Audit of a Bank or Other Credit Institution
An examination under International Standards on Auditing
Go to the Mandatory Audit serviceChecked against the official source:
Banks and other credit institutions are on the list in Article 35 of the Law "On Auditing Activity": their annual financial statements must undergo a mandatory audit regardless of the scale of their operations.
An audit of a credit institution differs from an ordinary corporate audit first and foremost in its subject matter: the main risk lies not in revenue but in the valuation of the loan portfolio and the adequacy of loss allowances.
Legal requirements
- banks and other credit institutions undergo a mandatory annual audit (Article 35 of Law ZRU-677);
- a bank's auditor must be a firm in which at least two auditors hold a certificate entitling them to audit banks;
- banks are public interest entities that keep their accounts and report under IFRS (Presidential Resolution PP-282); the key area is expected credit losses under IFRS 9.
What the audit focuses on
- Classification of assets by quality and adequacy of the allowances recognised
- Recognition of interest income, including on problem loans
- Related party transactions and risk concentrations
- Capital adequacy and disclosure of prudential ratios
- Accounting for derivatives and securities transactions, if any
Requirements for the audit firm
Only an audit firm that holds a valid licence and complies with the independence requirements of Article 34 of Law ZRU-677 may audit a credit institution. Independence is impaired, in particular, where the auditor has a financial interest in the audited entity.
IFRS financial statements
Credit institutions that prepare financial statements under international standards have exactly those statements audited. This changes both the volume of work and the composition of working papers: judgements on loss allowances and fair value require separate testing and documentation.
Discuss an audit of a credit institution
We will estimate the scope of the audit based on the structure of your portfolio and the reporting standards you apply.
Go to the Mandatory Audit serviceFrequently asked questions
Does a bank audit take longer than an audit of an ordinary company?
As a rule, yes: in addition to the standard areas, the auditor tests judgements on the loan portfolio, and these require sample-based analysis of loan files and supporting documents.
Does a bank need internal audit if it already has an external audit?
Yes, these are different functions. Internal audit works for the governing bodies throughout the year, while external audit expresses an independent opinion on the annual financial statements. Having one does not remove the need for the other.
Who may audit a bank?
An audit firm with at least two auditors on staff who hold a certificate entitling them to audit banks (Article 35 of Law ZRU-677).
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