The Bank of Israel's Supervisory Council has appointed Ernst & Young Israel - Kost Forer Gabbay and Kasierer as its auditor, succeeding KPMG Israel Somekh Chaikin, an auditor of Israeli commercial banks, which resulted in criticism.
The Bank of Israel said that the one-year appointment is renewable for one-year periods for up to a total of five years. "The Supervisory Council adopted the recommendation of the committee it had appointed to conduct the process of choosing an accountant-auditor for the Bank of Israel. The committee was led by Council member Yitzhak Edelman, CPA. The other members of the committee were Council members Uri Galili, Prof. Nina Zaltzman, and Maxine Fassberg, as well as Shlomo Handel, CPA, who joined as an external member of the committee."
In February, "Globes" reported that the IMF said that the Bank of Israel should encourage the rotation of auditors, especially given the near monopoly of one firm on the banks. The IMF did not name the firm, but it is KPMG Israel Somekh Chaikin, headed by Gad Somekh. The firm audits four of Israel's big five banks Bank Hapoalim (TASE: POLI), Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), and First International Bank of Israel (TASE: FTIN), as well as the sixth largest bank, Union Bank of Israel (TASE: UNON), and the Bank of Israel.. Mizrahi Tefahot Bank (TASE:MZTF) of the big five banks and Bank of Jerusalem (TASE: JBNK) of the other major banks are the only banks it does not audit.
The IMF rejected the claims by the accounting firms and the Banking Supervision Department that the Somekh Chaikin's internal turnover means that, every few years, different accountants handle a particular bank's reports. The IMF also criticized what it calls the prevailing self-regulation on the banks' books and the lack of proper public oversight.
The IMF did not consider the Bank of Israel's Proper Banking Procedure 302, the guidelines for auditors, as an adequate response to the current situation, which has lasted for many years. The guidelines state that an accounting firm's partners should be rotated every five years, and that a bank's board of directors should discuss, at least once every three years, or at the end of the term of the auditor, whichever comes later, whether the auditor should be rotated.
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2012
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