Auditors missed chance on tax issue

KPMG's roleNational Irish Bank's (NIB) former auditors, KPMG, should have done more to get the financial institution's management to assess the risk posed by a potential tax liability in 1995, the High Court inspectors' investigation of NIB found.

In 1994, NIB's then head of internal audit, Mr Paul Harte, singled out deposit interest retention tax (DIRT) for an internal audit. DIRT is levied on the interest earned by savers, and the bank is responsible for deducting it and paying the Revenue. In December 1994, NIB's internal audit found that its level of compliance in this area was poor.

Despite this, NIB management at that stage made no attempt to calculate its DIRT liability and pay this money to the Revenue

Its external auditors, KPMG, received a copy of the internal audit. "This should have led to KPMG asking management to quantify the potential retrospective liability to the Revenue Commissioners," the report says.

"KPMG did not seek to have this done. The inspectors are of the opinion that, if KPMG had requested the potentially material liability to be quantified, this would have emphasised its importance to senior management and it is unlikely that they could have ignored it, as they did."

However, the report also states that this was the only occasion where KPMG did not act appropriately. The director of corporate enforcement, Mr Paul Appleby, said he would take no action against the accountants. He added that he had referred the report to the Institute of Chartered Accountants in Ireland.