Audit: trust the smaller firm

I was intrigued to learn that Gordon Brown has announced that all MPs’ receipts for expenses claimed over the last four years will be independently scrutinised.

Presumably, this exercise will also be conducted by the new independent auditing body, which is to be policed by professional external accountants and is expected to cost £600,000 per annum.

However, I am not sure if the cost of effectively auditing possibly up to 31,000 expense claims, going back to May 2005 has been taken into account because the budget seems to only cover future expense claims (which I have a feeling will be substantially down on past years!).

The big question on my mind is who will get the lucrative contract to audit these expenses and will they really want it? Let’s face it, any firm of accountants that zealously goes into expenses in depth could make themselves non too popular when it comes to awarding lucrative government contracts in the future.

Can you imagine hauling Gordon Brown or David Cameron over the coals over their previous expense claims and then suggesting you are the right firm for the next big contract? So why not award this type of work to accounting firms that do not carry out any government work? Surely, it is only this type of firm that can be considered truly independent in carrying out this type of exercise?

While auditing MPs’ expenses will not be as easy as it may seem, The Green Book published in July 2006 helps by stating that expenses can only be claimed if they have been incurred wholly, exclusively and necessarily for the purpose of performing parliamentary duties.

Any accountant worth his salt knows that claiming for horse manure, a bath plug, a duck pond or even for moat repairs are unlikely to fulfil the ‘wholly, exclusively and necessarily’ test, particularly when The Green Book goes on to advise MPs that ‘your additional cost allowance claims are above reproach and there can be no grounds for a suggestion of misuse of public money’.

So, while I have no doubt that the new independent auditing body will be staffed by one of the Big Four, isn’t it about time that an exercise of this type should be given to one of the smaller or medium-sized accountancy firms that are more than capable of carrying out this assignment?

Lynton R Stock is a partner at Shelley Stock Hutter LLP