Many years ago I used to have responsibility for civil serviceudit society’ where risk in business is downgraded and those who ‘check’ receive better rewards and higher esteem than those who offer creativity and innovative ideas. pay.
After a good deal of grief and effort, we worked ourselves into a position where pay could be differentiated between different skills and disciplines as well as between geographical areas and merit.
One of the issues constantly raised was that accountants and auditors should be better paid than the more ordinary civil servant. The argument was that this is what the market looked for. There may have been something in that, but the civil service wasn’t having any of it. The line we took, as expressed by a very formidable Treasury permanent secretary of the day, was that ‘checkers must never be paid more than doers’.
You would not get away with such an argument today. Indeed, the government does not get away with it; the head of the government accountancy service, the comptroller and auditor general and the head of the Audit Commission, are among the best paid officials in the public sector. They earn more than those who run the health service, head-up the big departments of state or, indeed, sit as members of the Cabinet.
And, of course, the public service is not alone in this – senior partners in accountancy firms get more pay than the heads of most of the organisations they audit.
This is just one effect of the so-called ‘audit society’. Michael Power of the London School of Economics has just written a fascinating book under this very title. And he is no starry-eyed academic; he is a member of the English ICA and has worked with Coopers & Lybrand, no less, for a number of years.
Other reports have also drawn attention to this audit explosion. One projection suggests that if you add bodies like Ofsted and the Health and Safety Executive to the more formal audit bodies, such as the National Audit Office and the Audit Commission, then there will soon be more checkers and auditors in the public sector than there are actually doers.
Michael Power does not go so far, but he still thinks this is a dangerous trend. And he has got to be right. Doing is more important than checking.
To start with, audit is an overhead; or turn it upside down, a barnacle on the hull of society. It costs money. The LSE study suggests the figure for the public sector is #1bn per annum. You could get quite a few hospitals for that. And it costs the private sector too.
Coopers’ audit fees in this country alone are put at #250m per annum.
You could create a good few productive jobs with that.
And, as well as money, there is the resource cost. It cannot be right that so many of our best, most imaginative brains find themselves involved in checking what others do. Choosing to join a big accounting firm rather than a big engineering firm is bad for UK plc.
Another worry is what this trend does for the doers themselves. It sucks creativeness and action out of society.
In Power’s book, he makes the point that when we talk about the audit society, we are actually talking about the auditee society. That is to say, we are talking about the creation of a nervous, looking-over-my-shoulder, risk-averse society.
Auditors themselves, of course, undertake little risk – one doesn’t often find auditors in the dock, although this does not prevent incessant moaning from them about ways to get out of liability.
Non-action is always easier to defend than action. But those who actually have to take decisions and do things are getting twitchy. They are starting to play safe. People are keeping their heads down, and innovation suffers.
A hundred years ago, Mr Morris would have been advised by his accountants to stick to bicycles instead of going into motor cars, which was too risky.
Fifty years ago, Alexander Fleming would have been told to stop playing around with penicillin because the audit committee would want to know exactly where the money was going. And today in government, for instance, the private finance initiative is being strangled by fears of upsetting the National Audit Office or Public Accounts Committee.
An auditee society is just what we do not want, but it is what we seem to be getting. It is time we started to live with a few risks and sent the checkers back to doing.
Sir Peter Kemp is chief executive of the Foundation for Accountancy and Financial Management.