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Minister must act to hold external auditors to account – McDonald

20 April, 2011 - by Mary Lou McDonald TD

Speaking in the Dáil this evening on the Nyberg Banking Report Sinn Féin Deputy Leader Mary Lou McDonald asked the Minister for Finance, as the sole shareholder acting on behalf of the state, what action he has taken in holding External Auditors to account for their role in the banking crisis?

Ms McDonald said:

“The Nyberg Report notes that all of the banks covered by the guarantee received unqualified audit reports throughout this period so the question must be asked – why did the banks require State support in 2008 so soon after all of them had received unqualified audit reports from various auditing firms? The report does not reach a definitive conclusion on this question.

“To add insult to injury the report notes that the on-going recapitalisation of the guaranteed banks by the State has protected external Auditors from legal challenges commonly mounted by liquidations against auditors when businesses collapse soon after clean audit reports.

“The Report states ‘the extent to which large parts of Irish society were willing to let the good times roll on until the very last minute’ will stick in the craw of families the length and breadth of the state struggling to keep their heads above water. Let us be very clear. There is a very particular section of society who let the good times roll – overpaid government Ministers, those within the government circle and the legal, accountancy and banking sector who were paid outlandish salaries. For some the good times continue to roll on.

“Auditors gave clean bills of health to banks that most would have believed were insolvent. Ernst & Young were paid 1 million euro per year for the 9 years prior to the bank Guarantee for auditing Anglo Irish Banks accounts. It is worth noting that just last week the formers auditors of Anglo took a High Court Challenge to halt an inquiry by the Chartered Accounts Regulatory Body into the firm’s role in auditing the banks books. In 2009 Ernst & Young also declined an invitation to come before an Oireachtas Committee hearing Anglo.

“On February 20th 2009, after Anglo had been nationalised and some 5 months after the bank guarantee, the 2008 Accounts for Anglo were published and Ernst & Young presented their audit report. That Audit Report was clean and unqualified and stated that Anglo had made a profit of €784 million in the year to September 30th 2008.

“Yet in September 2007 the issue of sub-prime lending first raised its head in the US. On St Patricks Day 2008 the share price in Anglo collapsed. In July 2008 the former Taoiseach meets Sean Fitzpatrick in Druids Glen. In September 2008 Lehman’s Brothers collapses in the US. And on the 29th of September 2008 the infamous Government Bank Guarantee is born – in the main arising from fears over Anglo.

“Despite all of the warning signs, the auditors accepted the view of the directors that this bank was profitable and solvent. They had a Bad Debt Provision of just 2% of the loan book. Astonishing!

“What action has the Minister for Finance taken, as the sole shareholder acting on behalf of the state, to hold External Auditors to account for their role in the banking crisis?” ENDS

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