Audit standards crackdown urged after crash errors
The Tánaiste and Jobs and Enterprise Minister Frances Fitzgerald has asked the Government to back a tougher regime for overseeing and disciplining auditors, in a package of measures taken to Cabinet last night.
The proposed Companies (Statutory Auditors) Bill 2017 will aim to beef up the powers of the Irish Auditing and Accounting Supervisory Authority (IAASA), as the competent authority responsible for oversight of auditors.
It will also update the rules for auditors of institutions other than companies, such as industrial and provident societies and friendly societies, which will extend the tighter rules to building societies and credit unions. The move to toughen auditing standards generally comes after firms that signed off on the finances of the main banks in the build-up to the crash escaped largely unscathed, despite the scale of the subsequent crisis.
Anglo Irish Bank's former auditor Ernst & Young (EY) was lambasted last year by Judge Martin Nolan following the trial of three of the bank's executives, for failing to spot a €7.2bn conspiracy to defraud.
"It beggars belief that Ernst & Young signed off on the accounts," the judge said. "How they signed off on the accounts as true and fair is a mystery to me."
In a brief press statement at the time, EY said none of its staff had been called to give evidence before the judge.
Two years ago a report commissioned by accounting standards agency the Chartered Accountants Regulatory Board (CARB) surprised many when it, in effect, exonerated all of the firms, including EY, that had audited the banks before the crash.
The research looked at audits in 2008 and 2009 by KPMG of AIB, Irish Nationwide Building Society (INBS), and Irish Life and Permanent (Il&P); Ernst & Young (EY)'s audits of Anglo Irish Bank and EBS; and PwC at Bank of Ireland.
Work carried out at the main banks by accountancy firms around the time of the crash was "satisfactory" and met international standards, according to the long-awaited report.