Dear Editor,
The acceptance by Mr Chandradat Chintamani, FCCA of a place on the board of Demerara Distillers Limited on the last day of 2008 has highlighted the role of individual accountants and the regulator in ensuring that ethical standards in the accounting profession are maintained.
Mr Chintamani is a member of the Council of the Institute of Chartered Accountants of Guyana (ICAG) and the Secretary and point man of its Investigations Committee. That committee took close to five years (April 22, 2004 to December 30, 2008) to adjudicate on a professional complaint against two senior directors of DDL and the company’s auditors over a loan-buy back from troubled Hamilton Bank. The evidence is that the company gained from the transaction US$1.1M or more than G$200M at the then exchange rate of the US to the Guyana dollar. The gist of the complaint was that DDL had failed to account for the gain in its financial statements on which the auditors gave a clean opinion.
As the complainant I provided Mr Chintamani directly with particulars of the buy-back which were not reflected in the company’s financial statements.
What increased the concern over the transaction were the conflicting statements made by two senior officials of the company and their inconsistency with the information provided to Mr Chintamani.
In a letter dated December 1, 2003 the company’s Chairman had stated that “the loan was treated as a creditor and included in current liabilities since it is a line of credit.” For good measure the Chairman added that the net effect of the settlement resulted in no gain or loss to the company.
Two weeks later on December 14, 2003 a different story emerged from an article in the Stabroek News in which then Finance Controller and now General Manager of the company Mr Loris Nathoo reported that “since the transaction happened within the financial year and the loans were short-term the company did not see it necessary to report the matter in its statement” (sic). He was also reported as saying that the 25% discount of US$1.1M reflected “interest and other charges.”
After some considerable silence on the part of the Investigations Committee I received a letter dated December 30, 2008 advising me that “based on documentation examined, the Council [of the ICAG] is convinced that the settlement of the loan with Hamilton Bank Limited was properly accounted for in the financial statements of DDL for the year ended December 31, 2002.” I was therefore confronted with a number of questions:
If according to the company’s Chairman the loan was treated as a creditor (as opposed to loans payable or separate treatment as it is an interest bearing liability) how could the Investigations Committee find that it was properly accounted for?
If the later statement by the Finance Controller is correct and there was no need to report the matter in its financial statements were the Finance Controller and the ICAG referring to two different sets of statements?
Assuming that the ICAG is correct, why did interest payable only increase by $72M from 2002 to 2003 if in fact a gain was set against interest payable in 2002?
Should there not have been a disclosure of a loan transaction involving US$4.673M including the credit being specifically disclosed in note 4 to the financial statements?
Since under the ICAG’s bye-laws the Institute can initiate an investigation without a complaint, what is the burden and standard of proof applied by the Investigations Committee and its own obligations to pursue evidence in relation to any enquiry it carries out?
To resolve these questions I wrote the Secretary of the ICAG on January 19, 2009 asking for a copy of the report done by the Investigations Committee. I have not had a response to my request but learnt unofficially that the report may have been oral which raises some serious questions indeed.
The role of the ICAG as regulator is not only to advance the interest of its members generally but also to ensure the maintenance of high standards of practice and professional conduct by all its members. Vernon Soare, ICAEW Executive Director of Professional Standards on the occasion of the decision of that body to open up its tribunals to the press and the public in 2007 put it this way: “A modern professional body must demonstrate that its processes are objective and in the public interest.”
The conduct of the Investigations Committee and the ICAG in the matter of the complaint against DDL and its auditors clearly did not meet that test but rather demonstrated the serious weaknesses in self-regulation and the failure of the accounting profession in its duty to the public. The reputation of the country is no less determined by the conduct of its politicians than by the integrity of the accounting profession.
From the sequence of events Mr Chintamani must have been engaged in discussions about a seat on DDL’s board even while he bore a duty to participate in an independent investigation into a complaint against leading members of that Board. At a minimum, Mr Chintamani should have disclosed to the Council of the ICAG his impending appointment and the Board of DDL ought to have considered the ethical issue involved in offering a place to Mr Chintamani. The approach to him was improper and distasteful and does a disservice to the entire Board of DDL but in the final analysis it was Mr Chintamani’s duty to refuse. His failure to do so, undermined the investigation and discredits the profession.
Mr Chintamani needs to reconsider his decision and lapse of judgment and do what is necessary to restore some measure of confidence in the profession. The Council of the ICAG must also consider whether in the light of these developments the findings of the Investigations Committee can and should stand. A profession that many see, perhaps unfairly, as part of the tax evasion industry cannot afford to feed any negative perceptions about its leading members and itself.
Yours faithfully,
Christopher Ram
Member, ICAG
