Africa-Press – Lesotho. The Bankers Association of Lesotho (BAL) had rebut the ongoing malpractice allegations as reported by the July 22 International Monetary Fund (IMF) report on the local banking industry.
The IMF report titled: Kingdom of Lesotho: Technical Assistance Report- Implementation of Base II holds that the local banks enlist the services of foreign audit firms, with no presence in Lesotho
thereby challenging its compliance with accounting standards. This report is produced following the IMF staff tour of duty, IMF AFRITAC South which offered the Technical Assistance
Mission on Risk Based Supervision in March last year at the request of the Central Bank of Lesotho (CBL). The IMF mission report reads pertinent part,
“banks must have annual financial statements in accordance with International
Standards Auditing (ISA),…however while reviewing the financials of some banks, the mission found that there seems to be a local banking practice of having a Big 4 [collective term for the four multinational accounting firms;
Deloitte, KPMG, Ernst Young (EY) and Pricehousewater Coopers (PwC)] audit firm, which with no offices in Lesotho using a small Lesotho audit firm, which
otherwise would not likely be able to perform as auditor of a bank, to take full legal responsibility for signing the auditor’s opinion expressing compliance with IFRS [International Financial Reporting Standards] and ISA
[International Standards of Auditing] on financial statements that do not
comply with these international standards. The mission flagged this with the Supervisor, who knew about it, highlighting its implications. ” The Bankers Association of Lesotho(BAL) issued a statement this past Saturday arguing that the practice of using two audit firms is not unique to Lesotho. BAL further said the practice is not “prohibited” by the international auditing standards and Lesotho Institute of Accounts (LIA). “We respectively differ with IMF on this statement, and our firm position is that as a financial services sector , we are fully compliant with CBL [Central Bank of Lesotho] regulations and other
international financial reporting instruments…” reads BAL statement. Established in 2006, BAL is formed of four commercial banks, Standard Lesotho Bank, Nedbank,First National Bank (FNB) and
Lesotho Post Bank (LPB). Following the report by a local online edition, CBL responded to the malpractice allegations and said it “wishes to set the record straight and inform members of the public that none of the Banks
in Lesotho use the big 4 audit firms to do their audits and later use a local audit firm to issue and sign off the auditor’s report. ” “It is worth mentioning that the Financial
Institutions Act (FIA) of 2012 does not prohibit approved local audit firms from partnering with foreign audit firms. The International Standards of Auditing (ISAs), nor the International Financial Reporting Standards (IFRS)
prohibit firms from partnering where there are perceived capacity gaps. The allegations of malpractice are therefore unfounded,” reads the CBL statement in pertinent part.
Also, taking stock of these developments, the Lesotho Institute of Accounts (LIA) said “only auditors registered can sign the audit reports in the country.
” It further highlights that it does not have any knowledge of local audit firms signing off reports on behalf of their foreign counterparts. “The Institute is aware of partnerships that
some registered audit firms in Lesotho have with firms outside the country to carry out some audit assignments. LIA however is not aware of incidences where
local audit firms signed audit reports without being engaged in the audit process. ” Despite not being engaged throughout the processes, the Lesotho accountancy regulatory body promised to carry out investigations on alleged malpractice by the banks and engage the IMF to “establish the basis of its conclusions in the matter.”
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