New guidance from global regulators and domestic standards setters on the quality of external audits should be adopted as best practices, the Office of the Superintendent of Financial Institutions (OSFI) says.

In letters to the industry that were issued Friday, OSFI says that various international and domestic initiatives, which aim to strengthen external audit quality, have led to notable efforts that can assist audit committees. “We are of the view that these initiatives … provide best practices and should be implemented,” it says.

For banks, it says that audit committees should review recent guidance from the Basel Committee on Banking Supervision to ensure that they meet the standards established in the guidance.

For insurers, OSFI says that the International Association of Insurance Supervisors (IAIS) is examining possible changes to its core principles to reflect the audit committee’s responsibility in overseeing the external audit function. “Insurers will be notified of OSFI’s expectations after revisions to the Insurance Core Principles have been identified and agreed upon,” it says.

Domestically, OSFI also notes that the Canadian Public Accountability Board (CPAB) has issued a protocol for external auditors to share CPAB inspection information with audit committees. “This information should improve audit quality by enhancing the nature and depth of discussions between the external auditor and audit committee on audit quality,” it says; adding that it expects audit committees to discuss systemic audit quality issues that are raised in CPAB reports with their auditors.

Additionally, the Chartered Professional Accountants of Canada (CPA Canada) has also issued guidance designed to encourage open discussions about audit quality. OSFI also suggests that audit committees embrace the CPA Canada guidance and tools as part of their overall assessment of the external auditor.

OSFI says that these initiatives should be incorporated by the end of 2014. “As new guidance and publications on external audit quality are developed, OSFI expects audit committees to have a mechanism in place to ensure they are apprised of such developments and to determine the extent of their applicability,” it adds.