Crunch Time for Bank Audits? Questions of Practice and the Scope for Dialogue

This paper reviews the way in which auditing issues have been raised and addressed during the credit crunch and developing global financial crisis. Analysis is based on a review of the academic auditing literature, regulatory and audit reports, together with articles from the financial press. The paper serves both to focus and stimulate analysis of the credit crunch on the audit profession. It demonstrates the complexity of contemporary practice and highlights the importance of developing understanding of banking audit practice and associated regulatory interactions - including the possibilities both for research and enhanced academic-practitioner dialogue. After highlighting the relative lack of media attention devoted to the external auditing function in the light of major corporate collapses, we consider what, contrastingly, is an active and ongoing series of responses to the current crisis on the part of auditing firms and the profession more generally. Through such analysis the paper explores a number of implications of the credit crunch for both auditing practice and research, including the technical capacities of external audits in the banking sector, the contributions of standard setting bodies and regulatory oversight, and the scope for enhanced dialogue between such parties and audit researchers