Loan loss provisioning is an area of significant judgement that requires substantial effort by auditors to validate underlying management assumptions.

Deloitte established the Credit Centre of Excellence (CCE) in September 2013 to support audit teams in the execution of high-quality audits of loan loss provisioning on an ongoing basis. The CCE has been set up as part of the Distinctive Audit initiative, where we have identified additional analytical tools and techniques to be used or adapted in helping auditors provide the rigorous challenge expected in this area.

The tools were successfully used on a wide range of bank and building society audits throughout the UK for year-end 2014. In addition to informing our enhanced audit approach, the risk-based outputs from the tools were shared with clients through audit committee reporting and were very well received as value-added insights.

The Financial Reporting Council’s (FRC) Audit Quality Review (AQR) team undertakes independent inspections of the overall quality of the auditing function in the UK in relation to listed and other major public interest entities. The AQR published a report on the findings of its 2014/15 inspection of Deloitte on 29 May 2015. The full report with Deloitte’s results is available on the FRC’s website.