The investigation, conducted by Prof Ian Percy, former chairman of Scotland’s Accounts Commission, was ordered by the Irish Institute, following criticism of the conduct of auditors by a parliamentary committee.
It found that the banks had facilitated customers in the avoidance of deposit interest retention tax by allowing them to hold bogus non-resident accounts.
PwC acted as auditors for Allied Irish Banks, but failed to provide in the accounts for a potential DIRT liability on the basis that the bank had agreed an amnesty with the Revenue Commissioners. The parliamentary committee concluded that no such amnesty ever existed, and the bank subsequently made a IR£90m (Pounds 70m) tax settlement, the largest in the state’s history.
E&Y acted as auditors to the then state-owned ACC Bank, which reached a IR£21m (Pounds 16.5m) tax settlement following an extensive audit by the Revenue.
In the report of his inquiry, published this week, Prof Percy found there was no basis on which any accountant could be prosecuted for professional misconduct arising from the affair.
The firms had accepted assurances from the two banks that they had won an amnesty on DIRT liabilities, he said, and would not have had access to the information which later came to light at the parliamentary committee hearings.
Both companies welcomed the findings as a vindication of their position. Deputy prime minister Mary Harney said the report confirmed ‘serious weaknesses in the reporting standards of the time’ and pointed out that a new Irish Auditing and Accounting Supervisory Authority, to oversee the profession, would be put on a statutory footing later this month.
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