Role of auditors questioned

QUESTIONS HAD to be asked about the performance of auditing companies hired by successive governments, Tánaiste Eamon Gilmore told the Dáil.

He said this was particularly so in cases “where accounts were signed off by firms of auditors, particularly over the last couple of years when we have seen some of the extraordinary transactions in and between banks and financial institutions”.

Mr Gilmore agreed with Independent TD Shane Ross there was “an unhealthy concentration” of business among a small number of auditing and accounting companies, which must be looked at.

“The present Government, however, relies less and less on consultancy work being done for it by various financial companies,” he said.

Mr Ross said the auditing world was dominated by an “oligopoly” of the “big four” companies: PricewaterhouseCoopers, Deloitte Touche, KPMG and Ernst Young. The kernel of the issue, he added, was that consultancy work was given to auditors who were also auditing the firm in question.

“In other words, the same company is doing consultancy work and the audit, so it has a serious conflict of interest,” he added.

The Government, said Mr Ross, had invariably employed the “big four” to do consultancy work in the case of the banks.

In many high-profile cases, he added, they had passed the banks and given the all-clear for the solvency test.

“How long will the Government continue to accept the independence of these guys when they are patently compromised?” he asked.

“How long will it continue to give them millions in consultancy fees when they are also auditing the banks’ accounts?”

Mr Gilmore said legislation being drafted for whistleblowing would contribute to greater transparency in the way in which these matters were addressed.

Mr Ross said vast fees were paid to the firms involved, including Ernst Young, which had “disgraced” itself in Anglo Irish Bank. “How long will the Government continue to pay these fees when there are equally reputable – or equally disreputable – people in the second line of auditors who will do the job for much less?”

He also asked why the Government always and invariably went, sometimes without going through the tendering process, to the “big four”, which were discredited in Ireland and internationally.

Mr Gilmore said the EU was working on a new directive on the role of auditors. A consultation phase was under way which would establish Europe-wide regulations governing the role of auditors.

“I do not disagree with the deputy and he will find that as time progresses, the Government’s approach to the securing of financial advice will reflect more the sentiments expressed in that question than it will reflect the practices of the past,” Mr Gilmore added.

Earlier, Mr Ross welcomed that Europe had woken up to the fact “that bankers are not the only scandals in suits in the financial crisis”.

There was no longer any trust between the clients of auditors, the public and the Government because auditors had betrayed trust, particularly in the reporting of financial institutions.