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?

 

 

 

 

 

38 comments

  • Vincent Codrington

    Is there an oversight body for Accounting Firms in Barbados? There is one for Accountants but none for reviewing Accounting firms. Quality of accounting firms is partially achieved by a regulation that limits the number of years a Firm can provide auditing services to a public company. I believe that regulation is in the Company act.

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  • @ Vincent

    We seem to be going round and round in circles with these topics. The regulator for auditors in the UK is the Financial Reporting Council. In Barbados it is the financial regulator for the corporates, and the accountants’ body for individuals.
    I have said here on numerous occasions, we need to separate the auditors from the accounts’ profession. By the way, all four top accountancy organisations have had problems with auditing.
    Let us have a serious debate on the issue.

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  • The profession of accountancy is one of legalized thievery. I wrote an article about this thievery some years ago in the press. An accountant replied to state that all were not thieves. My opinion of them has not changed in the interim.

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  • Vincent Codrington

    @ Hal Austin at 10 :28.
    The Accounting Firms audit corporations. There is no professional body of external auditors. I am sure this is also true in the UK. Do you recommend a regulating body as per UK?

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  • The truth is, I don’t understand half of what I I read in the local news.

    https://barbadostoday.bb/2020/07/18/top-staffer-suspended/

    In my world she was helping to right the good ship….
    No oversight….. no hindsight…… just keeping stuff ‘outasight’

    Liked by 1 person

  • @ Vincent
    In the UK the financial reporting council is the regulator for auditors – and the wider accounting profession. At present they are very busy with a number of investigations, the latest of which is Winecard.
    They have now put the big accounting firms on notice that they have to separate auditing from their consultancy work. I have been calling for this for years on BU. It is a no-brainer, like separating solicitors from barristers.
    I recommend a totally new Companies Act, getting rid of the nonsense of a company being a legal person, and making directors/shareholders responsible for all debt personally in cases of insolvency and, crucially, basing corporate tax on revenue and not profits.
    All these principles were based on 1920s circumstances, in 2020 it is a new environment. By the way, this government is talking waffle, as usual, about fiscal space, but it never explains what it means. They enjoy baffling the people with bovine excreta.
    Let us have a BU debate about the concept of fiscal space. I suspect the idea of fiscal space came from Dr Greenidge, certainly not from Persaud and unlikely to have been Dr Mascoll.
    The two economic ministers would not be that clever and the president could not tell fiscal space from black pudding. It is all browne and soft and comes out of intestines.

    Liked by 1 person

  • The point is taken that Accounting Houses to a large degree self regulate. What is different if we compare Barbados to developed countries is that there are vibrant watchdog non profit entities that play a significant role in the oversight process. Do we have similar entities in Barbados? It is a point to note also that PwC, Deloitte, EY, KPMG operate in Barbados.

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  • Vincent Codrington

    @ Hal Austin
    It amazes me that you recognize concepts as bovine excreta and try to give them importance by discussing therm. Do like me and scroll on by.
    @ David BU
    What these British firms do in UK need not relate to the Barbadian branches. Unless the system of external auditing is proven to be dysfunctional in our context, we have little to complain of. It is people that make the difference to the culture and integrity of a system.

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  • HEATHER COLE
    We suggest that you, like most, have misread this moment.
    This writer has stated elsewhere, and on this blog, that the same mischief which begot the NAACP has also ‘mothered’ this so-called Black Lives Matter ‘movement’ as a misdirection.
    This critique does not mean that some of the things which you have said are not valid, for they are!
    But the notion that all the Black pressure groups, which have been fighting in the streets for decades, could be bypassed for a hashtag. And that that hashtag (BLM) could be presumed to be pregnant with possibilities for African peoples in the West is unserious.
    At best, your equation, could be more meaningful if located within all the other forces at work.
    PS – somehow we could not attach this comment to your article, as below. Apologies!

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  • @blogmaster
    You should find a way of removing pornhub from your top clicks.
    The last time I looked at porn was when there was a naval base in St. Lucy and we would get magazines from the sailors.

    Like

  • de pedantic Dribbler

    @Mr Blogmaster I am hopefully that you are not attempting to place Bdos into an accounting/audit silo where local gypsy dust makes our operational standards/requirements magically different to those in UK specifically or internationally.

    There is well established dictum (eg IASB) for international business accounting rules just as bodies like the ACCA or CGA and the multiple others set professional guidelines … the alphabetic soup of orgs make change from regionl to region but whether one is dealing with the SEC in US and their GAAP standards or the UK’s variant GAAP and the IASB …. NONE of the competing differences- of which I am aware – deal with the ethics or duty of care in accounting practices and the directly related audit processes.

    ALL the major accounting houses or any local accounting practice MUST adhere to FUNDAMENTAL (international) practices … that they have been found to be offering ‘biased’ professional advice in order to maintain their audit client revenue or otherwise inveigh themselves for consultancies and other lucrative income with the large corporate players is an international scandal (can we still spell Enron or WorldCom or HomeEquity Derivatives) ….

    So when you say that in “developed countries [..] there are vibrant watchdog non profit entities that play a significant role in the oversight process” I gather you are speaking of a lot of ‘AFTER THE FACT’ vibrancy!!

    Bdos players are simply a part of the corrupt game which you so euphemistically (again 😂) cite as: “Accounting Houses to a large degree self regulate.”

    That they certainly do!

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  • @Dee Word

    You maybe onto something, it is a business and those audit fees must keep rolling in to support the business.

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  • Vincent Codrington

    Wuh Loss.!!
    It is also about personal and professional integrity. We put too high a rating on monetary value ,which is a mirage. It is here today and gone in a twinkling of an eye. Man prefer stability. This is a function of trust. Those who attempt to undermine trust do so at their own peril. Unless the current practice/ system is broken ,do not attempt to fix it.

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  • @Vincent

    It is the audit firms and their clients that negotiate fees in their mutual interest. This is fact.

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  • Vincent Codrington

    @ David BU

    No doubt they negotiate fees. But they do not negotiate professional standards and personal integrity. You seem to have a very low opinion of Barbadian morals,ethics and professional integrity. Why?

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  • @vincent

    We have Clico Holdings Barbados as a case study? What was listed in the Opinion letters over the years by PwC about the company? What did the management letters say?

    If PwC had issued commentary which communicated missing assets as one example could the Supervisor of Insurance have ignored?

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  • Vincent Codrington

    @ David BU
    I am reasonably sure that the external auditors discharged their responsibilities to the relevant bodies.
    The Supervisor of Insurance also discharged his or her responsibility.
    These issues have all been debated ad nauseam here on BU. We all know which node in the system failed to function. What you list above is no failure of the external audit system.

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  • Oh dear! How did pornhub get into the top clicks?

    Liked by 1 person

  • “This writer has stated elsewhere, and on this blog, that the same mischief which begot the NAACP has also ‘mothered’ this so-called Black Lives Matter ‘movement’ as a misdirection.”

    that is why more serious movements had to be birthed that CANNOT be penetrated as those 2 continue to be…….case in point, there are two already well organized movements that i know of that ONLY Black people can join and you MUST prove and be certified as African descended, you will be investigated to verify that you are not slave minded……nothing else will work, not if the African descended is to survive what is descending, no one is taking anymore chances with weak black minds that have HELPED those who have skills of manipulation etc to continue their destruction against Black people actions designed to destroy and on autopilot…and those people who are organizing to create a BLACK ONLY Nation and are NOT MENTALLY ENSLAVED in this era have to protect themselves and each other…

    here is where the wheat will be separated from the chaff….that is what it has reached to Pacha…all because of talk a lot and talk only, no useful nor real changes, no real action NAACP and BLM outside of hand holding, shouting and placard carrying ad nauseum…who have both been infiltrated….it is clear that it will not end well for either of them….so the most intelligent have moved on to much better and are actually seeing progress…..and it has spread to several countries, demographic is important.

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  • William Skinner

    @ David
    The biggest “ case study “ should be the annual Auditor General Report that has not been taken seriously for nearly forty years and the same two parties running the country.
    Everything else pales in comparison. And nonsense being written that it is “ people” who cause the corruption. Are we living on a planet with another group of Aliens other than people?
    Who else then would commit these transgressions / thievery, Apes, lions, dogs , cats………
    @ Hal
    Your stamina astounds me. Proper regulation is only attractive when in opposition. Ask any of your BLP or DLP
    friends.

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  • Auditor General highlights public sector missteps as it pertains to the financial rules. What we are highlighting here is of greater reach.

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  • Perhaps we should go for all of the low hanging fruit while going for that of greater reach.

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  • https://barbadostoday.bb/2020/07/18/top-staffer-suspended/

    Surprise that this did not generate any comments. Potential ‘whistle-blowers’ should read and understand the implications. “You are on your own”

    Liked by 1 person

  • NorthernObserver

    The #1 issue is management. Most of the improper actions stem from them. #2 is the Board, who sometimes turn a blind eye and/or do not understand their job/options. A very few of any profession will be bad apples. They will lose their livelihood, although their own professional enforcement bodies vary in their effectiveness from place to place.
    If I have a ‘beef’ with auditors it relates to how information is presented. And their failure to highlight certain anomalies in their comments, preferring to leave them buried in a note.
    All for the separation of professions governed by bodies from those who are not. Accounts vs Consultants as an example. Yet the spin off of Andersen Consulting (Accenture) from the Accounting firm circa 1990, did not prevent Enron/WMI/Sunbeam leading to the accounting side downfall 12 years later.

    Liked by 1 person

  • The FRC reported that 39% of the audits delivered by KPMG were deficient as can be seen from the below attachment:

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  • Terence M Blackett

    @DAVID

    Thanks for fixing those #pdfs!!!

    BLESSINGS!

    Like

  • Terence M Blackett

    @DAVID

    Final PRAYER Thought:

    HAS LEROY PARRIS BEEN ARRESTED?

    Like

  • @TB

    He was arrested, charged and released on bail.

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  • Like

  • TheO,

    They are not on their own. I was reading and rereading for clarity.

    I have knowledge of what was going on and I have to speak to somebody to get further details.

    But honestly, a talk to even the bus drivers would be illuminating. It was an open secret that operations were not above board.

    Liked by 1 person

  • Vincent Codrington

    NorthernObserver
    Thanks for zeroing on the fundamental point of the failure of the oversight problem as it relates to External Auditors examination of the Accounting/Financial Statements of Corporations. The rules of the game are quite simple.: Management has to explain / correct any infelicities that external auditors find in the accounts. The BoD are supposed to ensure that management makes the appropriate corrections. Shareholders at the AGM are to interrogate the reports and censure the BoD for any infelicities . The Stock exchange is supposed to ensure that the accounts do not mislead shareholders. So there are many checks and balances.The men and women in these positions have to enforce them. The problem is that courage and integrity are lacking. The society has to reward honesty. The greater lack is intellectual integrity. We look for excuses beyond ourselves.

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  • de pedantic Dribbler

    @NO and @Vincent although I follow your logical reasoning re ‘integrity of those in charge’ or words to that effect I am completely lost at the summary (offered by Vincent) that “The society has to reward honesty. The greater lack is intellectual integrity. We look for excuses beyond ourselves.”

    As someone else noted (@Skinner I believe) how in Mars can that be the summary… are we looking at aliens as our honest arbiters !

    Yes WE are the problem… but its pervasive and institutionalized.

    @NO you bash the execs and suggest that very few people are dishonest (or should I say inherently so)… but does evidence over the years really support that!

    I gotta go so I’ll have to prolix later but quickly 1…in Bim: where are the honest brokers who peruse the Aud Gen report year after year and STILL the grave deficiencies remain…. are WE (everyone) being honest to reelect these same negligent folks repeatedly…. are the other checkers and balancers showing integrity!

    In US and UK etc… didn’t the fact that Investment Banking were partners with Analysts and other parts of the ( like buy-sell) JP Morgans and Goldman Sachs etc. not a problem for many years.

    @NO you cite the split and indeed there was legislation demarking rules and responsibilities for accounting houses, investment firms and all that …BUT as you highlighted there was STIL)L nefarious stuff.

    Did precise and clear legislation (old Glass-Stegall or Dodd-Frank, certainly not integrity spams) stop the big LIBOR or the egregious conflicts that help cause the 2008… Nope!

    This is as simple as you guys suggest: the lack of integrity of persons involved…. however, I am just deeply amused that you both are giving so many folks the “good guy honesty” card!

    Lata.

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  • NorthernObserver

    @DIW
    I fear you have misunderstood, or I explained poorly.
    The thread jist was primarily about Accounting firms and the audit function.
    My contention is most of the problems lay not with those doing the audits, but with those within the entity(s) being audited. Not only in the creation, but in rectifying, issues.
    Hindsight being 20/20, it is easy sometimes to wonder how audits didn’t pick up certain irregularities sooner. Yet some schemes are quite ingenious.
    And since many have referenced the AG, throughout his reports one can find his office being stonewalled by the entities they must audit.
    You will find far less of this in the private sector.

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  • Vincent Codrington

    @ dpD
    What Society rewards or leaves unpunished it gets more of. And that is a fact of life. I see very often on this blog persons being praised for being smart assed. BU is j a microcosm of the wider society.

    Like

  • @ David”

    ” The long-mooted move to legislate for integrity in public life came a step closer to reality today with the passing of the Integrity in Public Life Bill 2020 in the House of Assembly.”
    https://www.nationnews.com/nationnews/news/246792/integrity-public-life-2020-nod-house

    Like

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