Startling details of previous dealings and irregularities of GK revealed
View(s):Startling details of previous dealings and irregularities of the now defunct Golden Key Credit Card Co. have been revealed in a research carried out by one of the members of the action group Anurika Widanagama into activities of GK by perusing the Ernst and Young audit report (E&Y Report)
According to findings of Miss Widanagama the company was registered three times as the Golden Key Credit Card Company Limited, Golden Key Company Private Limited and Golden Key Credit Card Company Limited between 03.06.1977 and as at 26.12.2008. Companies Act Section 08, shall grant permission to change a company name by a Special Resolution from prior approval to the Registrar of Companies and this was violated by former GK directors.
However the Registrar of Companies has accepted registering as Golden Key Credit Card Co. to operate Visa credit cards that was only authorised to Sri Lankan banks, she told the Business Times.
GK cancelled “visa credit card operation” in year 2002 and replaced with “Gold Cards for deposits” from 2002 (E&Y Report p, 40). This indicates, GKCCCL accepted deposits from public in year 2002 though not being a registered finance company (E&Y Report p, 44)
GKCCCL also issued credit cards without obtaining a security deposit for preferential customers; she said adding that 38 GK subsidiary companies have not filed annual reports at the Department of Registrar of Companies.
According to E&Y Report ( p, 42) loans and advances, net payable balance related to credit card holders having a corresponding deposit was transferred to “security deposit” payable and creditors control account includes transactions to merchant establishments(E&Y Report p, 49). Proper accounting entries are not recorded in this account since August 2008, she added.
Latest financial statements of companies affiliated to GK made investments were not available for review to ascertain financial status of “unquoted investments” (E&Y Report p, 22), she disclosed. This indicates GK subsidiaries did not prepare Annual Reports. As per Section 120, E&Y can obtain copies from Registrar of Companies. Whereas (E&Y p, 05) said they were unable to locate evidences to verify assets Rs 600,874,672 as at 31.12.2008 as most expenses were capitalized as asset “which have not expensed to income statements in prior years” (E&Y Report p, 05).
E&Y as auditor of Golden Key Eye & ENT Hospital failed to detect illegal share transfer among Ceylinco Insurance Employee Shares and GK and Golden Key Eye & ENT Hospital in Annual Report 2008( E&Y Report p88)
Above analysis questions on the credibility of Sri Lankan corporate governance system due to regulatory failures, audit quality and compliance to international financial reporting standards pre and post collapse of GK, merits an investigation at the highest level she concluded.