The role of auditors and reporting accountants in UK banking supervision

Under the Banking Act 1987, auditors of banks became involved in the system of UK banking supervision. In addition, the Act made provision for supervisors to require a report by an accountant on accounting and internal control systems and on returns made to the regulator. The auditor would normally be appointed as the reporting accountant. The paper examines the origins, development and current role of auditors and reporting accountants in UK banking supervision. The role of auditors reporting to shareholders under the Companies Act 1985, and the roles of auditors and reporting accountants reporting to supervisors under the Banking Act 1987 are discussed, and possibilities for misunderstandings of these roles are identified. It is argued that the involvement of auditors and reporting accountants in banking supervision may have strengthened the supervisory framework, but at the expense of a blurring of their roles, relationships and responsibilities. This has implications not only for the UK, but also internationally.