| || |
Editorial January 04 2004
The fraud that is
Far from our shores it may seem, but not so far after all. The Parmalat scandal appeared to be Italian but now it has come to haunt us, MaltaToday takes a closer look at this scandal. It makes for good reading. It tells us a tale of greed, deceit and fraud and paints a dark cloud over the once upon a time dignified operators, the auditors.
Or so we thought.
For Parmalat to have siphoned off millions of millions in euros and dollars, the likes of founder and owner Caristo Tanzi required the help of experts. Technical advisors who would ensure that Parmalat selectively move funds from one tax regime to another. This is not the work of amateurs but of professionals, normally called upon to uphold fiscal and diligence in a company. They come by the name of auditors.
The Parmalat story carries on where the USs Enron one left off, even if the Italian family run business may have started its shady deals way before Enrons fiddling.
What is happening in the case of Parmalat has direct reverberations on Malta. But it has been happening on a smaller scale with many other private and smaller companies in Malta.
Without generalising or specifying, for there is no concrete proof of collusion between auditors and fraud in Maltese companies, one can say that there is ample reason to believe that many companies are being advised to cook their books.
Companies engage auditors to verify their accounts and check their systems of internal control. Auditors also provide advice on taxation, and are often called upon for other professional consultancy services. Most of the relationships between auditors and their clients are probably above board, but when a company wants to fall foul of taxation law, it may be tempted to ask its auditors to comply, or be removed.
Unethical though that is, we have no doubt that it happens, and auditors are not eager to let go of the audit fees that provide their income.
The worst case scenario is when companies close shop and dismiss hundreds of workers. This has hardly happened in Malta, although the Price Club collapse quickly springs to mind, but there must have been many other close shaves with this unfortunate reality.
This calls for vigilance on the part of the financial authorities in Malta. Perhaps the time has come to stress the need for some real time due diligence on the part of auditors.