Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada today said
international auditing companies should be allowed to conduct external
audits of domestic banks and financial institutions (BFIs), indicating
the quality of chartered accountants (CAs) here was not up to
international standards.
“It may cost many times more to hire international auditors ... but if you give peanuts, you will only get monkeys,” the central bank governor told a conference on financial fraud organised here by National Banking Institute, referring to the adage, which roughly means one cannot expect quality service from low-paid employees.
The quality of domestic CAs, who conduct external audits of BFIs, has often been questioned because NRB has detected holes in many balance sheets approved by domestic CAs.
Take the case of Grand Bank, for instance. Its capital adequacy ratio, which stood at 12.43 per cent at the end of third quarter of last fiscal year, had slumped to 4.07 per cent by end of that year.
At that time, many had expressed disbelief, as such rapid erosion in the ratio — which gauges a banking institution’s strength to absorb shocks and ability to extend loans — in such a short period of time was deemed impossible.
Since the poor financial health of the bank was made public after entry of a new CEO in the bank, it was suspected that the previous chief executive had deliberately tried to hide the problem. It was also deemed that external auditors had colluded with the previous CEO to sweep the issue under the carpet.
“It is true that our CAs lack skill. But because of legal barriers, we cannot hire foreign auditors to conduct audits,” Spokesperson at the Office of the Auditor General Babu Ram Gautam said.
As per the Institute of Chartered Accountants of Nepal, the regulatory body for auditors, foreign auditors can only extend consultancy service here but cannot conduct audits of banks and financial institutions.“I have discussed this issue with the Auditor General,” Khatiwada said.
source: the himalayan times,12 march 2015
LINK
“It may cost many times more to hire international auditors ... but if you give peanuts, you will only get monkeys,” the central bank governor told a conference on financial fraud organised here by National Banking Institute, referring to the adage, which roughly means one cannot expect quality service from low-paid employees.
The quality of domestic CAs, who conduct external audits of BFIs, has often been questioned because NRB has detected holes in many balance sheets approved by domestic CAs.
Take the case of Grand Bank, for instance. Its capital adequacy ratio, which stood at 12.43 per cent at the end of third quarter of last fiscal year, had slumped to 4.07 per cent by end of that year.
At that time, many had expressed disbelief, as such rapid erosion in the ratio — which gauges a banking institution’s strength to absorb shocks and ability to extend loans — in such a short period of time was deemed impossible.
Since the poor financial health of the bank was made public after entry of a new CEO in the bank, it was suspected that the previous chief executive had deliberately tried to hide the problem. It was also deemed that external auditors had colluded with the previous CEO to sweep the issue under the carpet.
“It is true that our CAs lack skill. But because of legal barriers, we cannot hire foreign auditors to conduct audits,” Spokesperson at the Office of the Auditor General Babu Ram Gautam said.
As per the Institute of Chartered Accountants of Nepal, the regulatory body for auditors, foreign auditors can only extend consultancy service here but cannot conduct audits of banks and financial institutions.“I have discussed this issue with the Auditor General,” Khatiwada said.
source: the himalayan times,12 march 2015
LINK
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