Thursday • December 22, 2005
SHOULD action be taken against Price- waterhouseCoopers (PwC) for failing, since 1999, to detect the National Kidney Foundation's (NKF) inadequate accounting practices?
The question, posed several times to Health Minister Khaw Boon Wan during a media conference yesterday, received no direct answer — but not without Mr Khaw expressing his disappointment with the NKF's former auditors and laying upon the accounting regulator the onus to respond.
He noted that despite certified public accountants having pored through the charity organisation's books, "weaknesses in the NKF's corporate governance went unnoticed".
Even last year, when the Ministry of Health asked KPMG to do an ad-hoc review of the NKF's tax-deductible receipts, the audit firm found no large-scale weaknesses, he said. This year, in contrast, KPMG dug up a history of atrocious governance during its extensive independent probe into the organisation's internal processes. The auditor had been engaged by the NKF's new board after some shocking revelations about the practices of former chief executive T T Durai.
So will the Government or the new NKF board take issue with PwC for overseeing financial manoeuvres such as the backdating of expenses?
Mr Khaw said he is sure that the NKF was looking into the matter. The regulator — the Accounting and Corporate Regulatory Authority (Acra) — should also be looking into the matter, he added.
However, Mr Khaw stressed that PwC, unlike the KPMG investigators who could deploy enormous resources, faced certain constraints as an external auditor.
"With the former NKF board and CEO having resigned, the KPMG auditors were able to go through every file and read every email without people looking over their shoulders or obstructing their way," he explained.
But Mr Khaw added that "it is not impossible" that the truth could have been uncovered earlier with extra effort, "hence my disappointment with the former NKF auditors".
When contacted yesterday, a PwC spokesman said: "Our primary responsibility was to express an opinion on whether the NKF financial statements show a true and fair view. We believe we have discharged that responsibility.
"We have noted the Minister's comments and will take them constructively."
An Acra spokesperson said the agency "will look into the matter and take appropriate action if necessary."
Over at the Institute of Certified Public Accountants of Singapore (Icpas), which upholds professional standards here, an eight-man team overseeing corporate governance matters moved into action yesterday. The body will soon air its view on the NKF findings publicly, Icpas vice-president Ernest Kan told Today.
"This matter is very pressing because it involves issues concerning the role of auditors," he said, while cautioning against any knee-jerk calls for the overhaul of an auditor's role.
Mr Kan added that current standards here are already in line with international best practices.
Still, an industry observer noted that accounting firms are likely to "start exploring new methodology to ensure higher quality in audits".
"Spotlight on PwC"
Oct 28: PwC certifies NKF's financial statement for the year ended 31 Dec 2004 as "true and fair" amid KPMG's independent probe into the charity.
Oct 30: KPMG starts interviewing PwC representatives to understand their assessment of NKF's control environment.
Nov 24: PwC resigns as external auditor. NKF now seeking a replacement.
Dec 19: KPMG released its report on Monday expressing concern that PwC failed to catch errors in NKF's 2004 financial statement, which if detected would have caused a downward-adjustment of $2 million in the 2003 accounts. KPMG also finds it "puzzling" that PwC never issued any suggestions on how NKF could improve its check and balances at its year-end audits. When asked for access to its audit working papers by KPMG, PwC said that it would do so if NKF and KPMG indemnified PwC against any legal claims by third parties, an offer KPMG declined.
Dec 21: Minister Khaw finds NKF's former auditors wanting.
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