A Failing of Oversight Bodies
Are you [blogmaster] cognizant that 35% of the audits signed-off and delivered by PwC here in the UK (of BRITISH HOME STORES #BHS fame) are patently deficient, as per the UK Regulator’s Report?
PwC has failed to meet the UK’s “Feather-Duster” standards, year after year, delivering poor audits and nothing happens to them while the UKGOV continues to award them contract after contract…
Is the same fiasco happening in Barbados and is the BIMGOV complicit as is the UKGOV in covering up for “DODGY COMPANIES” like Price Waterhouse Coopers?
As a concerned citizen, I am asking a key question given the current state of global corporatocracy in a bedevilled marketplace and its effects on small nation-states!!!
Terence Blackett – BU Family Member
Since the failure of the Port of Spain headquartered CL Financial and its affiliates across the region, belly searching questions have been asked about the quality of supervision being delivered by oversight agencies. Although another chapter in the story of CLICO Financial Holdings started last month with the arrest of former Executive Chairman Leroy Parris, the blogmaster is of the view more interesting chapters are to come.
In 2011 the Judicial Managers reported that CLICO assets amounted to $802 million BUT documentation available only supported $446 million dollars. The situation forced Barbadians to ask why were the oversight agencies apparently asleep on the job. What informed the Opinion Letters issued by PriceWaterhouseCoopers. Of interest, what informed the management letters issued to the senior management of CLICO Barbados Holdings Limited in the years leading to the demise of the company. So many questions keep coming from Barbadians who have been left holding the bag for the hybrid bailout of former policyholders.
Another question the blogmaster keeps asking is who are the prominent citizens – including politicians – to successfully cash out policies (annuities) BEFORE the company cease doing business with the public.
The blogmaster agrees with those positing the view that several Boards of Directors of CLICO Barbados Holdings failed to discharge fiduciary responsibilities.
The blogmaster agrees with those positing the view that executive and senior management of CLICO Barbados Holdings failed to effectively discharge responsibilities.
The blogmaster agrees with those positing the view that the Supervisor of Insurance failed to discharge his fiduciary responsibilities.
Finally, blogmaster agrees with those positing the view that several oversight agencies (watchdog) agencies failed to discharge responsibilities required of them under law.
Related link: A Culture Of Diminishing Corporate Governance
In summary it was a cohobblopot of missteps that straddled corruption by management to lack of enforcement of rules and regulation by regulatory bodies. It is no mistake the blogmaster has not mentioned the politician’s role in the CLICO mess. The laws of Barbados gives authority to regulatory bodies to act. They did not.
Against the preamble, the 2020 PwC LLP AUDIT QUALITY INSPECTION report issued by the Financial Reporting Council is instructive. It is an independent regulator in the UK and Ireland, responsible for regulating auditors, accountants and actuaries, and setting the UK’s Corporate Governance and Stewardship Codes.
An extract from the introductory statement of the report:
High quality audit is essential to maintain investor confidence by providing an independent, impartial view of a company’s financial statements. Poor auditing may fail to alert management, shareholders and other stakeholders to material misstatements (including those arising from fraud) or financial control weaknesses, in those cases where management have not identified or appropriately amended them. The combination of management not meeting their responsibilities in this respect and poor auditing could potentially put businesses and jobs at risk. High quality audit matters and we will drive audit firms to implement the necessary changes to reach the required standards.
Here is the summary assessment of PcW:
PwC overall assessment
We reviewed 17 individual audits this year and assessed only 11 (65%) as requiring no more than limited improvements. Of the 12 FTSE 350 audits we reviewed this year, we assessed only eight (67%) as achieving this standard.
The firm has taken steps to address the key findings in our 2019 public report, with actions that included increased resources and enhanced training. We have identified improvements, for example in the audit of revenue, a key finding last year. We also identified good practice in a number of areas of the audits we reviewed (including the use of internal specialists and experts) and in the firm-wide procedures (including initiatives to change behaviours relating to the challenge of management).
The most recurring findings that contributed to these results related to the challenge of management’s cash flow forecasts, primarily used in impairment reviews.
We have highlighted in this report aspects of firm-wide procedures which should be improved, including increasing the number and depth of in-flight reviews. PwC introduced its Programme to Enhance Audit Quality (“PEAQ”) in Summer 2019, to improve audit quality. The firm has implemented the plan on a phased basis to ensure that it is manageable and achievable. Given when the plan was introduced, it will not have had any impact on the audits we reviewed in this inspection cycle. Some of the initiatives will also take time to embed fully.
The overall inspection results remain unsatisfactory and we expect the firm to take specific action to address this. We will continue to review the progress of the firm’s PEAQ and plan to inspect a higher number of its audits proportionately in our 2020/21 cycle than at some other firms.
A reminder this is a review of an accounting house in the UK.
Why has the oversight role by accounting houses in Barbados not been subjected to the harsh glare of public scrutiny? Especially since the collapse of CLICO Holdings Barbados Limited?