By Staff Writers
Maseru, Aug 07 (The Night’s Watch) – THE Central Bank of Lesotho (CBL) has dismissed as false claims by the International Monetary Fund (IMF) that local banks use foreign audit firms that are not registered in Lesotho to do their audits, and later use a local audit firm to issue and sign off the auditor’s report.
The Night’s Watch reported on Tuesday that an investigation by the IMF mission that was in the country in March 2019, had revealed a malpractice in the local banking industry, which had seemingly been concealed by CBL.
The IMF’s AFRITAC South mission, visited Maseru on March 4–14, 2019, at the request of CBL, to provide technical assistance on the implementation of Basel II.
The mission revealed in its report published on July 22 that: “Banks must have their annual financial statements audited in accordance with ISA, however, and despite not in the scope of this mission, while reviewing the financials of some banks, the mission found that there seems to be a local banking practice of having a Big 4 audit firm doing audit work for the bank but a small, domestic audit firm issuing and signing the Auditor’s report.”
It suggested that such practice did not comply with both the International Financial Reporting Standards (IFRS) and International Standards of Auditing (ISA).
The mission said while it was clear that that such audits were not conducted in accordance with ISAs, and that the audited financial statements were not IFRS-compliant, “the situation reveals a malpractice that consist of having Big 4 audit firm with no offices in Lesotho using a small Lesotho firm, which – otherwise – would not likely be able to perform as the auditor of a bank, to take full legal responsibility for the auditor’s opinion expressing compliance with IFRS and ISAs on financial statements that do not comply with these international standards.”
But in statement published on Thursday, CBL refuted the IMF claims.
It said: “The Bank 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 added that: “What the Central Bank of Lesotho is, however, aware of is that local banks engage local audit firms to do their audits; and local audit firms then later partner with foreign audit firms in areas where they lack capacity.”
The central bank also indicated that the Financial Institutions Act (FIA) of 2012 “does not prohibit approved local audit firms from partnering with foreign audit firms”.
It said neither the ISAs, nor the IFRS prohibited audit firms from partnering in circumstances where there were perceived capacity gaps.
“The allegations of malpractice regarding auditing of banks in Lesotho are therefore unfounded. The public is assured that the local banking industry is operating professionally within a robust regulatory framework and underpinning international best practice and standards. There is therefore no need for alarm,” the central bank said.
The Central Bank of Lesotho is a statutory organisation fully owned by the government of Lesotho. The bank enjoys a fair amount of independence in formulating and implementing monetary policy.
It was first established as the Lesotho Monetary Authority in 1978, under the Lesotho Monetary Authority Act of 1978.
It started its operations on January 2nd 1980. In 1982, through the Act of Parliament, the name Lesotho Monetary Authority was changed to the Central Bank of Lesotho and additional functions and responsibilities were prescribed to the new institution.
In August 2000, the Central Bank of Lesotho Act of 2000 came into force. This new Act conferred considerable autonomy to the Central Bank and defined a singular objective for the bank. NW