Tiago Ferreira was heard this Wednesday as a witness at the Court of Competition, Regulation and Supervision (TCRS), in Santarém, in the trial of the request to challenge KPMG's decision by the CMVM, which imposed a fine of 1 million euros on the auditor for violations in the audit of the consolidated accounts of Banco Espírito Santo (BES) for 2012 and 2013.
In a statement that will continue on Thursday, Tiago Ferreira said that the situations detected by KPMG Angola in the 2012 and 2013 accounts of BESA, in particular those relating to the bank's credit portfolio, should have given rise to an explanation of all the procedures adopted to ascertain the information needed to issue an opinion.
The memorandums drawn up by KPMG Portugal, which is responsible for certifying the consolidated accounts of the BES Group, should contain details of the "nature, timeliness and extent" of the procedures adopted to identify risk situations, he said.
At the session on the 7th, the chairman of KPMG, Sikander Sattar, said that the CMVM had not seen the documents relating to BESA because it had not requested access from the Angolan supervisors, stressing that the workbooks of KPMG Angola cannot leave the country, as happens with any other branch located in a different country.
In its decision, the CMVM condemned the auditor for practices such as lack of adequate documentation of the audit procedures carried out at BES Angola, in particular regarding the evidence obtained about loans to clients in a unit that was relevant to the consolidated accounts of BES.
Tiago Ferreira, who before joining the CMVM worked in auditing credit institutions, particularly in Angola (between 2013 and 2016) for Ernst & Young, acknowledged "differences" in the work carried out in the two countries, stressing that in that African country "it was normal another type of risk, which the auditor had to take care of".
As an example he pointed out the different accounting references, the deficiencies of the internal control systems implemented in the banking institutions or the difficulties in the land register, the latter with implications in the evaluation of the collateral associated to the credits, given the practice of "unusual things in Portugal such as mortgage promises".
Recognizing that in Angola there were added difficulties to the audit work, such as those pointed out by KPMG in the process, particularly with regard to access to information on borrowers, the destination of the financing, the coverage of risks, Tiago Ferreira said that these situations forced the adoption of alternative inspection measures.
Admitting that they had existed, Tiago Ferreira stated that the detailed description of these procedures is not included in KPMG Portugal's documents to substantiate why the reservations issued to the accounts in Angola had no impact on the opinions of the consolidated accounts.
Sikander Sattar, when questioned by judge Mariana Machado about the facts in the CMVM's indictment, relating to the lack of information on BESA's credit portfolio and which the regulator believes should have led to the issue of reservations on the consolidated accounts of BES, said that this is one of the "great mistakes" of the decision, by assuming as final statements that are reported in interim reports.
In the CMVM's view, the poor documentation of information on BESA made it impossible to fully understand the consolidated accounts of BES, considering that the auditor failed to document "important facts that were of its knowledge", did not include reservations and provided false information, and did so deliberately.
The trial continues on Thursday with the continuation of the testimony of Tiago Ferreira and the hearing of Andreia Ferreira, also from the supervision department of the CMVM.
