BSP to revise rules on selection of external auditors

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is looking to amend the guidelines on the selection of external auditors for banks and financial institutions to enhance corporate governance.

In a draft circular, the BSP said it considers the external auditing profession as a partner in promoting the safety and soundness of BSP-supervised financial institutions (BSFI).

“External auditors, through the conduct of audits and opinions rendered on audited financial statements, contribute to enhancing corporate governance and empowering the public and investors to make informed financial decisions,” it said.

Thus, the BSP will amend relevant sections of the Manual of Regulations for Banks and Non-Bank Financial Institutions, pursuant to Republic Act 8791 or the General Banking Law of 2000, as amended.

Under the draft rules, the BSP included new entities that external auditors can extend their services to such as digital banks, credit card issuers and virtual asset providers.

“The external auditors’ category or group shall be determined based on their track record and the results of the BSP’s assessment of their continuing eligibility to be included in the List of Selected External Auditors for BSFIs,” the BSP said.

External auditors applying for inclusion (new or renewal) in the list of selected external auditors for BSFIs should adhere to the BSP’s qualification and documentary requirements. The BSP may require additional documents as deemed necessary.

Lead partners and the engagement quality control reviewers of audit firms should be included in the list of selected external auditors as well. They will also be subject to the same requirements of the BSP.

Being a part of the BSP’s list of selected external auditors should be valid for five years or for a shorter period as prescribed by the central bank.

“The BSP shall not be held responsible for any liability or loss arising from the selection of the external auditors to be engaged by BSFIs for audit or non-audit services,” the BSP said.

The central bank will also periodically evaluate the external auditor’s performance by assessing the quality of the BSFI’s audited financial statements and its compliance with the requirements.

External auditors whose validity for inclusion expires after the audit of 2023 financial statements will be allowed to engage in the audit of the 2024 financial statements, excluding those who are subject to escalated enforcement action, the BSP said.