On Tuesday, September 3, 2019, the Institute of Chartered
Accountant, Ghana fined some four audit firms for some unprofessional practices
in their audit of the books of some five banks that were collapsed by the
central bank.
The four auditing companies were Deloitte & Touche, PKF Chartered
Accountants, J. Mills Lamptey & Co. and Morrison & Associates.
The firms were fined a total of GH¢2.2 million for their various malpractices.
Among the four was Deloitte and Touche, a leading accounting firm which is a
prestigious member of the Big 4 accounting firms which is made of KPMG, EY,
PwC.
Deloitte and Touche received the biggest fine with GH¢1.15 million slapped on them
for their involvement with Unibank, UTBank and Royal Bank.
Explaining the infractions committed by the firm, the ICAG in its statement
said: the definition of cash & cash equivalents in the financial statements
of all the three banks audited by the firm include, among others, “liquid
assets with maturities of less than three months”.
However, the cash and cash equivalents in the cash flow statement in all the
three (3) banks included “Placements with other banks” with maturities of more
than three months.
This is inconsistent with the provisions in all the three bank’s own accounting
policy; IAS 7 and Section 2.12(3(j)) of Guide for Financial Publication for
Banks and Bank of Ghana Licensed Financial Institutions (2016).
Also, the deferred tax assets of GH¢9,563,313 was recognized in the Royal
Bank’s Financial Statements. However, there was no documentary evidence in the
working papers that the recognition was done in accordance with the provisions
of IAS 12 (revised).
Again, financial statements of all the three banks audited by Deloitte
contained errors that suggested a weak quality control over-reporting.
The following are examples of significant errors:
a) A review of UT Bank’s financial statements for the year ended 31st December
2014 indicated that an amount on the face of the statement of financial
position for total liabilities is GH¢1,489,991 whiles the amount in the notes
was GH¢1,513,377.
Additionally, the comparative amounts on the face of the statement of profit or
loss for interest expenses, net interest expense, fees, and commission income,
taxation did not agree to the amounts in the notes.
b) A review of The Royal Bank’s financial statements for the year ended 31st
December 2016 indicates that the comparative for other expenses figure on the
face of the statement of profit or loss was GH¢30,446,862, whiles the amount in
the note was GH¢73,430,364.
In addition to the above, the comparative for deferred income figure on the
face of the statement of financial position was GH¢605,434 whiles the amount in
the note was GH¢605,437.
Consequently, the Council of ICAG therefore, approved the recommendations of
the Disciplinary Committee, and sanctioned Deloitte & Touche and its
Engagement Partners with a fine of GH¢1.15 million with respect to the audit of
UniBank’s Financial Statements for the year ended 31st December, 2016, UT
Bank’s Financial Statements for the year ended 31st December, 2014, and The
Royal Bank’s Financial Statements for the year ended 31st December, 2016.
Background
Last year, Bank of Ghana (BoG) announced the formation of Consolidated Bank
Ghana Limited (CBG) to take over the good assets and the operations of Five (5)
local Banks that were placed under receivership by Bank of Ghana.
In August 2017, Bank of Ghana approved GCB Bank Limited’s acquisition of the
good assets of UT Bank and Capital Bank, through a Purchase and Assumption
Agreement.
The Council of the Institute of Chartered Accountants (Ghana)-(ICAG) took note
of these developments in the banking industry in Ghana, particularly, the
question of the Auditors’ work relative to the Seven (7) banks that were placed
under receivership.
After a meeting held on Monday, 13th August 2018 with the Auditors of these
banks, the Council of the ICAG decided to set up a Fact-Finding Committee to:
a) Review the audit files prepared by the Audit firms on the said banks to
determine whether audit work done supported the opinion issued by the Auditors.
b) Review the specific circumstance of each bank under receivership and
determine whether or not there were sufficient grounds to initiate disciplinary
action against the Statutory Auditors.
The Fact-Finding Committee completed its work and presented its final report on
Friday, 12th April 2019 to the Council of ICAG.
Subsequently, the Council in accordance with Section 16 (2) of the Chartered
Accountants Act, 1963, (Act 170), set up a Disciplinary Committee for the
purpose of holding an inquiry into the conduct of Auditors of the Seven (7)
banks that were placed under receivership.
The Disciplinary Committee granted hearing to the Auditors of the Banks placed
under receivership. The Representatives were given the opportunity to respond
both in writing and orally to the infractions raised by the Disciplinary
Committee.
The following firms appeared before the Disciplinary Committee: EY Chartered
Accountants, PKF Chartered Accountants, J. Mills Lamptey & Co., Morrison
& Associates and Deloitte & Touche.
CBN
