The Sundaytimes Sri Lanka

Role of Central Bank and bogus auditors


A shocking revelation has been made by a Central Bank official that “auditors cook up figures to hide the true financial position” (Business Times 24th June 2012). If so shouldn’t the Central Bank (CB) report these auditors to the Auditing standards Monitoring Board so that appropriate action can be taken against them? Why is the CB protecting errant auditors without exposing them?

The Director-General of the Auditing Standards Monitoring Board is duty bound to obtain the details of these auditors and the financial statements that have been falsified, from the CB and take appropriate action.

What is the rationale for the CB taking over appointment of external auditors to financial institutions? First the appointment of directors and now appointment of external auditors. Will rating agencies like Standard & Poor’s consider appointment of auditors by the CB as a step in the right direction to improve good corporate governance. Or will the Standard & Poor’s view this also as a conflict of interest?.
Does this also mean that the external auditors appointed by CB will be monitored by the CB instead of the Auditing standards Monitoring Board once the new scheme of appointing external auditors comes into effect? There are provisions in the Companies Act regarding the appointment of external auditors. Can the CB appoint auditors overriding such provisions in the Companies Act?

In Sri Lanka there isn’t a single instance where an external auditor had been found guilty of failing to discharge their duties satisfactorily. Recently there was a case of auditors failing to detect a huge overvaluation of stocks in a textile manufacturing company. All that was done by this blue chip group was to change the external auditors for all the group companies.

If the auditors are cooking up figures what is required is to take action against such auditors and not to change laws to enable the CB to appoint external auditors. Will the CB care to provide answers to the investing public on the matters raised herein?
An external auditor

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