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UK forensic probe raises issues over PwC/Clico audit
The Institute of Chartered Accountants (ICATT) was moving to discipline the management of PricewaterhouseCoopers (PwC) in 2009 after a report it commissioned from a London forensic accounting firm, FTI Consulting, raised serious concerns about how the firm had conducted its audit of Clico in 2007.
However, the Government decision to call a commission of enquiry into Clico after its collapse in 2009 scuttled the move. After reviewing PwC’s 2007 audit of Clico, FTI expressed concerns about the audit in its October 2009 report to ICATT.
ICATT, the governing body for the local accounting fraternity, had hired FTI to do the forensic audit to determine whether its rules of professional conduct had been breached. According to clause 18 of ICATT’s rules and regulations, institute members must observe proper standards of professional conduct and refrain from any misconduct, which includes acts or omissions likely to bring discredit to themselves, the institute or the accountancy profession. Members who fail to observe these standards may be subject to ICATT’s disciplinary procedures.
When the T&T Guardian contacted FTI’s London office on the report, spokesman Heather McConnell said FTI had done the review in 2009 and verified the author of the report sent to ICATT. Anthony Pierre, who was ICATT president in 2009, also confirmed the exercise had taken place. He said the local ICATT body had been doing its work on the issue.
The FTI report noted that in January 2009, “within just two months of completion of the 2007 Group audit, CL Financial was in serious financial difficulties” and required significant support from T&T’s Central Bank.
It also noted various areas of weakness and commercial risks which “painted a picture of a company with significant issues which, apart from the economic environment, should lead to a close examination of the going concern issue.”
Other concerns raised by FTI included inter-group transactions, whistleblower issues, the valuation of unquoted assets, managed funds, underlying profitability and issues with the Central Bank of T&T.
Other members of the 2009 ICATT administration which mandated the FTI report told the T&T Guardian the matter was serious and had been taken on board by ICATT with all the seriousness required.
They said at the time, ICATT had completed investigations and was in the process of taking it to the next level of asking PwC to respond to the concerns made in the FTI report. The disciplinary process would have been the next phase of the process but the commission of enquiry into Clico was established.
They said the commission’s coming into being led to the ICATT process being suspended since ICATT was advised it was not appropriate to proceed while an enquiry was being undertaken.
“If not for the commission of enquiry, we would have taken action on this matter already,” said one source. Both of the PwC personnel with whom FTI’s investigator interacted during the review of the audit have since retired, PwC’s communications officer Marsha Caballero-Stewart said.
Contacted on the matter, PwC’s Sean Ramirez, territory assurance leader, said he had not seen the FTI report and could not comment. Current ICATT president Derek Mohammed said: “We’re reviewing our position, based on advice, and a statement will be made in due course very soon on the entire situation, all of it.
“Due to the sensitive nature of the matter we do not want to taint any process, whether ICATT’s or the commission of enquiry.” Mohammed was initially contacted by the T&T Guardian on Tuesday about the implications for the industry after allegations about the purchase by certain PwC directors of apartments at CLF’s One Woodbrook Place luxury apartments.
In view of those allegations, Mohammed was also asked about PwC’s receipt in 2010 of a prestigious “quality checked” award from the Association of Chartered Certified Accountants (ACCA). It was stated then that in order to achieve the award, PwC Trinidad had to demonstrate, during a rigorous inspection by ACCA compliance officers, it had applied best practice.
ICATT has oversight for practice monitoring. ICATT said there were differences between the quality check procedure and an audit.
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