Basel Core Principles for Effective Banking Supervision (2024) P27: Principle 27: financial reporting and external audit

The bank and banking group keep adequate and reliable records, prepare financial statements under internationally accepted accounting policies and practices supported by recordkeeping systems that produce reliable data, and annually publish statements that fairly reflect their financial condition and performance and bear an independent external auditor's opinion from an audit under internationally accepted standards; the board and management are held responsible for both. Valuation practices follow internationally accepted accounting standards, the fair value framework is independently verified and validated, and significant differences between financial reporting and regulatory valuations are documented. The external audit covers, among others, the loan portfolio, loan loss provisions, non-performing exposures, asset valuations, trading and securities activities, derivatives, securitisations, consolidation of and involvement with off-balance sheet vehicles and internal control over financial reporting, on a risk- and materiality-based approach. The bank and parent company govern and oversee the external audit, rotate the audit firm or individuals from time to time, accept that the supervisor may reject or rescind an auditor lacking expertise or independence, and the auditor reports matters of material significance to the supervisor directly or through the bank (such as licensing or legal breaches and significant control weaknesses in financial reporting).