"Ernst&Young" - auditor for Petroleum Industry of Serbia?

Unofficially, "Ernst&Young", one of the world's four largest audit companies, may become the new auditor for Petroleum Industry of Serbia (NIS).

Super-auditor, hired and paid by the Government of Serbia, should be officially appointed by mid-July, so it could finish its part of the job prior to September 30th (when the last deadline for adoption of consolidated financial balance for year 2008 expires).

Special task force within the Government will be formed within the next few days, and it should be led by Dušan Mrakić, the State Secretary in the Ministry of Energy and Mining. As "Politika" finds out, that group will appoint new auditor and it is logical that aforementioned audit company would be hired to review the financial books of NIS, after KPMG had done that, and determine if the Petroleum Industry of Serbia registered 2.3 billion RSD worth of profit, as Serbian side claims, or about 8 billion RSD worth of losses, which is the conclusion reached by previous auditor KPMG.

Concerning the fact that the consortium of "Merrill Lynch" and "Raiffeisen investment" used to be NIS' privatization adviser for design of the privatization strategy and programme, that "Deloitte&Touche" had done the evaluation of the capital just before NIS was taken over by "Gazpromneft", that KPMG had already been hired to audit final balance, and that Russian "Gazpromneft" already cooperates with "PriceWaterHouse Coopers", the only option that remains is that such big and important job be given to audit company "Ernest&Young".

Branko Pavlović, former Director of the Privatization Agency, told "Politika" that the new audit company hired by the Government should be as respectable and strong in business as KPMG.

However, he says that it is unlikely that the new auditor will produce the report different from the one made by KPMG, which means that the Government's insisting on additional auditing of NIS' final balance is its another attempt to postpone resolving of the serious problem. According to him, the Government is trying to avoid responsibility for what had been done with NIS prior to the takeover of that company by Russian majority owner.

When asked if it was possible that KMPG had made mistake in the final report, Pavlović claimed that that was almost impossible and that the Government should be blamed for lousy work, which would be confirmed by the new auditor.

Nikola Martinović, a member of the Administrative Board of NIS, says that, based on the agreement in principal, the name of the new auditor should not be revealed until the new final balance for NIS is done. According to him, KPMG made a mistake because it had not made the list of the entire property of NIS prior to February 10th before they started writing the report.

(Note: complete text is taken over from newspaper "Politika" of July 3rd, 2009)