UKRAINE: CONTROL & AUDITING DEPARTMENT CAUTIONS STATE ENTERPRISES AGAINST POSSIBILITY OF NON-OBJECTIVE APPRAISAL OF THEIR ASSETS BY ERNST & YOUNG

Ukrainian News Agency, Kyiv, Ukraine, June 26, 2008

KYIV - The Main Control and Auditing Department cautions state enterprises against significant mistakes that might have been committed by Ernst & Young LLC (Kyiv) during appraisal of their assets. Ukrainian News learned this from the report of the department.

"To prevent the possibility of major errors in appraisal of assets of state enterprises, the Main Control and Auditing Department considers it reasonable to caution the heads of enterprises of the government sector of economy against possible significant mistakes in asset appraisal conducted by Ernst & Young LLC," the report reads.

The department recommends that the State Property Fund examine the adequacy of the company's appraising activity and annul its certificate if necessary.
The department has hopes that the company heads will be more critical in assessment of efforts of their employees.

"The Main Control and Auditing Department hopes that the management of Ernst & Young LLC will make a more critical assessment of their employees in order to restore their image," the report reads.

The department also criticizes the statement of Ernst & Young that its appraisal of fixed assets of the State Railway Transport Administration
(Ukrzaliznytsia) in 2007 was objective.

As Ukrainian News earlier reported, chairman of the Main Control and Auditing Department Mykola Syvulskyi announced on June 17 that during an audit of financial and business operations at Ukrzaliznytsia it was established that Ernst & Young appraised the five-story administrative building of the Prydniprovska Railway Company with a total floor space of 19,600 square meters, situated in Dnipropetrovsk downtown, at UAH 0.4 million in 2007.

Meanwhile, the residual value of the building was UAH 5.1 million, and in the second half of 2006 the railway administration performed capital repairs in the building that cost it UAH 19.9 million.

Syvulskyi said that the State Property Fund department in Dnipropetrovsk region qualified the appraising report by Ernst & Young as not corresponding to the requirements of the regulatory acts on property appraisal.

The Main Control and Auditing Department also requested the State Property Fund to revoke the appraising license of Ernst & Young. Ernst & Young later said that its appraisal of Ukrzaliznytsia's fixed assets in 2007 was objective.