14
Item |
2002 |
2003 |
2004 |
Audits pursuant to sections 44 and 44c of the Banking Act |
69 |
79 |
155 |
Auditors' reports on the special funds of investment companies |
1 431 |
1 309 |
1 459 |
Reports from investment companies on their activities |
6 635 |
6 891 |
6 606 |
Reports under Principle I |
32 846 |
29 923 |
28 907 |
Reports under Principle II |
31 617 |
28 990 |
27 789 |
Audits of internal risk models |
8 |
9 |
6 |
Reports under the Capital Accord of the Basel Committee on Banking |
76 |
76 |
81 |
From the statistics on ongoing banking supervision, it can be seen that although auditors'
reports on annual accounts, routine special and deposit guarantee fund auditors' reports have
decreased, audits pursuant to sections 44 and 44c of the Banking Act, auditors' reports on the
special funds of investment companies have increased. Particularly notable is the significant
increase in sections 44 and 44c audits pursuant to the Banking Act. Between 2002 and 2004,
these audits have more than doubled.
From this, it can be inferred that the adoption of risk based regulation in financial supervision
in Germany has overall, not resulted to a reduction in its use of external auditors. The growing
importance of risk-based regulation is also highlighted through risk-oriented reporting as it
now represents a significant component of standard disclosure requirements and credit
institutions must not only explain their assets and other elements but also outline their own
risk situation and their ability to manage these risks.119 The growing importance of using
external auditors is also demonstrated through the Basel Committee's recommendations120 and
certain post Enron reforms.121 It is therefore difficult to establish which is of greater
importance - whether it is risk-based regulation or the use of external auditors.
The Impact of Basel II on German Banking Supervision
It was expected that the new Basel Capital Accord would result to a shift as on-site
prudential audits assumed greater importance within the supervisory review process
and came to supplement the evaluation of reports and returns from institutions.122 This
seems to be reflected in the above table of statistics on ongoing supervision. Basel II has three
119 See Deutsche Bundesbank, 'New Transparency Rules for Credit Institutions' Deutsche Bundesbank Monthly
Report (October 2005) p 69
120 Basel Committee's Core Principles for Effective Banking Supervision and the Relationship between Banking
Supervisors and Banks' External Auditors , International Auditing Practices Committee
121 See Deutsche Bundesbank, 'The Evolution of Accounting Standards for Credit Institutions, Deutsche
Bundesbank Monthly Report (June 2002) p 39
122 Deutsche Bundesbank, Deutsche Bundesbank's Involvement in Banking Supervision Monthly Report
(September 2000) p 37