Forensic Audit: التدقيق الجنائي; Discussions and Updates. Thank You GMA for insisting!!!

Do you support GMA: BDL Forensic Audit is key to identify and fix corruption and the economy?


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Iron Maiden

Iron Maiden

Paragon of Bacon
Orange Room Supporter
Ma fhemt khaye 3am men bi3 batata nehna hon? jeyin badna nda2i2 b hsebet el masrif el markaze w inta sheft website 3le description w 2elt yalla?
chefet pop up ad 3a google enta el sede2..
if people can prove that this company is useless i’ll be glad and i wont lose any sleep over it, but just to come say hey they are not qualified with no proof is just hearsay and i dont buy it.
 
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  • Robin Hood

    Robin Hood

    Legendary Member
    Orange Room Supporter
    Will the audit report be made public?

    Sent from my SM-G973W using Tapatalk
     
    cedarheart

    cedarheart

    Well-Known Member
    The forensic audit is a very welcomed action, and I fully supported and wish it can be extended to all ministries, funds, “sanadi2”, etc. To be fair, GMA has been asking for it even before he came back to Lebanon (but of course like many of his other ideas and plans he put it on the backburner for a while).

    That’s in principle. But, in practice and current reality, I’m not optimistic at all about the results and already see several malign and questionable issues with the current action of the government, mainly:

    • If you decide to hold a forensic audit, it means that you suspect irregularities; so how come you keep the same management team (the suspects)? Usually they are suspended until the audit is over especially that they can play a role in misleading the auditors
    • What’s the point in announcing publically for months that you’ll hold a forensic audit instead of acting secretly and announcing it when it starts. This gave the suspects enough time to “cook the books” and fix any irregularity and also take all the defensive measures.
    In essence, I don’t trust anything that comes from the current political players in Lebanon.
     
    Dark Angel

    Dark Angel

    Legendary Member
    The forensic audit is a very welcomed action, and I fully supported and wish it can be extended to all ministries, funds, “sanadi2”, etc. To be fair, GMA has been asking for it even before he came back to Lebanon (but of course like many of his other ideas and plans he put it on the backburner for a while).

    That’s in principle. But, in practice and current reality, I’m not optimistic at all about the results and already see several malign and questionable issues with the current action of the government, mainly:

    • If you decide to hold a forensic audit, it means that you suspect irregularities; so how come you keep the same management team (the suspects)? Usually they are suspended until the audit is over especially that they can play a role in misleading the auditors
    • What’s the point in announcing publically for months that you’ll hold a forensic audit instead of acting secretly and announcing it when it starts. This gave the suspects enough time to “cook the books” and fix any irregularity and also take all the defensive measures.
    In essence, I don’t trust anything that comes from the current political players in Lebanon.
    i think going for everything at once in the same contract may be counter productive. it would make more sense to divide these these investigations each targeting a specific black whole, otherwise the size of the cases and even the sheer size of the files that will ensue will cause a processing problem.

    i think the details of the forensic audit contract and the process with which it will be conducted are as important as the audit itself. at the moment it will be a bit too early to speculate how it will be conducted without these details being known.

    it goes without saying however that everything needs to be investigated and no stone should be left unturned.
     
    V

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    Member
    Don't mess with Salameh, Rai said.
    Or else....




    Lebanon: Central bank chief inflated assets by $6bn in 2018
    Copy of 2018 central bank audit seen by Reuters also shows that auditors were unable to verify Lebanon's gold reserves.


    Demonstrators carry Lebanese flags and a banner depicting Lebanon's Central Bank Governor Riad Salameh [File: Aziz Taher/Reuters]

    Demonstrators carry Lebanese flags and a banner depicting Lebanon's Central Bank Governor Riad Salameh [File: Aziz Taher/Reuters]

    Lebanon's central bank governor inflated the institution's assets by over $6bn in 2018, its audited annual accounts show, underlining the extent of financial engineering used to help prop up the country's economy.
    The financial statements for 2018, a copy of which was seen by Reuters news agency, were signed off with qualifications by EY and Deloitte just last month, and have not been made public.
    The accounts show how the central bank managed to balance its books while helping to fund an ever-widening government deficit, including recording a 10.27 trillion Lebanese pound ($6.82bn) asset described as "seigniorage on financial stability".
    Seigniorage is the difference between the cost of printing new money and its face value.
    The accounts said governor Riad Salameh "determines on a yearly basis the amount that should be allocated from the liability balance from seigniorage to deferred interest expense and other finance costs".
    Most central banks record seigniorage as an income stream. But Lebanon's central bank was recording expected seigniorage profits as an asset, according to the annual financial statement for 2018, prepared by the central bank and reviewed by EY and Deloitte.

    "The item that deals with seigniorage is total fiction," said Steve H Hanke, Professor of Applied Economics at the Johns Hopkins University.
    A central banking expert who has been following the financial crisis in Lebanon for years, Hanke said Lebanon's central bank had used the category of "other assets" to disguise losses on loans to the government.
    Salameh did not respond to detailed questions that were emailed to his office.
    Deloitte declined to comment. EY did not respond to a request for comment.
    The outlines of the central bank's accounting approach were first reported by the Financial Times.
    Explaining why they were signing off on the accounts with qualifications, EY and Deloitte listed several factors including being unable to confirm all deposit balances and being unable to conduct an in-person inventory of the bank's gold reserves.

    Additionally, Deloitte and EY said the central bank used an accounting and financial reporting framework adopted by its own council, rather than International Financial Reporting Standards (IFRS). They said their own audit was conducted in accordance with International Standards on Auditing.
    The central bank's unusual approach is permissible because there is no global standard for central bank accounting.
    This engineering, we were forced to do it to buy time for Lebanon ...
    RIAD SALAMEH, GOVERNOR, BANQUE DU LIBON (LEBANON'S CENTRAL BANK)
    'Financial engineering'
    During Salameh's 27 years in charge, the governor has used what he has described as "financial engineering" to keep Lebanon's public finances afloat and defend the pound's peg to the United States dollar, chiefly by attracting dollars from local banks with high interest rates.
    The International Monetary Fund described Lebanon's central bank as "the linchpin of financial stability" in an October 2019 report "but at the cost of intensifying sovereign-bank linkages, which pose risks to banking sector stability, and weighing down its balance sheet while protecting banks' profitability".
    Salameh has publicly defended the strategy.
    "This engineering, we were forced to do it to buy time for Lebanon, so Lebanon could reform," he said in a televised address in April.

    But an economic crisis that has seen Lebanon default on its sovereign debt repayments and its currency plunge by 80 percent on parallel market exchanges, has shaken Salamen's reputation as a pillar of stability, making him a focus of anger for street protesters.
    Prime Minister Hassan Diab said on Tuesday that turnaround specialist Alvarez and Marsal would conduct a forensic audit, and KPMG and Oliver Wyman a financial audit of the central bank amid a dispute over the scale of the financial losses facing the institution.
    The 2018 report shows a number of methods used to inflate assets and minimise liabilities of the central bank, which the government and the IMF say is $50bn in the red. Lebanon is seeking a bailout from the IMF.
    As well as the unorthodox seigniorage accounting, the central bank also booked supposed profits on lending to the government. The cost of interest paid to banks at rates of between 10 percent and 20 percent was meanwhile constantly deferred, building up huge future debts, the statements show.
    The statements also refer to the central bank purchasing treasury bills from the banks at a premium carried over unamortised, meaning it should be treated as a liability on the central bank's balance sheet.
    "Central banks don't have strict rules like companies do, IFRS or GAAP," said Mike Azar, a senior financial adviser based in Lebanon, referring to international accounting standards.

    "But there are good practices they should follow. One is not to show losses and resulting negative capital as fake assets."
    Lebanon Central Bank Governor Riad Salameh

    Lebanon's central bank chief Riad Salameh has become a focal point of protests as the country plunges even deeper into economic crisis [File: Mohamed Azakir/Reuters]
    Gold reserves
    Talks with the IMF that began in May are on hold while the government and central bank argue over the scale of losses in the financial system - estimated at nearly $69bn by Alain Bifani, a former member of Lebanon's negotiating team with the IMF - and how they should be shared.
    The most recent central bank data show it had assets of $152bn last month. According to research by Credit Libanais, that included "other assets" valued at $48.2bn in mid-June, 61 percent higher than a year before, a rise the investment bank attributed to seigniorage, open market operations and an appreciation in gold reserves.
    The 2018 statements showed the central bank held gold worth 10.61 trillion pounds, although the auditors said they were unable to perform a physical inventory due to a "policy which gives access exclusivity to top executives of the bank".
    One accountant, who spoke on condition of anonymity, said that should have raised a red flag given the central bank's asset position and credibility was under scrutiny.
    The accountant also said it was not best practice for the central bank's financial statements to be released so late.

    A September 2018 paper by the IMF said more than half of central banks publish their statements within nine months of their financial year-ends.
    Asked about the 2018 report, Bifani, the second member of Lebanon's IMF team to quit last month, after 20 years as director general at the finance ministry, said auditors had not carried out a physical inspection of the central bank's gold reserves for years.
    "As far as I know in the last 30 years they haven't been allowed to do an inventory of the gold reserves," he said.
    "The most glaring thing is how they're hiding the losses. He is trying to inflate his assets as much as possible."
    SOURCE: REUTERS NEWS AG
     
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    Central banks
    Controversy over seigniorage in Lebanon is a warning sign
    Unorthodox measures of central banks may be storing up trouble

    At the Banque du Liban, seigniorage profits have been won at the cost of a catastrophic loss of confidence in the currency
    © Sima Diab/Bloomberg

    July 30, 2020 9:00 am by John Plender
    The controversy over the Lebanese central bank’s decision to record seigniorage as an asset in its crisis-torn balance sheet is no parochial matter. Across the world, strange things are happening to this important source of income for central banks and finance ministries.
    Described as the profit made from printing money, seigniorage is the difference between the amount central banks receive on issuing money and the much lower cost of producing it, and the usually paltry interest paid to commercial banks on the reserves they hold at the central bank.
    Seigniorage is a valuable asset, because issuing money and investing it in low-risk securities has always been a profitable business. Traditionally, central banks have treated the profits in accounting terms as an income stream rather than an asset. Yet putting a capital value on the discounted future income is not entirely outrageous. Indeed, it is odd that what is arguably any central bank’s most valuable asset does not appear on the balance sheet.

    Provided that a central bank’s liabilities are not denominated in foreign currency and are not index-linked, the present value of seigniorage will always guarantee solvency. This is true even where, under conventional accounting, the central bank is lossmaking and showing a deficiency of assets against liabilities. Put another way, it can always print its way out of a solvency trap.
    At the Banque du Liban, one snag is that seigniorage profits have been won at the cost of a catastrophic loss of confidence in the currency. Lebanon’s economic crisis has rocked the financial system, the government has defaulted on foreign debt and yield-hungry investors have turned tail and fled.
    Steve Hanke of Johns Hopkins University, an authority on hyperinflation, estimates that inflation in Lebanon has been running at what he calls a sizzling 52.6 per cent per month. Since the monthly inflation rate has exceeded 50 per cent for 30 consecutive days, it now qualifies as a hyperinflation, he says.
    A second snag is that the seigniorage asset that the bank has chosen to record on its balance sheet is completely illiquid. Finance ministries cannot cash in the value in a crisis by selling equity in the bank — too bad in the Lebanese case, where the government’s debt mountain stands at over 170 per cent of gross domestic product.
    Another aspect of central bank profitability that entails an Alice in Wonderland approach to accounting is the biggest liability in the balance sheet, which is money. Yet to call this a liability risks what Winston Churchill called a “terminological inexactitude”. This lie is because, in a fiat system where the currency is not backed by gold or some other valuable asset, central bank money is irredeemable. While it is undoubtedly an asset of the holder, the holder cannot go to the central bank and demand that it pay up on its IOUs.
    The significance of all this for the developed world concerns what is happening to the net present value of seigniorage more generally. For the big central banks, quantitative easing after the 2008 financial crisis caused seigniorage revenues to surge as they expanded their balance sheets. Meanwhile, the present value of the future income has soared because it is being discounted at ultra-low interest rates. The lower the rate, the higher the capital value.
    Willem Buiter, former Citigroup global chief economist, has shown that with today’s levels of nominal and real interest rates, it is easy to arrive at infinite quantities for the net present value of future seigniorage.
    This sounds like super-solvency, which would be very reassuring. But interest rates can go up as well as down, and one day they will. The climate of moral hazard surrounding the central banks’ unconventional measures since the financial crisis may receive encouragement.
    Since 2008, the public sector and non-bank corporate sector’s borrowing has rocketed in the big economies. This underlines that the response to the financial crisis, and now the pandemic, continues the asymmetric monetary policy that has prevailed since the late 1980s. The US Federal Reserve has established a pattern of bailing out markets when they collapse, but failing to cap them when they fall prey to bubbles.
    Meanwhile, through asset purchase programmes, central banks have joined in the search for yield that they themselves prompted, buying risky assets such as corporate bonds and, in the Bank of Japan’s case, even equities. We know they can print their way out of trouble. But a real risk is that what is left of their independence will be under threat when trouble next strikes, as it surely will.
    [email protected]
     
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