For those of you who feel that auditors have questions to answer for the colossal cost of the collapse of the Irish banking system, you’re not alone. Whilst auditors cannot be blamed for failing to identify a credit/property bubble or for not being able to forecast loan losses, they can be blamed for failing to uncover sloppy loan documentation which subsequently rendered loans valueless, and the carouselling of deposits at year end in order to enhance the appearance of financial accounts. In the US, the global accounting and audit firm Arthur Andersen met its end – as it was then embodied, there is still an Arthur Andersen brand name – in the wake of the Enron scandal. Yet in Ireland, not a single auditor has been called to account in the collapse of the banking system as we approach the fourth anniversary of the bank guarantee in September 2008.
It seems that Minister for Finance Michael Noonan has no real interest in pursuing auditors, if only to establish if there is culpability which might give rise to a claim for compensation. Yesterday in the Dail the Sinn Fein finance spokesperson Pearse Doherty asked Minister Noonan to identify those responsible for the audits in Anglo and Irish Life and Permanent – remember these were the two banks where €7.4bn of deposits were transferred at year end so as to enhance the apparent financial strength of Anglo. It was KPMG which audited Irish Life in 2008 and the Minister identified the partner responsible for the audit as Alan Boyne. However in the case of Ernst and Young which audited Anglo, the response was that Anglo was “not in a position to positively identify all the principal persons at that company who were responsible for the conduct of the audit” !
Of course the identity of those responsible for the audits is secondary to the issues that many believe the audits should have uncovered. And when asked what steps had been taken by Minister Noonan to seek redress for apparent failings in the audits, the Minister’s response does not fill you with confidence that there is any serious will, either on the part of the Minister who is the sole shareholder in Anglo (now renamed IBRC after the merger with INBS) and who controls over 99% of Permanent TSB, or on the part of the Department of Finance which supports the Minister. The matter is pawned off on the Chartered Accountants Regulatory Body which is akin to, say, the Irish Farmers Association investigating allegations of milk price-fixing by farmers. It is the State that owns these banks, it is the State that has potentially suffered financial loss and yet it is a trade body (or professional body) which is looked to, to deliver justice to the State. The prosecution of three former Anglo staff is also cited as an excuse for the delay, frankly the opposite could be the case – the prosecution of Messrs Fitzpatrick, McAteer and Whelan could prejudice a financial claim on the auditors.
The full text of the questions is shown here. There is a previous blogpost which details the auditors in Irish banks during the boom and crash here, together with a flavour of Minister Noonan’s position.
Deputy Pearse Doherty: To ask the Minister for Finance the principal person or persons at an audit firm (details supplied) who was or were responsible for the audit of the financial statements for the year ended 30 September 2008, of the bank formerly known as Anglo Irish Bank which is now 100% owned by the State.
Deputy Pearse Doherty: To ask the Minister for Finance the steps taken by the bank formerly known as Anglo Irish Bank to seek redress from an audit firm (details supplied) in respect of any failure to identify irregularities in the financial statements for the year ended 30 September, 2008..
Deputy Pearse Doherty: To ask the Minister for Finance the steps taken by him or agencies acting under his aegis to seek redress from auditors (details supplied) in respect of any failure to identify irregularities in the financial statements for Anglo Irish Bank..
Minister for Finance, Michael Noonan: I propose to take questions 268, 270 and 271 together .
As the Deputy is aware the company referred to in the question, chartered accountants and registered auditors, conducted the audits of the relevant financial statements of Anglo Irish Bank Corporation for the year ended 30 September 2008. I have been informed that the bank is not in a position to positively identify all the principal persons at that company who were responsible for the conduct of the audit.
The Deputy will be aware that the Chartered Accountants Regulatory Board (CARB) appointed Mr John Purcell to conduct an independent enquiry into certain matters relating to their conduct as auditors of Anglo. The Statement issued by CARB following his investigation is attached.
Mr Purcell also carried out an investigation into the conduct of Mr Sean Fitzpatrick, Mr William McAteer and Mr David Drumm, all officers of Anglo and members of CAI. The Statement issued following the investigation is attached
In all cases Mr Purcell concluded there was a prima facie case. The next step in the process is for CARB to hold public Disciplinary Tribunals. However, these have been stayed following a request from the DPP who was concerned that the CARB prosecution of any of these cases could prejudice the criminal enquiry against the individuals or the firm named above arising from the various investigations carried out by the Garda and Regulatory Authorities.
The bank has also advised me that it is actively investigating all legacy issues with a view to taking appropriate action to resolve such issues. Due to the sensitive nature of those issues, it would be inappropriate for the bank to comment further on the subject matter of the question at this time.