Deloitte was appointed to do a special audit at Bank of Rajasthan under the authority of the Reserve Bank of India (RBI). This audit was ordered as a result of anomalous operations by BoR.
Deloitte has to audit the bank’s lending policy and the information security system.
Knowing that special audits (ordered by RBI) are uncommon, Bank of Rajasthan must have done very irregular transactions.
Last week, BoR was already under fire because of breaking the law on different occasions, such as anti-money laundering, not supplying some documents to RBI, …
Besides, management of BoR is not always reliable so the RBI imposed a special audit.
Furthermore, Bank of Rajasthan has only one committee to accept loans. This approach is different compared with other commercial banks, who have more committees. For instance, a local office can accept loans up to Rs (Indian Currency Unit) 250 millions, the credit committee at the head office can approve loans between Rs 250 and 500 millions and only the management committee can accept loans above Rs 500 millions.
The RBI is afraid that at BoR, the directors largely decide in the credit delivery system.
Deloitte Haskins & Sell’s will control if BoR has observed all the statutory regulations. The auditors will also take a look at the pension contributions given to the bank’s employees.
The majority of the bank’s 4,000 employees has a pay which is in accordance with the agreement between the Indian Banks Association and the BoR, but 10% of the employees in the mid to senior level receive a different pay and pension contribution.
In my way of thinking, it’s was a good idea to audit this bank. But I also think it would be good if banks were audited every two years, so the government would discover earlier if banks are doing irregular dealings.
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zondag 4 april 2010
zaterdag 3 april 2010
Absolute power corrupts absolutely
After writing 7 blogs and reading the other blogs, I notice already that the big 4 are not as objective as they should be, moreover they have been carelessness in some cases. In my last blog, I would like to highlight that audited cases are not always trustable.
Due to the financial crisis, the High Court dealt with 13 negligence cases last year. This is a record, in comparison with the previous 5 year, there were only 4 cases. The main raison is that shareholder lost their invested money when companies collapsed. I definitely understand that investors are targeting the wrongdoer and in most cases the accountant can be blamed for not warning investors for possible problems.
But this is nothing compared with the 61 claims for audit firms, which participate in corrupt scandals as Enron and WorldCom. Lawyers think that this is just the beginning: the crisis could provoke a storm of scandals. Investors had always had faith in audit firms, the big 4 gives hope in a certain way. If they give the books of a company approval, investors can use the fact that everything happened above board. But nowadays, I completely understand that the confidence in audit firms is gone because they are not always copper-bottomed.
They are plenty of examples of corrupted cases: Equitable life audited by E&Y sued for £700 million in 2005, KPMG sued for $1 billion by New Century, doubts about the impartiality of PwC in the case of Satyam, the role of E&Y by the collapsed Lehman Brothers, … These are a few examples, but as you notice we cannot ignore these problems. An ostrich politics will only worsen the problem.
I definitely think that there must be supreme control on the audit firms, a kind of an upper hand. It is their job to control objectively the companies so investors can know if they should invest. If we can’t have trust in them any longer, how can we possible know whether a company is worth to invest in or not? In my view it is drastic times call for drastic measures.
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'Big four' maintain hold on UK audit market
The Big four is composed of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers. The share of these four auditing companies has not changed the latest four years. Even tough, regulators are taking measures to promote competition of smaller firms. Moreover, there is only one company in the FTSE100, the most important stock exchange, that does not use one of the auditors of the Big four namely the business Randgold Resources which is audited by BDO.
As I said regulators are promoting smaller companies, Steve Maslin, partner of Grant Thornton, also wants to give smaller firms a chance to execute a big audit. As a result of some misunderstandings, the Big four are thought to be the only auditors that furnish services at the biggest public companies.
In 2006, the report of FRC and the Department of Trade and Industry declared that large companies did not have any alternatives other than the Big four to do their audits. This report also explained that it was impossible for small firms to enter at these big audits because of high barriers. Consequently, the makers of this report started a working group with the aim to become a concurrent of the Big four. The latest report showed that there is a small growth compared to 2006.
You can wonder whether it is necessary to bring some competition for the Big four or not, regulators want this because they are afraid that a mistake of one of the Big four could eventually lead to a catastrophe in the British Business. However, this has already happened after a downfall of Arthur Andersen, which used to be one of the Big five. As you know the Big five became the Big four after the Enron scandal.
In my view, I really think it is essential that the working group of any other competition of the Big four become more important. As you have read in some other blogs, for example the blog: ‘Cooperation of E&Y in beer fraud’, Ernst&Young is having some big issues and maybe they end like Arthur Andersen. This can lead to a downfall of the Big four, companies can lose their thrust in it because this had already happened once. Therefore, they would not tolerate a second decline.
Read the article
As I said regulators are promoting smaller companies, Steve Maslin, partner of Grant Thornton, also wants to give smaller firms a chance to execute a big audit. As a result of some misunderstandings, the Big four are thought to be the only auditors that furnish services at the biggest public companies.
In 2006, the report of FRC and the Department of Trade and Industry declared that large companies did not have any alternatives other than the Big four to do their audits. This report also explained that it was impossible for small firms to enter at these big audits because of high barriers. Consequently, the makers of this report started a working group with the aim to become a concurrent of the Big four. The latest report showed that there is a small growth compared to 2006.
You can wonder whether it is necessary to bring some competition for the Big four or not, regulators want this because they are afraid that a mistake of one of the Big four could eventually lead to a catastrophe in the British Business. However, this has already happened after a downfall of Arthur Andersen, which used to be one of the Big five. As you know the Big five became the Big four after the Enron scandal.
In my view, I really think it is essential that the working group of any other competition of the Big four become more important. As you have read in some other blogs, for example the blog: ‘Cooperation of E&Y in beer fraud’, Ernst&Young is having some big issues and maybe they end like Arthur Andersen. This can lead to a downfall of the Big four, companies can lose their thrust in it because this had already happened once. Therefore, they would not tolerate a second decline.
Read the article
vrijdag 2 april 2010
Spontaneous actions by Belgocontrol are not excluded
This week the subject of my blog deals again with the problems by Belgocontrol. Last week, I was blogging about the audit who was executed by Belgocontrol and that was very negative for the company. This audit brought lots of consequences with it and that’s what I’m blogging about now.
Caused by the bad results of the audit previous week, there’s no confidence between the staff and the management at all. Possibly, there will be still spontaneous actions of the staff the coming days.
Recently, it was said that Belgocontrol had a bad management for years and it suffered from structural financial problems. The conclusions have been confirmed now. The staff has no longer confidence in the management. They also disagree with the reaction of CEO Jean-Claude Tintin. He demolishes the audit, but it would be much better if he should search for measures to solve the problems, according to Tourlamain of the syndicate.
Now, there is a presentation of a plan for Belgocontrol. It consists of 5 action points that have to be concluded by July 1. The first point is preparing a new management contract. The second point consists in working out synergies with the military air traffic controllers. A proposal of the financial problems would be presented soon to the board of ministers. Concerning the international position, they think about alliances with other countries. At least, there will be probably a replacement for the Board of Directors, says Tourlamain.
I understand the staff lost its confidence in the management of the company. It’s really important the staff is good informed about the exact problems and especially the measures the company will take to solve them. Everyone in the firm has to know his task. Only in this way the objectives can be achieved. It’s good there is already an actionplan, hopefully it will bring Belgocontrol again on the right track.
Read the article
Caused by the bad results of the audit previous week, there’s no confidence between the staff and the management at all. Possibly, there will be still spontaneous actions of the staff the coming days.
Recently, it was said that Belgocontrol had a bad management for years and it suffered from structural financial problems. The conclusions have been confirmed now. The staff has no longer confidence in the management. They also disagree with the reaction of CEO Jean-Claude Tintin. He demolishes the audit, but it would be much better if he should search for measures to solve the problems, according to Tourlamain of the syndicate.
Now, there is a presentation of a plan for Belgocontrol. It consists of 5 action points that have to be concluded by July 1. The first point is preparing a new management contract. The second point consists in working out synergies with the military air traffic controllers. A proposal of the financial problems would be presented soon to the board of ministers. Concerning the international position, they think about alliances with other countries. At least, there will be probably a replacement for the Board of Directors, says Tourlamain.
I understand the staff lost its confidence in the management of the company. It’s really important the staff is good informed about the exact problems and especially the measures the company will take to solve them. Everyone in the firm has to know his task. Only in this way the objectives can be achieved. It’s good there is already an actionplan, hopefully it will bring Belgocontrol again on the right track.
Read the article
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