Calls for bank auditors to meet regulator shot down
Attempts by the Financial Regulator Matthew Elderfield to persuade bank auditors to hold regular private meetings with his staff over issues at Ireland's leading lenders have run into further opposition -- this time from Ernst & Young, once the auditors to Anglo Irish Bank.
Mr Elderfield is trying to introduce a new code governing the relationship between those who audit the banks and regulators.
Among his proposals are at least two regular meetings a year between the Central Bank and the auditors, where what is going on within the banks is discussed.
However, Ernst & Young, while supportive of increased co-operation between auditors and the Central Bank, insists Ireland has no proper legal framework allowing such discussions to take place. Opposition to the idea has already come from the banks.
The firm also takes issue with the idea that an auditor's role should go beyond just giving opinion on the historical financial statements.
The firm said while future risks at a bank could be looked at, it must happen in the context of assessing whether a bank was a going concern or not.
Ernst & Young claimed Irish law was not as comprehensive as UK law in relation to auditors talking to regulators, leaving auditors working in Ireland without sufficient protection.
"As you know, auditors in the UK have a right and duty to communicate with the regulator and to volunteer information the auditor believes to be material to the regulator,'' its audit compliance partner Dargan FitzGerald said. "By contrast, in Ireland, an auditor only has an obligation to report to the regulator in specific circumstances defined by law.
"An Irish auditor could therefore be accused of breach of duty if he or she was to communicate with the Central Bank in other circumstances without the client's permission,'' he added.
While Mr Elderfield has sought to make auditors include the idea of talks with the Central Bank in their actual contracts with banks, Ernst & Young said this would still not adequately protect audit firms.
"Such provisions in the terms of engagement would only operate as between the client and the auditors, and would not necessarily protect the auditing firm from a claim by a third party',' it said.