Auditors who signed off on Anglo and National Irish accounts to be investigated

THE auditors who signed off on misleading accounts produced by the crippled financial institutions will have their work investigated in the ongoing banking inquiry.

The probe will examine Ernst & Young, who audited Anglo Irish Bank, and KPMG, who audited Irish Nationwide Building Society.

Finance Minister Brian Lenihan said the level to which Anglo’s accounts were misrepresented prior to its nationalisation was a cause of concern.

“I think the matters are serious and will require investigation. Both by the accountancy bodies themselves and by the banking inquiry which is under way.

“I entirely agree that these matters require full scrutiny because of the dramatic character of the change which took place when the public interest and the taxpayer was secured in Anglo Irish Bank, and in any other institution,” he said.

Mr Lenihan was in the Dáil responding to demands from Sinn Féin’s Caoimhghín O Caoláin. The Sinn Féin leader questioned NAMA’s decision to employ the services of Ernst & Young in the land valuation process.

He said this should not happen as the company audited Anglo in 2008 when the bank attempted to conceal its capital shortages and directors’ loans.

“That report, produced by Ernst & Young, effectively gave Anglo Irish Bank a clean bill of health. Yet, we now know the 2008 year- end figures included cash that had been transferred from [Irish Life and Permanent].

“We know that directors’ loans were concealed. And loans were given to shareholders to buy more shares... Yet none of these matters were exposed in the end-of- year accounts presented by Ernst & Young,” he said.

Mr O Caoláin also asked the minister to investigate the involvement of KPMG in overseeing the accounts of Irish Nationwide Building Society.

“What role have KPMG now in the NAMA process? And how did they come to be involved in the NAMA process as they are?

“KPMG audited Irish Nationwide. Their 2008 results, announced in April 2009, showed a pre-tax profit of €300 million after having set aside €500m for bad debts. And [this week’s] announcements confirmed Irish Nationwide requires €2.6 billion in funds from Government,” he said.

Mr Lenihan said he agreed with Mr O Caoláin and said he would ask NAMA, as an independent body, to examine their role.

He pointed out Anglo had changed its auditors since it was nationalised.

And he said the ongoing banking inquiry should probe these issues.

Mr Lenihan also said he would examine the continued role of the chairs of the risk management and audit/ compliance committees of the guaranteed institutions.

This was after Labour Party deputy Pat Rabbitte revealed that in one institution these positions had not changed since the guarantee was introduced.

“I know of one covered institution for a fact where they haven’t change. And I wonder if they have changed generally,” he said.

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