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Contentions

Auditing Autocracies

This past weekend, in London, I picked up a copy of the Independent and this article about corruption in Afghanistan and, more specifically, the theft of $1 billion from the Kabul Bank caught my eye.

In Iraq, Afghanistan, and elsewhere in the Middle East, the news media focuses on terrorism. Television cameras don’t lie, but they also seldom show the full perspective. Even during the height of the insurgency in Iraq, for example, terrorist attacks were localized and most of the country—Iraqi Kurdistan and the Shi‘i south, for example—remained relatively free from violence. To the American television audience, however, bombs were going off everywhere and it was impossible to walk 100 feet anywhere in Iraq without getting shot.

Terrorism—even at its worst—only directly hurts a small fraction of the people living in Middle Eastern societies, those unlucky to be in the wrong place at the wrong time. Corruption, however, affects nearly everyone—hence the Arab uprisings. Back in 2005, I wrote a piece in Lebanon’s excellent Daily Star on corruption, arguing that the failure of our allies to counter it allows Islamists more fertile ground to recruit.

While I’ve often criticized the Iraqi Kurdish administration for corruption (and received death threats because of my criticism), the Kurdistan Regional Government counters that they have engaged PricewaterhouseCoopers to aid transparency, efficiency, and to combat corruption. Sadly, buried in the article about the massive fraud at Afghanistan’s Kabul Bank was this:

The document points the finger at the former chairman and the former chief executive of Kabul Bank, and criticizes the top accountancy firm Deloitte for not doing enough in response to allegations of corruption at the bank. It also highlights how auditors from PricewaterhouseCoopers (PwC) failed to spot any signs of fraud.

PricewaterhouseCoopers appears to have become to emerging Middle Eastern states what Arthur Andersen was to Enron. The point is not to single out an accountancy firm, however, but rather to highlight how, when it comes to corruption in the region, the niceties of Western accountants sifting through paperwork is never going to work. Firms must recognize this, and woe to those that allow their names to be used as cover for corruption. More importantly, if the region is going to emerge from the disaster which poor governance and corruption has bestowed upon it, there needs to be a serious discussion about corruption and foreign aid. The worst thing that could be done is simply to throw more money at the problem.


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