AUDITOR’S ROLE IN AN EVER CHANGING BANKING INDUSTRY WITH REFERENCE TO BANK OF CREDIT AND COMMERCE INTERNATIONAL (BCCI)AND BANK OF CREDIT AND COMMERCE HONG KONG(BCCHK)CASES

Over the past decade the world banking industry has grown significantly and this has led to increasing sophistication and complexity in its practices.The industry has been affected by changes in the way in which it is regulated and supervised,by changes in the nature of its products,by the way in which individual bank manages its own affairs and controls its assets and by the way in which it accounts to the outside world for its activities.These changes have probably been of more significance than those experienced in any other industry over the past few years.Hong Kong which is one of the foremost financial centres of the world,has experienced all of these changes,probably to a greater extent than most other parts of the world.Hong Kong is one of the world’s major international banking centres and has a thriving domestic banking community.There is a need to review our banking practices and their accounting and auditing implications.The BCCI and BCCHK events happened in mid—1991 should trigger us to further reassess the role of auditor(both external and internal)in this ever changing and fast moving industry in co—operation with local authorities such as the Banking Commission,Department of Monetary Affairs and Security Commission.A number of investigations and articles on the role of bank auditors have been done and written,these include the study of challenges faced by bank auditors in today’s environment (Seidman,1987),the examination of the changing role of the bank audit committee(Haugh and Bradley,1987)and new risks faced by bank auditors (Clark,1987).In this paper,we will try to identify some of the common problems which might have caused the banking crisis.We will examine the role of auditor and try to establish the responsibilities of auditor when performing an audit task in a banking environment with the view to reducing the chance of the crisis happening again,if not eliminated completely.The regulatory body will still be the Banking Commission,while auditor will assume a supporting role in t