Investor on the warpath

Guy Jubb, head of corporate governance at Standard Life, has clashed with the
head of the UK’s biggest accountancy firm over audit reports. While Ian Powell,
the head of PwC, insisted that extra detail could not be added to reports for
individual companies, Jubb stood his ground and insisted it could.

What’s happened?

In front of 100 influential accountants, businessmen and regulators, Jubb
attempted to demonstrate that auditors could offer much greater detail in their
audit reports, which he dismissed as “riddled with get-out-of-jail-free
clauses”. His attack climaxed with the dire warning that auditors need to change
or “wither on the vine”.

A seasoned public debater, he does not shy from delivering even the harshest
of views. Indeed, Jubb has a history of expressing spikey comments. Jubb was
part of the Standard Life team that demanded a meeting with the chairman and
chief executive of British Airways when the Terminal Five opening went
disastrously wrong. He publicly scolded the Bradford & Bingley management
when they refused potential buyers access to detailed accounts, and he was
sceptical about the remuneration package handed to the new CEO of Marks &
Spencer. Most memorably of all he lashed out at the bonuses offered to
executives at Shell and was quoted saying he was “dismayed” by the pay package
of former CEO Jeroen van der Veer.

City desk reporters are always ready to call on Jubb because he doesn’t
appear to hold back when he has a complaint to air.

But if his opinion on audit reports was hard to hear it would have been even
more difficult to swallow because Jubb is himself an ICAS-trained accountant,
though his career has been in corporate finance, venture capital and fund
management.

What happens next?

The examination of audit reports will enter a new phase. In effect Jubb’s
forthright comments were the opening salvoes of a wider examination of what
audit reports should be achieving by the FRC. The regulator seems to be on a
mission and clearly wants to involve more investors in the issue, which tunes in
nicely with Jubb’s view that it will take audit committees, auditors and
investors to make real progress on the problem.

Jubb is a member of the Association of British Insurers’ investment
committee. The ABI is, of course, the former home of the FRC’s new chief Stephen
Haddrill and its new investment adviser Peter Montagnon. Jubb, therefore, would
have been articulating a view that is very familiar to the new regulators of
accountancy. And the more that view is reported, the more it is likely to become
accepted wisdom and the easier it will be for the FRC to bring about change that
auditors could find very uncomfortable.