For the first time in 56 years, Ghana’s Institute of Chartered Accountants sanctioned 4 auditing firms. Here’s why

The Institute of Chartered Accountants (ICAG) on Tuesday, September 3, 2019, sanctioned four auditing firms that audited the seven banks that collapsed in 2017 and 2018.

Professor Kwame Adom-Frimpong

Pannell Kerr Forster (PKF) Chartered Accountant, J. Mills Lamptey & Co., Morrison & Associates and Deloitte & Touche were the firms involved in the infractions.

The move is the first of its kind by the accounting and auditing watchdog since its establishment in 1963.

According to ICAG, the four firms were sanctioned for non-compliance with auditing standards.

It hence formed a committee to look into the roles played by audit firms in the collapse of commercial banks in Ghana.

A statement issued and signed by the President of the accounting profession’s oversight body, Professor Kwame Adom-Frimpong after the enquiry had noted that the firms have been fined for various infractions committed.

PKF was fined GH¢550,000; J. Mills Lamptey & Co., GH¢150,000; Morrison & Associates, GH¢350,000, and Deloitte & Touche, GH¢1.15 million.

Here’s a vivid explainer of the infractions the four firms committed:

PKF Chartered Accountants

For the specific breaches, the statement said PKF was fined for its work with Capital Bank, whose licence was withdrawn in August 2017.

It said the firm did not obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption in the preparation of financial statements and to conclude whether there was a material uncertainty about the entity’s ability to continue as a going concern.

“For example, the firm (PKF) failed to assess the impact of the non-existent investments totalling GH¢482 million and impaired loans of GH¢423 million which had been ring-fenced to be written off within a period of five years on the financial statements and on the opinion.

“Both amounts were fully impaired at the reporting date and should have been written off to profit and loss in full,” it said.

Deloitte & Touche

For Deloitte & Touche, it said it was fined for the audit work done on uniBank, UT Bank and the Royal Bank, whose licences were withdrawn in August 2018.

It said the firm wrongfully defined liquid assets to include placements with other banks.

“This is inconsistent with the provisions in all the three banks’ own accounting policy; IAS 7 and Section 2.12 (3(j)) of the Guide for Financial Publication for Banks and Bank of Ghana Licensed Financial Institutions (2016),” it said.

It further found that Deloitte & Touche’s audited accounts of the three banks “contained errors that suggested a weak quality control over-reporting”.

Morrison & Associates

Morrison & Associates was fined for work done on the accounts of the BEIGE Bank, whose licence was also withdrawn in August 2018.

The statement said the firm provided insufficient documentation of audit to back its work.

“The bank’s disclosure of related parties and their transactions in the financial statements was inadequate. For example, Beige Bank had placed about 35.7 per cent of its investments in a related party investment company (Beige Capital Assets Company), contrary to the BoG’s regulatory requirement limit of 10 per cent. This was clearly conspicuous in the bank’s investment portfolio but was not highlighted by the firm during the audit,” it said.

J. Mills Lamptey & Co.

J. Mills Lamptey & Co. was fined for breaches committed while auditing the accounts of the Construction Bank, whose licence was withdrawn in August 2018.

The statement said the firm failed to obtain sufficient appropriate audit evidence on bank balances before issuing the audit opinion.

“The firm did not perform audit procedures designed to obtain sufficient appropriate audit evidence that all events up to the date of the auditor's report that may require adjustment of or disclosure in the financial statements had been identified. For example, on Wednesday, 21st February 2018, the bank received GH¢34 million from a shareholder as consideration for shares. The treatment of this as a post-balance sheet adjusting event was incorrect and inconsistent with the basis of recognising stated capital in accordance with Section 66 of the Companies Act, 1963, (Act 179),” it said.

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