State Audit Institution violated the code of ethics of the state auditors and Law on State Audit Institution giving itself the status of ’the Gods of Olympus’
Press release by the company 13.Jul-Plantaže concerning a double, adverse opinion of the State Audit Institution , given on the controlled,financial operation for 2018
The Board of Directors of the company 13.Jul-Plantaže a.d. Podgorica considered the Report of the State Audit Institution on the Audit of the Annual Financial Statements for 2018 at two meetings.
At the first meeting, held on the 30th of July, 2020, the Board of Directors considered the preliminary report of the State Audit Institution which did not contain either the opinion on the financial statements or the evaluation of the concerned audit.It was stated that in the provided, preliminary Report it has not been determined that any of the stated misstatements and recommendations affects materially the financial statements and that certain recommendations from the Report shall be certainly adopted as well as the evaluation that there is no room for fear of stating the adverse opinion by the State Audit Institution of Montenegro (DRI Mne).
Analyzing these recommendations, the Board of Directors concluded that they have not essential material and pervasive effects on the balance positions of the financial statements and they do not bring into question their accuracy, authenticity and truth, so there is no ground for stating the adverse opinion.
At the second meeting, the Board of Director has considered the Final report and made the Decision related to the implementation of the activities on the realisation of the given recommendations by DRI.
Acting by the stated decision of the Board of Directors, we stated the Institute of Certified Accountants of Montenegro which is as a professional non-government organisation the public authorities holder, assigned by the Regulation of the Government of Montenegro (Official Gaz. Mne No.044/07; 33/10), member of the International Federation of Accountants (IFAC) and member of the European Federation of Accountants (AE) with the advisory role at EU Commission in the fields of accountancy and audit. This Institute has a longterm agreement on the co-opeation with DRI, based on which the personnel of DRI has been educated at the Institute, so it recommends it additionally for expertly qualified monitoring of the related report.
Analysing DRI report, it was stated preliminary:
1.that there are no conditions for stating the adverse opinion on the audit of the financial statements for 2018,
2. that there are no conditions for stating the adverse opinion on the audit assertion with the other law regulations and the qualified opinion should have been given in the Report for this part of the audit.
It is indicative that renowned and internationally recognised audit firms which had conducted audits on the financial statements in the company 13.Jul-Plantaže, in the previous 14 years, have never given the adverse opinions (KPMG, HLB Mont Audit, BDO) in the process of persuading that the company financial statements are true and fair. The Institute considers that the fact that DRI applies another methodology in its work which cannot, any way, bring into question the fact that the Plantaže financial statements are true and fair; otherwise, it would mean that all renowned audit firms, engaged so far, have made wrong audits. Therefore, on the base of the same data , accessible to DRI, all engaged audit firms so far have not given the adverse opinion, because it was concluded that the effects of the misstatements have not been material and pervasive.
Regarding the fact that all, stated audit firms have been insured for any damage, caused to the client of the audit-owners,we deem that they conducted the audit of the financial statements professionally and in compliance with the international standards of audit and quality control. That is why we consider that this audit, conducted by DRI, was created with the special’leimotif’, so Mr Jelić,as its manager should ask himself whether he acted ethically and professionally when he gave the adverse opinion on the financial statements, based on the fact that Plantaže had not registered 11 mil.m2 of the land in the inventory in its business books, but for which they do not have settled ownership-legal status which was the conclusion of all audit firms so far as well as on the base of the fact that his auditor’s team insisted on the reservations on the base of the court disputes, although it is contrary with the par.14,MRS 37, prescribing three cumulative conditions that have not been fulfilled in this case, so that the concerned reservation could be made. Furthermore, there are no grounds for the adverse opinion on the audit assertion which is proved by the fact that the Society has harmonised its work with most laws from the relevant national regulations and there are no grounds that in DRI report is stated that ,,determined cases of discrepancies have material and pervasive effect related to set criteria for the audit assertion’’. Therefore, the effects had not been material and pervasive,so we consider that the qualified opinion should have been given. This relates particularly to the recommendations from ordinary No.8 to No.20. So, in the recommendation No.8, regarding the changes of the book entry order, pursuant to Art.19 of Law on Accounting, contrary to DRI opinion , Rules on the Chart of accounts has not been violated because it was stated in the Art.1 that conducts, stated in this Rules have not been the only allowed conducts in the accounting as well as that different accounting methods did not bring into question the accuracy and quality of the balance positions. Similar recommendations were included in the par.45,MRS 1- Presentation of the financial statements, related to the consistency of the presentation , stating that another classification and presentation have been allowed, provided that they lead to the fair financial statements.
The intention of trying to realise ’execution for political reasons’ of the strategic and operational management of Plantaže was proved by the fact that Mr Jelić was malicious in the Report and at the same time, he tried in the public document, in an unethical manner, to delude the professional and laic public that ’there will be not a track in the system, by deleting the order’.Instead of dealing with the police forensics, he should, as an expert now, introduce to the public that deletion of the planned items (in this case, planned amortisations) in order to make entry of the real items, does not represent violatin of the clauses of the Accounting Law. It is not of less importance that DRI violated the ethical codex of the state auditors and Law on State Auditors’ Institution ( Offic.Gaz. No. 070/17), giving itself the status of the ’Gods of Olympus’ and thus, the status of supreme right to assume the ingerences of the Constitutional court , related to the interpretation of the clauses of the Constitution, concerning disclosing the offical secret in the context of the public interest.
Hereby we wish particularly to indicate to the public that ,prior to issuance of the Final report of DRI, while it was a draft, we notified Mr Jelić, on 27/05/2020 that the disclosure of certain data was completely contrary to the internal acts of Plantaže, related to the obligation of keeping confidentiality. Therefore, we acted in accordance with the Art.10, par.2 of the Law on State Audit Institution, by which the subject of the audit should provide DRI with the data that are classified as confidential and as business secret. Pursuant to point 6 (professional secret) of the ethical codex for state auditors, it is prescribed that a state auditor must not reveal the data he learned during auditing without authorisation or if there is no lawful or professional right of their disclosure. However, the competent collegiate body of DRI has, unfortunately, disregarded our remarks although it should have acted by them, pursuant to Art.11 of the Law on DRI and brought the decision to make the classified data accessible in public. Therefore,we consider the possibility of undertaking the legal acts in compliance with the Law on Protection of the Undisclosed Data (Off.Gaz. Mne No. 73/08) as well as Criminal Law of Montenegro (Art.280-disclosure of business secret). Simultaneously, in compliance with the clauses of the Ethical codex of the State Auditors, we shall initiate at the DRI Senate the consideration of the ethical responsibility of the state auditors who disclosed the data of the subject of the audit, classified as the business secret.
By preliminary analysis of DRI report, it was determined that only 4 recommendations correspond to the stated state (to constitute Auditor’s Board, to make the Rules on accounting policies, to improve some internal porocedures). There were not justified the recommndations from No.18 to 20, related to the cashier’s operation that Plantaže act contraty to Law on prevention of Illegal Operation, for they are formal discrepancies with the regulations where the auditor has not absolutely determined that there is a misstatement which could have any consequence.
As far as the recommendations for improvement of managemet and internal controls in the public sector are concerned,the Law came into force by the end of the year for which the audit has been conducted and in the Art. 56 of this Law there was a lawful time limit of 18 months for Plantaže, among the other business companies, to harmonise its operations with it. Regarding it, we undertook the activities to improve the internal procedures which should be the subject of the audit for 2020. That is why such recomnedations should not have been givejn in the DRI report for 2018, except that DRI, in case of the justification for political purposes, ’put down something in the Report’.
Finally, there is the issue of time period in which this Report was published, ie the evaluation of the relevance of the fact that it was published immediately after the completion of the parliamentary elections. It may be explained, as all other, only by an old folk’s saying: ’ The snow does not fall to cover the hill, but to make any beast show its trail. ’
We also remind the Montenegrin public of an interesting fact which makes DRI report, in a certain way, a problematic and relative and that is that the member of the Senate, Zoran Jelić, as the manager of the collegiate body , who conducted the audit in the Society, was in the conflict of the interests, because his wife was for 5 years a member of the BoD of Plantaže in the time period which was relevant and influential in the period when the related audit has been conducted by DRI.
Considering above mentioned, we will act very gladly by the opinion of the senator Branislav Radulović to organise the hearing in the Parliament of Montenegro, or before its competent boards, where besides the representatives of the company , our consultants, representatives of the auditor’s firm BDO and members of the auditor’s team DRI will be present.