EBA欧洲银行-2011-02-11-EBA-comments-to-IAASB-IAPS-1000_7页_185kb

Summary of EBA Comments on IAPS Proposals

Core Content

The European Banking Authority (EBA) has provided detailed comments on the exposure draft proposals relating to the Withdrawal of existing IAPSs and the Clarification of the Status and Authority of New IAPSs, specifically Proposed IAPS 1000, Special Considerations in Auditing Complex Financial Instruments. The EBA emphasizes the importance of high-quality audit practices in supporting sound corporate reporting, which is essential for market confidence and discipline. The comments are aimed at improving the clarity, scope, and practical applicability of the IAPSs, particularly for complex financial instruments.

Main Views and Key Points

1. Withdrawal of Existing IAPSs and Status of New IAPSs

• The EBA supports the withdrawal of existing IAPSs that are outdated or require reworking, especially those related to derivative financial instruments.
• They welcome efforts to refresh guidance on the interaction between auditors and banking supervisory authorities, especially in the context of the financial crisis.
• The status and authority of IAPSs need to be clearly defined, and the EBA recommends that this should be included in the Preface or, ideally, in ISA 200.
• The EBA suggests that IAPSs should not impose additional requirements beyond those in ISAs, and that auditors should be required to explain why they do not apply IAPS 1000 if it is relevant to their audit.

2. Proposed IAPS 1000

• The EBA supports the separation of audit guidance from educational material in IAPS 1000 to ensure clarity on authoritative status.
• They believe the scope of IAPS 1000 should not attempt to define complex financial instruments or list them, as this would limit its applicability.
• The EBA supports the framework in paragraph 7 that outlines characteristics of complex financial instruments, but suggests improvements to the description of purposes related to trading.
• The EBA recommends that the IAPS should focus more on practical audit procedures rather than management activities.

3. Effective Date

• The EBA supports an effective date that allows auditors sufficient time to understand the content, determine its relevance, and integrate it into their audit planning.
• They suggest a set future date with the option to apply early to accommodate the complexity of the subject.

4. Content Recommendations

• The EBA believes the current balance of content in IAPS 1000 is too management-oriented and should be more auditor-focused.
• They highlight the need for more detailed guidance on:
  • ISA 540 (auditing estimates), particularly in the context of complex financial instruments.
  • Valuation models, including the approach to testing, the importance of model risk, and the validation processes.
  • Own credit risk, including the valuation approaches used and the assessment of management bias.
  • Fair value hierarchy, including the judgment involved in categorizing instruments and the importance of this for audit risk.
  • Information technology (IT) controls, including automated business controls and IT general controls.
  • Professional scepticism, especially in relation to management bias.
  • Governance and control environment, including competence of management, participation of those charged with governance, and reference to international guidance (e.g., BCBS, IMF, OECD, CEBS).
  • Functions in the control environment, including interactions with different parts of the institution (front, middle, back office) to ensure comprehensive risk assessment.

Conclusion

The EBA's comments reflect a strong support for the objectives of the proposals but emphasize the need for greater clarity, practicality, and focus on audit procedures. The clarification of IAPS authority, enhanced guidance on complex financial instruments, and improved effective date and content structure are key areas of recommendation. The EBA also encourages the IAASB to consider the long-term integration of IAPSs into a clearly articulated audit literature hierarchy.