The audit of banks and financial organizations is an essential component for ensuring financial stability and confidence in the financial sphere. Banks and financial institutions play a critical role in economic life, so their financial reporting must be reliable and trustworthy.
The regulations of the legislative regulators of the activities of the mentioned institutions, namely the National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission (NSSMC), set increased requirements regarding the scope of issues that the auditor must check in addition to standard audit procedures, set additional requirements to the content of the auditor’s report.
Therefore, the selection of an auditor of a bank and financial organization shall be balanced, and the available experience and practice of such an auditing firm should be considered. You can review the portfolio of Kreston Ukraine clients here.
the auditor shall ensure that the financial statements of the bank or financial institution meet the requirements of IFRS in all material respects. This includes compliance with the defined standards for classification, evaluation, recognition of assets and liabilities, and their proper presentation in financial statements.
the auditor checks whether the activities of a bank or financial institution meet all the requirements and standards established by legislative regulators (NBU, NSSMC).
the auditor evaluates the effectiveness of internal control systems used in a bank or financial organization to ensure their effectiveness and compliance with legal requirements and conducts its testing to ascertain whether the reliability of financial statements is ensured.
the auditor assesses the risks associated with potential misstatements in financial statements based on the obtained understanding of a banks or financial institution’s business, the adopted accounting policies, etc., develops an audit strategy and plans audit procedures in response to identified risks, including fraud risks.
the auditor verifies the accuracy and completeness of the data included in the financial statements by applying the procedures of external confirmation, recalculation, inspection, observation, analytical procedures, substantive procedures, etc. The auditor analyses the composition of assets and liabilities of a bank or financial institution to identify possible risks of non-compliance with the requirements of the NBU or NSSMC and verifies the accuracy and reliability of financial operations and transactions carried out by the bank or financial institution.
upon completion of the audit, the auditor provides his opinion on the reliability of all material aspects of the banks or financial institution’s financial statements, which may be unmodified (clean, unqualified) or modified (qualified opinion, adverse opinion, disclaimer of opinion)
Importance of the audit of banks and financial organizations:
the audit helps to identify possible financial risks and problems that may affect the indicators of stability and reliability of a bank or financial institution.
audit results help attract and retain investors and clients by demonstrating a high level of financial transparency and reliability.
the auditor's recommendations contribute to improving a bank or financial institution's internal control and risk management systems, preventing non-compliance with legal requirements, and improving internal control over the financial reporting process.
the need and procedure for conducting audits of banks and financial organizations are provided for by the requirements of laws and regulations of the relevant regulatory authorities (NBU, NSSMC) within the framework of conducting an audit by such requirements, other issues are taken into account and may be considered (in particular, diagnostics of banks' credit portfolio), timeliness and the quality of audit procedures affect the state of interaction with regulatory authorities and their confidence in a bank or financial institution.
