Auditing oversight bodies scared to tackle white collar crime

Aug 17, 2014 News

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– They seem to be cowed into silence and inaction when they have to examine problems involving powerful figures -Greenidge

By Kiana Wilburg
Preventing the abuse of loopholes and the execution of innovative ways to cut corners in order to make a quick dollar is often one of the biggest dilemmas facing Guyana’s financial regulators.

Even when these perpetrators are found, it is believed that they more often than not, escape punishment for such dishonest acts.
At a workshop for internal auditors which concluded a few weeks ago, Ramesh Dookhoo, a board member of the Institute of Internal Auditors (IIA) emphasized how important it is for Internal Auditors to effect change in this regard.
He voiced his disappointment with the fact that while Guyana may be ripe with anti-fraud and bribery legislations, it has a low rate of prosecution when it comes to white collar crime.
Dookhoo had urged the participants of the workshop to ensure that where necessary, they highlight and prevent as much as possible, white-collar crime which refers to financially motivated nonviolent crime committed by businesses and government professionals.
Anand Goolsarran of Transparency Institute of Guyana Inc. (TIGI) expressed that this is a good initiative on the part of the IIA Chapter in Guyana. He said too that he would like to commend the organizers for taking the initiative of having a seminar on various aspects of internal auditing.
Internal auditing he posited, has assumed a far greater role in assisting organizations in ensuring good governance practices, transparency and greater accountability.
Regrettably, at the level of government, the former Auditor General said that there has not been much appreciation for the role of the internal auditor. Goolsarran said that many of the scandals and acts of financial impropriety that are uncovered almost on a daily basis could be avoided if there are strong and effective internal audits backed by professional and competent auditors with appropriate reporting lines.
Goolsarran said that indeed, most frauds and other forms of irregularities can be traced to the deficiencies in and breakdown of internal controls. This he pointed, is where internal auditors come in. He said that they police the system on a daily basis; have their ears to the ground; can detect red flags and spot questionable transactions quickly. He noted that internal auditors can assist in nipping white collar crime in the bud before they become endemic.
While the Ministry of Finance has made some effort to establish an internal auditing unit, Goolsarran said that more needs to be done at the larger ministries and departments to ensure full-fledged internal audits are in place. He said that this will relieve the workload of the Audit Office so that they can be able to concentrate on “big ticket items.”
As he too gave his support for the initiative taken by the organizers of the workshop, Chairman of the Public Accounts Committee (PAC), Carl Greenidge said that as the millennium broke, there was a string of corporate scandals involving appalling audit failures which were as a result of bad management, misleading accounts, shoddy auditing and outright fraud.
He said that at the heart of the audit failures lay a set of business relationships that were bedeviled by what have been called “perverse incentives” and “conflicts of interest.”
“In reality it has proved easy to play on an individual’s fear of losing a lucrative audit assignment. And they often turn a blind eye to many irregularities in order to keep business. This has been found to be present in some cases in Guyana and the audit oversight bodies need to pay attention to perverse incentives and conflicts of interest and how these two factors compromise the integrity of their work,” Greenidge said.
The politician pointed to several changes which he believes should be enacted. He posited that there needs to be stricter statutory regulation of the local auditing profession, including disciplinary powers with real sanctions for those who fall victim to “perverse incentives.”
“In Guyana we have seen that self-regulation; both through peer review and by professional and oversight bodies are fiction…Accounting firms should be restricted or prohibited from offering (often more profitable) consulting and other services to their audit clients. Another change that needs to be implemented is rotation every four years or so, so that individuals do not become too committed to their clients and audit firms. This should be mandatory,” The PAC Chairman explained.
He said that he would like to see attention paid to ethics and ethical practices. Greenidge said that the IIA itself needs to pay attention to the framework in which auditors operate and the institution’s responsibility for enforcing rules that they have pledged to uphold.
The Parliamentarian said that it is hard to “take these oversight bodies seriously” as they appear to be “cowed into silence and inaction” when faced by problems that may require them to look at powerful figures and or Government’s behavior.
“Guyana of course has a low rate for the prosecution of white collar crime and it would suggest that these auditing oversight bodies are scared to tackle such,” the former Finance Minister concluded.

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