In this regard, the Bank of Thailand meets with external auditors at the beginning of each year, in order to exchange views on common areas of concerns and to gain greater insights on the planned audit scope for the coming year, for example, the quality of risk management, the reliability of assigned collateral and foreclosure values. In addition to ongoing meetings with external auditors, there are periodic discussions at the agency level between the Bank of Thailand and the accountancy bodies. Regularly, the Bank of Thailand seeks comments from the Institute of Certifed Accountants and Auditors of Thailand prior to the issuance of new regulations. Likewise, the Bank of Thailand’s supervisors are regularly invited to be a member of the auditing standard committee whose responsibilities involve the development and improvement of Thai auditing standards. In summary, the Bank of Thailand has signifcantly benefited from the increasing coordination between supervisors and external auditors. Despite these benefts, there are several challenges ahead in our relationship with external auditors that merits careful deliberation. First, supervisors should be sensitive to the independence of the external auditors, particularly when the auditors provide various types of consulting services to the bank, which often times may be far more lucrative than external auditing fees. In Thailand, the Ministry of Commerce released a ministerial regulation in 1991 to prohibit external auditors from providing auditing services to any entities where their independence cannot be maintained. However, this regulation still leaves the assessment of independence to the external auditors themselves.

As banking supervisors, we can leverage off the auditors’ significant experience in testing for the adequacy of an institution’s internal control environment, as we begin to implement this risk-based framework. Second, external audits help to ensure the accuracy of financial statements that are provided to the public, which in turn helps to promote market discipline and foster a safe and sound banking system. Ladies and Gentlemen, Now, I would like to present our experience with external auditors from both the regulatory and supervisory perspectives. First on the regulatory side, the value of this relationship was initially recognized in 1962 when the Commercial Banking Act provides the Bank of Thailand with the authority to accept or oppose the appointment of a bank’s external auditor. Based on this act, the framework for external auditor qualifications and reporting requirements to the Bank of Thailand was issued in 2000, after extensive consultations with the Institute of Certifed Accountants and Auditors of Thailand (ICAAT), the Securities and Exchange Commission (SEC) and other relevant regulatory bodies. Let me provide some specifics on auditor qualifications with respect to our law. First, qualifed auditors must never have had their auditing license revoked or suspended by the auditing licensing body. Second, auditors that are not authorized to audit entities under the supervision of the SEC or other government agencies are not permitted to audit banks. Third, the Bank of Thailand prohibits any external auditors to consecutively serve a bank for more than fve years.