Written answers

Tuesday, 3 May 2011

Department of Finance

Banking Sector Regulation

9:00 pm

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Question 57: To ask the Minister for Finance the action being taken by him in the investigation into the role of auditors in banks which have received State assistance; and if he will make a statement on the matter. [9656/11]

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Question 61: To ask the Minister for Finance as the sole shareholder in Anglo Irish Bank and acting on behalf of the State, the actions he will take against the external auditors who gave Irish banks unqualified audit reports in the months preceding the bank guarantee in 2008; the measures he will put in place to ensure that external auditors can be held to account in any future banking crisis; and if he will make a statement on the matter. [9663/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 57 and 61 together.

As the Deputies will be aware the Nyberg Commission of Investigation recently published its Report. The main findings of the Commission, in relation to the role of auditors, were

auditors' commentary regularly focuses only on issues which they consider relate to the accuracy of the historic accounts

in the absence of an express requirement for the auditors to do so, there appears to have been no challenging dialogue with the covered banks on their business models and their growing property and funding exposures. Such dialogue could have highlighted the business model risks and might have influenced the banks in relation to their growing vulnerabilities as the Period progressed.

that it was unfortunate that sufficient, timely and challenging auditor dialogue was not used to influence the banks' business models and lending practices.

These findings and recommendations raise a number of issues for the audit profession concerning how it sees its own role and its relationship to both client firms and to external statutory and other stakeholders.

It is clear however that the Commission of Investigation generally accords with the view that the audit profession should be able to contemplate an enhanced role in co-operation with supervisory authorities, while recognising their respective statutory functions. This is a view which I generally support and indeed I understand that the Central Bank has commenced a process of engagement with the audit profession to explore the potential for enhanced, regular dialogue between auditors and supervisors and how the profession can best assist the Bank in carrying out its supervisory functions.

I also welcome the fact that the representative body, the Institute of Chartered Accountants in Ireland, is itself seeking to actively engage in this debate and is currently undertaking an industry-level review of the role of statutory audit which is considering issues such as the scope of the audit; how the audit profession interacts with and reports to shareholders and the information included in such reports; relationships between auditors and supervisors; and how the profession is regulated. This review of course extends beyond the audit of financial institutions.

In addition, I am aware that the Irish Auditing and Accounting Supervisory Authority (IAASA) has a statutory role for the supervision of the accountancy bodies' regulation and monitoring of their members. In this role, the IAASA has contacted the Institute of Chartered Accountants in Ireland (the Institute) with a view to establishing the Institute's regulatory response to the emergence of issues into the public domain in December 2008. Subsequent to this, the Institute's Complaints Committee, which is the Chartered Accountants Regulatory Board (CARB), appointed a Special Investigator to examine the role that any of its members or member firms may have played in events at Anglo Irish Bank.

Separately, in 2010, CARB also initiated a review of the 2008 audits by member firms of the "covered" financial institutions. The scope of this review, which takes place under the CARB Quality Assurance remit, was approved by its Board following consultation with IAASA.

The review is focusing on the application of appropriate procedures during the audit of accounts for 2008 year end, specifically in respect of loan valuations and provisions for impairments of those loans. The CARB Board appointed an independent expert to oversee the review and I have been informed that the Board expects to publish a report in the summer of 2011.

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