MP attacks 'dodgy auditing' and conflicts of interest
Former Labour MP accuses firms of 'sometimes dodgy auditing' of banks
Auditors accused of ‘dodgy auditing’
A former Labour minister has accused firms of ‘sometimes dodgy auditing’ of
banks, as the fallout from the credit crunch threatens to turn bitter.
Former Labour environment minister Michael Meacher this week complained about
the conduct of auditors during Commons exchanges, as MPs scrutinised the
chancellor’s huge bank support package.
Meacher, a left-wing challenger for Labour’s deputy leadership, said the
purpose of taking public control of a bank should not be ‘merely to stabilise it
before returning it to the private sector’, but ‘to tackle the fundamental
causes of the banking system’s approach to speculative trading and the use of
hedge funds, derivatives, offshore accounting and securitisation, as well as to
the obscure reporting of corporate risk and sometimes dodgy auditing.’
Meacher later told Accountancy Age he thought there were
some issues with conflicts of interest at auditors. He claimed that a number of
firms ‘have commercial relationships with those they audit’ and claimed there
was ‘plenty of evidence that Chinese walls’ within firms ‘are breached’.
He also criticised reports that are overly complicated and lack transparency.
‘One condition of having government money must be that the role of their
auditors must be rigorously independent,’ said Meacher.
Auditors of the major banks being taken into state ownership have made
millions in non-audit fees. RBS paid Deloitte £17m in audit fees and £14.2m in
non-audit fees in 2007.
Lloyds TSB’s audit fee paid to PricewaterhouseCoopers was £12m, with only
£800,000 paid in non-audit fees. The accounts said the non-audit fees related
mostly to corporate finance work.
HBOS, audited by KPMG, paid £8m for its audit and £2.4m on non-audit work,
including tax, IT, corporate finance and other miscellaneous services.
Deloitte said: ‘There is a comprehensive framework of standards which set out
what work can and cannot be done. Deloitte follows these standards.’
KPMG declined to comment on Meacher’s statement, while PwC had not commented
at the time of going to press.