Every audit report of a specified business enterprise confirms that financial statements are prepared and presented to the shareholders in accordance with the Sri Lankan Accounting Standards. If there is non compliance then it has to be reported by the Auditor. However, in the context of the recent exposure by the Sri Lankan Accounting and Auditing Standards Monitoring Board (SLAASMB) that some audit firms have failed to report on non compliance with Accounting Standards, the President of the Institute of Chartered Accountants of Sri Lanka had allegedly made a statement exonerating the Auditors from any negligence. The fact is if the auditors fail to report that a company has failed to comply with an Accounting Standard, the audit had not been conducted in accordance with the Sri Lankan Accounting Standard and therefore the auditor is negligent in the discharge of his duties. Unfortunately the President of the ICASL allegedly disagrees, fortunately for the auditors.

When errors contained in a financial statement are not detected by them, there are numerous dubious excuses the auditors could give to exonerate themselves. Unfortunately there is absolutely no excuse auditors could give, when they do not report that a company had failed to comply with an Accounting Standard. Either you comply or do not comply with a standard. But the ICASL President allegedly states compliance depends on materiality. He adds more confusion to the minds of those who are struggling to comply with the Accounting Standards promulgated by ICASL. The SLAASMB officials who have reported non compliance, make their observation based on the same information that are available to the auditors of the company or for that matter on less information. How does an auditor explain the detection of non compliance by SLAASMB, when the auditor has failed to do so.

Whether the defaulting auditors exposed by SLAASMB will be brought to book is anybody’s guess, considering the conflict of interest all round; ICASL, SLAASMB and the protected species the Sri Lankan auditors.

At least the SEC should ensure that laws are in place to prevent incompetent auditors being re-appointed by quoted companies.

Gone are the days when members of the ICASL were appointed to the Board of Directors of all leading private sector companies. The ICASL, in particular the Council should find out the reasons for the loss of confidence of the business community in their membership.
Small Investor
Nugegoda