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The Public Financial Enterprises Agency (PFEA),
supervisor of Ethiopia's state-owned financial
firms, instructed the Commercial Bank of Ethiopia (CBE)
to stop its attempt from hiring an external auditor
without the Agency's consent.
The instruction was communicated to Abie Sano, CBE's
president, in a letter signed by Eyob Tesfaye (PhD),
PFEA's director general, and dated November 12,
2007, according to a copy of the document obtained
by Fortune.
The letter from Eyob, who was appointed by Prime
Minister Meles Zenawi in July, 2007 as director of
the Agency, stipulated that hiring an auditor for
the bank is the Agency's jurisdiction. He is the
second chief of the Agency. When the Agency,
commenced operations in September 2005, Getachew
Gebre was its first director general, before he
resigned the post at the end of 2006.
CBE, Ethiopia's largest
bank with 35.8 billion Br in assets, has only hired
a private auditor once in its 33-year history,
relying instead on the state audit firm, Audit
Services Corporation (ASC). CBE broke from this
tradition in 2002 when it hired Germany's KPMG, and
again this year when it opened an international
tender for a private auditor.
"The measure taken by the Agency is legitimate,"
said a senior management member at the CBE.
"However, it should have issued the instruction two
months ago to avoid the cost the bank has incurred
for the evaluation of the offers."
CBE invited category
one audit firms, the highest rated firms, to submit
bids. Accordingly, ASC, HST & Co and Getachew
Kassaye & Co each submitted their offers.
The Bank, which has been evaluating the documents
submitted to the bidders, was planning to reveal the
winner last week until the Agency instructed the
management of CBE to halt the evaluation.
According to the senior member of CBE's management,
the Bank has urged the Agency to approve an external
auditor based on the Bank's evaluations, rather than
starting the selection process from scratch.
Sources disclosed that the Agency is considering the
Bank's recommendation, though Fortune was
unable to confirm this with Eyob.
Established in 1994 under the auspices of the Prime
Minister's office, the Agency supervises all four
state-owned financial firms: the CBE, Construction
and Business Bank (CBB), Development Bank of
Ethiopia (DBE) and the Ethiopian Insurance
Corporation (EIC).
The Agency stopped CBE from hiring an auditor,
claiming that the CBE does not have the authority to
hire an external auditor.
According to the Commercial Code of Ethiopia, only
the shareholders of a financial institution have the
right to contract an external auditor. Nonetheless,
CBE is not the only state financial institution that
has hired an external auditor. In November 2005, the
board of the DBE also decided to hire an auditor
through a public tender, attracting bids from HST
and ASC, which submitted a lower offer and ultimatly
carried out the auditing.
Though officials at CBE declined to disclose the
amount of the financial offers made by the bidders,
HST and ASC gave the highest and lowest offers,
respectively.
Haileleul Tamru, senior
partner at HST, confirmed that his company made the
highest offer.
"We made an offer that we considered would be
reasonable for auditing this huge bank, which has so
many branches," he told Fortune.
Established in 1942, CBE has 1.2 million account
holders and 194 branches all over the country.
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