Bcci Case Study for Auditing - 5660 Words

Introduction In July 1991, the largest scandal in the financial history exploded when the branch offices of the Bank of Credit and Commerce (BCCI) has been seized by regulators in seven countries. The closure of the bank is mainly due to massive fraud and corruption that happened at the heart of the bank. BCCI also involved in other illegal activities such as money laundering, dubious lending, fraudulent record-keeping and support in terrorism. The BCCI was a supranational bank founded in London in 1972 by a Pakistani financier, Agha Hasan Abedi. Overall, BCCI was expanded from 19 branches in five countries in 1973 to 108 branches in 78 countries in 1976 with excess assets of around US$20 billions at its peak. BCCI has been†¦show more content†¦Thus, the Basle Committee on Banking Supervision has been set up in July 1992 and issued a new standard for the supervision of international banks. The underlying principles were that any international banking group must agreed to be governed by the central bank in the home country which taking into account the bank’s worldwide activities. However, the recommendations proposed by Basle Committee is viewed to be a bit loose, thus another reform of Banking Act was proposed by the UK government and BOE which provided BOE with more supervisory powers. The proposals placed legal responsibility on the auditors to provide information of the banks whenever it is requested by BOE for monitoring purposes. This proposal also attempted to close the regulation gap between countries where the bank was chartered and where it was operated, which was found to be the main reason why BCCI’s fraud went undetected for so long. Issues of Accounting, Auditing and Governance Involved There were 3 parties involved extensively in BCCI crisis: senior management, external auditors and regulator were accountable to the interest of depositors and creditors. Roles of each party will be examined below. Leaders play significant role in embedding ethical norms and values into organizational culture. Longnecker (cited in Gottlieb Sanzgiri 1996, p. 1278) organizational leaders should articulate ethical policy, communicate ethical statements and codes, and provideShow MoreRelatedWhy Is It Important for External Auditors to Be Independent? Relate Your Answer to the Primary Role of External Auditors. Give Examples of Specific Ways the Lack of Auditor Independence May Impact Adversely on an Audit.1638 Words   |  7 Pages2004). This essay, is trying to define what is independence and discuss about the relationship between independence and quality of external auditors. First of all, it is good to know what is the external auditors and its primary role. External auditing is an observation of annual financial reports of a corporation, for example, Balance Sheet, Profit and Loss account and cashflow statement. 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