Speaking before the US Senate committee on banking in Washington, Sir David said: ‘No individual standard setter has a monopoly on the best solutions on accounting problems.’
His statements will appear as another dig at the US Securities and Exchange Commission for refusing to give its full backing to international standards while the rest of the Western world’s financial markets are moving towards harmonisation.
Despite praising US GAAP, Sir David said: ‘That does not mean that every individual US standard is the best, or that the US approach to standards is the best.’
Sir David was at the hearing as part of the ongoing investigations into accounting following the spectacular collapse of Enron and the involvement of the company’s auditor Andersen.
Andersen has admitted ‘an error in judgement’ while handling the Enron audit and also shredding documents even after official investigations had begun.
In the UK Andersen has moved to offer reassurance to clients while waiting to see what action might be taken by PricewaterhouseCoopers, administrators of Enron Europe. PwC has said that it could launch litigation but it is unclear whether this would be aimed at Andersen in the UK.
US regulators, standard-setters and analysts are taking a long hard look at how US GAAP is formulated and what went so wrong with Enron, once the seventh largest public company in the US.
‘No national standard setter is in a position to set accounting standards that can gain acceptance around the world,’ urged Sir David. He also took the opportunity to highlight the failings of the ‘rule-book mentality’.
International standards and UK standards are based on principles, unlike US GAAP which is based on detailed rules.
‘Put simply, adding the detailed guidance may obscure, rather than highlight, the underlying principle,’ Sir David told senators. Fears were growing around the world that US GAAP would become the internationally accepted accounting rules if the IASB had not recently gained millions in extra funding for its cause.