency body comprised of the BSP, Securities and Exchange Commission, Insurance Commission, and the Philippine Deposit Insurance Corp.
The Manila Times contacted a bank official for comment on the new guidelines, but the official said they have yet to receive an official copy of the new audit rules from the BSP.
The central bank said the new audit rules cover the responsibilities of the board of directors and management of financial institutions; the role of the external auditors; and the relationship between the BSP and external auditors.
For loan provisioning, the BSP said that external auditors are expected to look into the soundness of the assumptions and methodologies used under the prescribed financial reporting and BSP prudential reporting frameworks.
The monetary authority added that external auditors should charge reasonable audit fees, and should take into account the complexity of the activities and structure of the financial institution in its dealings.
“In this regard, external auditors are expected to ensure that the audit fees will be set at an amount that will not in any way compromise the quality of the audit,” the BSP stated.
The principles also provide that financial institutions shall allow external auditors “read-only” access to the BSP’s Report of Examination.
“This aims to facilitate identification of possible misstatements and high-risk areas relevant to the preparation of financial statements as well as expose external auditors to matters that are of interest to supervisors,” the central bank added.
The monetary authority noted that the principles set out on the expectations from an effective external audit function will also be adopted by the FSF member-agencies in their respective jurisdictions.