Accounting Regulator Says Banks Need to Improve Auditing

The U.K. accounting regulator said it’s concerned attempts to improve auditing practices at banks and building societies hasn’t been sufficient.

The Financial Reporting Council is assessing the quality of auditing at banks and will focus on how loan-loss provisions are tested, the London-based regulator said in a statement today. The review will start in the second quarter of 2014, and a report will be published at year-end.

“Concerns about the quality of auditing of banks and building societies persist, not least from our own inspections of audits and despite enhanced corporate-governance requirements,” Sarah Hogg, the FRC’s chairman, said in the statement. “There is scope for improvement, and we hope to see a genuine step change in the quality of bank and building society auditing in the U.K.”

HSBC Holdings Plc (HSBA) said in August it named PricewaterhouseCoopers LLP as auditor, dropping KPMG LLP after more than two decades. It came as British antitrust regulators said this year that large companies should be required to put their auditing contracts out to bid every five years to boost competition in the industry.

Auditors have been under scrutiny for not spotting practices that led to the financial crisis of 2008. The House of Lords’ Economic Affairs Committee said in a 2011 report said there had been “grave defects in the auditing of banks.”

To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Simone Meier at smeier@bloomberg.net

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