CSIBL irregularities case: ICAP may revoke Syed Hussain & Company's membership

The Institute of Chartered Accountants of Pakistan (ICAP) may revoke the membership of Syed Hussain & Co, chartered accountants and partners if allegations against them are proved.
President ICAP, Shabbar Zaidi said that the investigation committee of the ICAP was conducting the inquiry against the accused under Section 20D of Chartered Accountants Ordinance 1961 and the committee was expected to submit its report within a month. He said that if the allegations against Syed Hussain & Co, chartered accountants were proved their membership would be revoked as per the Ordinance.
It may be mentioned here that the Securities and Exchange Commission of Pakistan (SECP) had filed a complaint with the Institute of Chartered Accountants of Pakistan against Syed Hussain & Co, which were the statutory auditors of the Crescent Standard Investment Bank Limited (CSIBL) for the period ended December 2004. The SECP had found irregularities in the financial statements of CSIBL that was maintaining parallel books of account under the head of "Managed Portfolio."
SECP inspectors also found that published accounts for the half year, ended June 30, 2005 showed an asset base of Rs 9.5529 billion while parallel balance sheet showed an asset footing of Rs 5.252 billion.
The inspectors found that the bank had entered into a number of transactions in violation of various provisions of the Companies Ordinance, 1984, especially sections 230 and 234 of the Ordinance and Rule 7(1)(a) of Non-Banking Finance Companies (NBFC) Rules. The parallel books of account showed a placement of an amount of Rs 1.817 billion in investment made by the bank in 20.896 million shares of PICIC-DFI.
Investments were made through borrowing from various financial institutions as well as general public. The fact and amount of liabilities were, however, excluded from the books of accounts of the bank as on December 31, 2004 and June 30, 2005 despite the fact that it represented a liability of the bank. The books of accounts of the bank, therefore, failed to give a true and fair view of the affairs of the bank during that period.
The bank was maintaining six accounts in the name of Jhang Electric Supply Corporation (Jesco), depicting an aggregate activity of Rs 5.918 billion over a period of time. These accounts were not reported in the printed general ledger of the said branch as of June 30, 2005.
Besides several other violations and irregularities were also unearthed in the report submitted by A.F Ferguson and Company, chartered accountants, which was appointed to look into the affairs of the bank.
SECP initiated proceedings against CSIBL and Syed Hussain & Co, chartered accountants considering them equally involved as they were the statutory auditors of the bank for the period.
Shabbar Zaidi said that the investigation was under way, however, Syed Hussain & Co and partners were still the Institute of Chartered Accountants of Pakistan members, but their membership could be revoked if allegations were proved. To a question, he said that during the period the investigations were on, the Co could also be barred from carrying on its practice.