Morgan calls for suspension of state contracts to auditing firms under investigation
Sinn Féin Finance Spokesperson Arthur Morgan TD has called on Minister Brian Lenihan to suspend all state contracts to auditing firms currently under investigation. In recent weeks, Deputy Morgan and his colleagues have brought the matter of Ernst & Young, as well as KPMG’s involvement in the signing off of Anglo-Irish and Irish Nationwide’s annual accounts during years when massive loans to bank directors and transfers were taken off the books. Ernst & Young and KPMG were recently awarded contracts with NAMA.
Deputy Morgan said:
“When my colleague Caoimhghín Ó Caoláin raised these matters in the Dáil, we received assurance that the role of the auditing firms in question will be investigated, though the banking enquiry allegedly only covers the period to September 2008. However, we know already that Ernst & Young is under investigation by its own regulating authority, the Institute of Chartered Accountants in Ireland (IACI), which has appointed former Comptroller and Auditor General John Purcell as a Special Investigator into both the actions of Sean Fitzpatrick and Ernst & Young.
“With the knowledge of that investigation and an admission from the Minister that the banking inquiry will also be looking into the activities of the auditing firm, I believe the Minister has grounds to suspend the contract awarded to Ernst & Young by NAMA.
“I would ask the Minister to consider the following: if a goods supply firm where to come to a state department and seek a contract, but the firm was under investigation for revenue fraud, would he stand over that firm receiving a contract?
“The suspension of such valuable contracts from the state will do a number of things. It will firstly send out a clear message that this government is moving beyond previous practices of awarding contracts on the basis of who you know and not expertise. It will secondly protect the public who will be relying on independent auditing firms working for NAMA to get the best deal for the taxpayer. And finally, it will bring an impetus to these types of financial investigations, which can often run on for years until they are out of the public’s consciousness. If Ernst & Young truly believe they have acted correctly in their business, they will want a speedy outcome of this investigation as much as anybody. In the meantime, rather than availing of lucrative multi-million euro government contracts, they can focus their efforts on rooting out what policies and who among their management and staff was responsible for contributing to the largest bank crisis in our history.
“I am also calling on the Minister to examine the current system of self-regulating with the auditing profession. The various authorities, brought into law by the 2003 Companies Act, and designated to regulate this industry, were established in a time of light-touch laissez faire attitude that caused this mess. The fact that Sean Fitzpatrick was a member of the body that is now investigating him highlights everything that is wrong with this system. An independent supervisory body must be established to ensure standards are beyond reproach.”