Financial Times

Swallowing the innocent depositors
People deposit money in banks not only for safety, but also to get a little interest and to withdraw in an emergency. We have deposited some money at Kolonnawa People's Bank. After withdrawing some money from two accounts an amount of about Rs. 200 remained.

Though there is not enough balance for further withdrawals, I used to produce these books at an interval of about one year for insertion of interest. Accordingly, I handed over two books for interest on October 10. But when I took them back, I found that Rs.75 had been deducted on each book under dormant account, which has not been done up to last year.

I asked the bank manager the reason for the deduction. He replied that it was done as charges for the space provided to keep the accounts in the computer.

Then I told him that no person needs to keep Rs.200 in a bank computer by paying Rs.75 per year unless he is mad, and that it is wrong for the bank to do so without informing depositors. Otherwise, depositors could close their accounts before they are marked as dormant.

It is wrong for a bank to deduct money from the poor ignorant depositors without their knowledge. I hope that the money which has been deducted is refunded by a bank which claims that, "it is the pulse of the nation."

Dharmacharya Wilson Nelundeniya,
Jambuwatta,
Kelaniya.

Auditors: Watchdogs or lapdogs? - A reply
I refer to the article written by Ravi Mahendra, a member of CIMA in the Sunday Times of September 14, 2003.

Much is talked about the independence of auditors. The whole problem arises for the auditors from the fact that several parties such as lenders, depositors and so on may rely on audited statements of accounts for their decision-making. However, shareholders appoint the auditors; the report is addressed to the shareholders; shareholders fix the remuneration of the auditors.

In most cases the major shareholder, chairman and chief executive of the company is one and the same. Independence with regard to an auditor basically means that he must be independent from the entity being audited. The remuneration of auditors is effectively paid by the auditee. When the auditee pays the auditor it goes to the root of the independence of the auditor.

If any body expects complete or perfect independence of auditors the other alternatives are for the government to appoint auditors and pay their remuneration or to extend the functions of the Auditor General's Department to cover the private sector.

The professional auditors generally follow well-established standards in conducting the audit. They are well aware of the consequences of not following these standards. Audit should continue to evolve as a profession with self-regulation, skill development and ethical conduct if society is to reap the maximum benefit from it.

The writer expects the auditors to refrain from all other related services such as tax consultancy. If such a rule is enforced many audit firms will have to put up their shutters because they will not be able to survive only on their audit income.
Different stages of audit require different levels of skills and experience.

Audit firms have a hierarchical system of junior, seniors, managers and partners. Appropriate staff is used for different tasks. Accountants who have undergone their training in audit firms are much in demand here and abroad.

The suggestion that members of all accounting firms (meaning members of accountancy bodies such as CIMA) be allowed to do public practice here is ridiculous. USA, UK, India and and other countries would not allow their audits to be done by any one without their licensing qualifications.

Auditing requires a thorough knowledge of local auditing and accounting standards, tax laws, company law and many other local regulations. Hence, a person with foreign accountancy qualification being allowed to practice here is beyond comprehension and totally unacceptable.

W.D. Tilekaratne
Kalubowila.

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