The Securities and Exchange Commission of Pakistan (SECP) has fined Pak-Kuwait Takaful Company Ltd. Rs1 million for misstatements and showing improper accounts.An order recently passed by the SECP’s Commissioner Insurance Fida Hussain Samoo highlighted that the board of the company was never aware of the irregularities.
The order said that after the issue was pointed out, the board of directors of Pak-Kuwait Takaful appointed multinational professional services firm Ernst & Young in December 2014 to assess reserves against claims and examine paid claims of the company.
Ernst & Young found that out of the selected sample of 122 claims complete documents of 32 claims were not available which amounted to Rs1.91m.The remaining 90 claims showed that documents were altered, claims and supporting bills of workshops were generated before the date of accidents, some details of policies were incorrect and some claims were even approved on Sundays.
According to the SECP’s order, the management of the company carried out an analysis of the Ernst & Young’s report to identify the full impact of irregularities and found that there were no recoveries of contributions amounting to Rs31.1m nor were they supported by adequately documented policies.The report also said that there were no recoveries amounting to Rs249.5m and no specific reason was identified for the non-recovery.
The order referred to a letter by the statutory external auditor of the company, KMPG Taseer Hadi & Co. Chartered Accountants, dated April 24, 2015.The letter stated that the practice of incorrect reporting had been going on since 2002 in order to present positive results and to maintain solvency requirements, transpiring that business of the company had not been managed in a sound and prudent manner and with integrity.
During the course of inquiry, the SECP was informed that appropriate action had been taken against those responsible for the misconduct and both the CEO and COO of Pak-Kuwait Takaful were removed in May 2015.The commission has imposed a fine of Rs500,000 on CEO Imtiaz Ahmed Bhatti and the same amount on the company.
“The investors, stakeholders and other end-users of the financial statements look for true and fair information in all reports of the company,” SECP Commissioner Mr Samoo said in his order. “Financial statements are one of the underlying basis for the decision-making and may lead to wrong conclusion.”Those who have been fined can file an appeal against the order by the end of this month.
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