What Is Prudential Supervision?
The fundamentals of banking supervision have evolved over time and have been fine-tuned through the tests of financial crises. Internationally, banking supervisors have defined their best practices through Basel’s core principles for banking supervision. Unlike the banking supervisors, the PCAOB is in the early stages of developing an auditor oversight model. While the PCAOB has registered audit firms and is well into its inspections program, it is still defining what it means to be a supervisor of audit firms. This is a fascinating time to be involved in the oversight of the audit profession. While there may not be a universally held definition of the term “prudential supervision,” I use the term to mean the process of ensuring that institutions adhere to minimum standards imposed either by government regulation and policy, industry best practices, or an institution’s own policies, procedures and controls. These standards seek to provide an appropriate balance between the business str
