Auditor General to appoint audit firms for state companies
Sri Lanka’s state-owned companies (state owned enterprises – SOEs) have been brought under the scrutiny of Auditor General (AG)’s Department with authority, for the first time, to select and appoint private auditors for auditing of accounts.
In some cases earlier the Auditor General got the assistance of private auditors which were however selected by the Public Enterprises Department of the Finance Ministry.
However under new powers vested under the 19th Amendment to the Constitution, the AG’s department can on its own appoint private audit firms to handle audits of SOEs under its (AG’s) supervision.
For this purpose, the department recently called for Request for Proposals (RFP) from audit firms to carry out audits in accordance with Sri Lanka auditing standards on the financial statements of SOEs in which the Government has a 50 per cent or more stake.
According to the RFP criteria published in a newspaper advertisement recently, those government companies are registered or deemed to be registered under the Companies Act No 7 of 2007.
A senior department official said so far they have received proposals from 14 audit firms. Firms that satisfy the criteria will also have to face a competitive test on quality standards before the selection is made.
The official disclosed that some Finance Ministry – appointed audit firms earlier had been functioning as auditors of government companies for long periods. Citing one example, he noted that the same audit firm has been given the responsibility for auditing at Sri Lankan Airlines for more than 30 years.
Under the present set up a single audit firm will not be allowed to serve as the auditor in a government-owned company for more than three years.
These companies are functioning under the Companies Act and therefore they have to prepare annual accounts which are certified by a recognised private audit firm and file the annual accounts in the Company Registrar’s office.
Earlier, the government had no control over these accounts as there are no provisions in the Companies Act or any other act where the Auditor-General could get involved.
Those audit firms were used to give favourable audit reports for their clients, hiding actual facts, contributing to corruption and not releasing a report to their clients disadvantage and raising these issues, he added.
This situation has now been changed with the enactment of 19th Amendment to the Constitution which has brought those companies under the purview of the AG’s department he said. The closing date for submitting RFPs to the AG’s department is November 11.