On 2 October 2019, the PRA published a Dear Chief Financial Officer letter (Dear CFO letter) that it had sent to selected deposit takers which provided formal thematic feedback on the regulator’s review of ‘written auditor reports received in 2019’.
The feedback in the Dear CFO letter is set out in three parts. The main findings are briefly covered in the letter itself, with more detail provided in the two annexes, the first of which covers thematic findings on IFRS 9 Expected Credit Loss accounting (ECL), and the second covers thematic findings relating to matters other than ECL. The thematic findings do not identify any particular firm or auditor.
The PRA reports that as part of the next round of written auditor reporting questions for the 2019 year-end audit, the regulator has asked for the views from auditors on the extent to which their firm has adopted the practices set out in the Dear CFO letter and its enclosures, or whether the firm has alternative processes in place that achieve the same results. The PRA would appreciate firms engaging with their auditors in carrying out this work by performing their own analysis on how they have adopted the practices and by making that analysis available to their auditors as part of the year-end audit. The PRA intends to discuss wider adoption of these practices with firms; in 2020 as part of its continuing work with them on the consistent application of IFRS 9 ECL.