New NAO chief defends audit of banks

The National Audit Office chief designate, Amyas Morse, has won the support of the Commons Public Accounts Committee after launching a public defence of the role of the auditors who signed off healthy financial statements for banks now in need of massive state support.

A special report from the committee said it was 'satisfied' he is 'highly suitable for the post.'
Morse was challenged over the role of the audit arms of major accountancy firms in the banking crisis by Labour critic Austin Mitchell, who said he would be 'worried' and 'very suspicious' if what he described as 'the ethics of the big accountancy houses' came into the public sector.

Morse said that if the banks all had clean audit reports 'ethics really do not come into it,'
insisting the reports would have been 'on a finite basis on the
evidence available'.

He told the committee at a special informal confirmatory hearing: 'They are not supposed to predict what happens if there is a major financial slump or a crisis of the kind that we have got. They are a true and fair view based on the assumptions that are appropriate at
the time."

Mitchell has put down Commons motions highly critical of the alleged role of banks and major accountancy firms in tax avoidance and evasion.

Morse made it clear under cross-examination that he is skeptical of excessive hospitality, attending only 'three or four' private dinners or lunches at the RAC Club in the past year as Commercial Director at the Ministry of Defence, the job he leaves to join the NAO, turning down 40 of 51 invitations he received.

He said he did not regard this as excessive, adding: 'I prefer doing business over a sandwich at my desk in the office.'

Morse said he was 'neutral' on the merits of PFIs now coming onto state books, observing that in current circumstances in the capital markets he suspected they would be used 'rather rarely'.

He backed MPs' demands for the NAO to have free rein looking at the books of the BBC instead of having to agree topics for investigation and to add the exempt Financial Services Authority to the NAO's responsibilities.

He promised to take a tough line with his current colleagues at the Ministry of Defence where he claimed his direct responsibilities extended only to signing the contract for the two new aircraft carriers and otherwise limited to setting professional standards in espect of civil servants engaged on other programmes.

And he suggested the NAO may move to 'get more out of financial regulatory audits' as well as value for money work by 'getting a deeper view of the entities we are auditing'.

Morse, who qualified at Arthur Young in Scotland, and rose to become global managing partner (operations) at PricewaterhouseCoopers, expects to take over from current C&AG Tim Burr in June.