Quayson Writes : External Audit Impact And Failures In Ghanaian Financial Sector

The Son of Dr. Duffour former CEO of Unibank, Dr. Duffour Jnr. has taken KPMG to court for deceit that led to collapse of Unibank and infact I am super excited about the whole gesture as a professional Chartered Accountant myself.

This is what all the collapsed banks should be doing. Some of these audit firms are lazy cocoons using inexperienced hands for audit work because they don’t want to pay professionals well enough.

I worked in a government establishment that had one of this big four Chartered Accountancy firms audit them. They have audited the company for the past ten years.

They prepare the financials at the same time they do the audit. This is highly unprofessional and unacceptable because audit work begins when all accountancy work has ended.

Accountancy must be done by the company itself internally or if an audit firm must be consulted then another audit firm must be employed to carry out the audit. This was not the case in the company I am referring to. The audit firm prepared the financials and does the audit at the same time. They present the financials to the board as though the finance department prepared the financials and they came to audit it.

The board would then go ahead and sign these “audited” reports. This has being going on for the past 10 years.

What is even worrying is the kind of audit officers that are engaged on an audit assignment. They are fresh and inexperienced graduates who come around asking all the wrong questions and looking at all the wrong areas.

I did realise that in my internal audit reconciliation I did, all the signed reports for the past 10 years was totally false and misleading. The internal audit I did threw off every signed report for the past 10 years. It’s a shame and professional negligence!

This was a report that the board of directors have being signing for the past 10 years but in actual fact, the contents did not show a true and fair view about the state of affairs of the entity.

This is the situation in many companies in Ghana. The impact of external Audit is zero. Audit managers hardly come to the field to supervise audit officers. The areas they look at mostly only present a summarised view about operations but don’t look into details and seek appropriate audit evidences.

This is what happened in the banking sector. External auditors are only interested in their audit fees but not a constructive and thorough audit work.

The audit work is not planned appropriately to expose the rot in the system and the officers put on assignment are inexperienced enough to understand industry trends and compliance issues. Neither do they have a good grasp of regulatory framework.

What does a fresh university graduate know about cash ratio, capital requirements, risk management and corporate governance issues of banks? Yet these are the kind of personnel tasked to audit our prestigious banks.

Our lackadaisical attitudes as Ghanaians has crept into our audit work and the banking sector as well. I mean, how hard is it to count your remaining balance in your pocket and know whether you have met capital requirements or not? How hard is it to track how deposits of customers have been disbursed legitimately and issue a report accordingly if not?

We always see the audited reports of these banks in the Daily Graphic thinking everything is well not knowing the public, shareholders and the regulators were being deceived. I would say it is not the Board of Directors of these banks that deceived Ghanaians but the external auditors. Why? Because they audited all the financials of these banks and reported that it shows a true and fair view not knowing it was a lie. No institution in Ghana publishes it’s accounts more than banks in Ghana. They publish their financials at least two to four times a year and yet this is the rot that was going on at the top but the external auditors refused to report on all the dubios transactions by the various boards. It’s improper and very shameful indeed.

How can Directors be buying real estates and investing in dubios businesses with people’s funds and you the external auditors did not see it to report it to government and the public? Were all these auditors silenced or they were not professional enough to detect such unlawful practices?

The external auditors of these banks have played a major role in the current unemployment suffered by former staff of these collapsed banks as they failed to report appropriately the situation on the ground. Now many people have lost their jobs whiles it looks now that some of these irresponsible directors will walk away scot free yet rich with people’s stolen money. This is unfair and an economic injustice to both retrenched employees and the common tax payer in Ghana.

Is it an issue of lack of knowledge in the banking sector by some of these audit firms or their scope of audit does not allow them to look at some of these sensitive areas? Speaking of scope there is no scope that must overlook regulatory issues and in that regard the external auditors have failed shamefully.

You would think that in auditing an organisation that is regulated, you would seek the interest of both the regulator and management alike including shareholders. You should consider what BoG considers to be the standards to be maintained by banks and also look into the financials of their financials whether it shows a true and fair view.

But I guess most of the auditors of these troubled banks only concentrated on the financials without paying attention to regulatory requirements. If this had been done some of these issues could have been flagged longed before to BoG and the public before the collapses emerged.

Should we thank the current administration for saving the banking sector yet causing thousand of job losses or we should chastise these external auditors for the shoddy work they have done on these seven banks?

If anything at all we should take a cue from how the Auditor General is doing a massive job in our public sector today and audit that way in any bank we are engaged in because such situations casts a snare on the whole audit profession and not at all an ingredient for economic development.

I would urge corporate Ghana to sue any audit firm that does not perform creditably to expose certain rots during their engagement and the government must also place sanctions on some these audit firms for shoddy jobs.

I applaud Dr. Duffour Jnr. for such bold step in suing KPMG and I pray he wins. The phrase that “we should not be relied upon to expose every fraud or error if any but we will plan our audit to expose such based on evidences made available to us” used by auditors in their engagement letters should probably be revised to include auditors taking full responsibility in the case the audit work does not expose such. This will put auditors on their feet to deliver to the utmost.

Professional Accountants should be engaged for audit work and must be periodically trained to understand industry trends, practices and norms. Audit partners and managers should as much as possible engage audit staff on the field and even visit them to see if the right thing is being done not just depending on reports and signing them.

Let us consider the interest of stakeholders anytime we audit not just the interest in regular audit fees. Querries must be raised and response documented for reference. Where qualified reports must be issued let’s not sympathise with management and say everything shows a true and fair view.

The audit profession is a very honourable one and we should not use our care free attitude to approach it to the detriment of its integrity. We must be professional in our approach and do above 100% job on the field as auditors.

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