PracticeAccounting FirmsNo laughing matter

No laughing matter

Next month sees the first anniversary of Enron's collapse. The energy giant's demise also spelled the end of Andersen and, for many, the reputation of accountants everywhere. But, could notoriety become a good thing?

Do some accountants hanker for the good old days when they were depicted as pedantic bores on Monty Python’s Flying Circus?

Humour is often a guide to public perceptions. Jokes used to paint accountants as charisma deficient nerds – an extrovert accountant is one who looks at your shoes rather than his when talking to you.

Now comedians and cartoonists pillory them as dangerous or untrustworthy.

A recent Private Eye cover had Osama bin Laden giving up terrorism in favour of becoming an accountant. The latest crack going round boardrooms is: ‘The trouble with accountants is that the 99% give the 1% a bad name.’

Even Accountancy Age’s very own Colin was languishing in a US gaol after being seized by immigration officials and searched in a place where the sun doesn’t shine for a concealed mini calculator.

No wonder John Humphreys, Radio 4 Today’s tough-talking anchorman, told this year’s ICAEW annual conference in the summer that ‘accountants must wish back to a time when the profession was boring’. But not everybody sees the shift in accountants’ image as a laughing matter.

Peter Wyman, ICAEW president and a partner at PwC, admits the profession’s image has suffered.

‘It would be ridiculous to say otherwise,’ he says. But he believes it’s not all bad news. ‘The publicity has raised the profile of the profession and has blown away the dull very boring Monty Python image at a stroke. That’s something we’ve been trying to do for years without any success.’

Charles Tilley, chief executive of CIMA, says: ‘I think accountants’ image has been tarnished but the problem is similar to a few football fans ruining it for the majority. Some accountants have undermined people’s confidence but the vast majority are doing a very good job.’

But even Tilley admits the shift in image has reached ‘the man on the Clapham omnibus’. He was walking down a street and overheard a couple of scaffolders talking about how an accounting scandal would affect their pension fund. ‘People are thinking and joking about it in a way that’s very different to how they’ve done historically.’

The trouble for the profession is that once an image takes hold it’s very difficult to shift. That’s particularly true when the image is reinforced by the way accountants are portrayed in the tabloid press and popular culture – tarring accountants in practice and in business with the same brush.

That might not be so bad providing the companies who pay the bulk of the profession’s bills can sort the reality from the urban myth. But even among these, there are murmurings of concern. The British Chambers of Commerce has 135,000 member companies, most of which use small to medium-sized practices for their accounting needs.

Sally Low, BCC’s head of policy, says: ‘People are more aware of potential difficulties and problems that can occur when using accountants.’ She says the effective antidote is a long-term trusting relationship between a business and its accountants. Most small accountancy practices won’t have run into problems with clients, she says. ‘But they must be aware there has been a wavering in the terms of trust in the profession,’ she adds.

Many of the Confederation of British Industry’s members use the services of either the Big Four or one of the larger mid-market players. Clive Edrupt, a member of the CBI’s company affairs group, sees the recent problems mostly stemming from the United States.

Has there been a shift in perception about accountants in the UK? ‘No,’ says Edrupt. But not all the CBI’s member companies will be quite so sanguine, especially those that had to elect new auditors after Arthur Andersen imploded.

Other big-company FDs are concerned about less auditor choice at the top end of the market. Although there has been no rush of new laws to police financial management in the UK, such as the Sarbanes-Oxley Act in the US, the industry’s leaders believe the various reviews and reforms under way, such as the proposed Investigations and Discipline Board, should restore public confidence.

But the industry still has well-informed critics. Earlier this month, SFO director Rosalind Wright warned accountants they should be more vigilant in dealing with fraud and money laundering. Criminal intelligence service statistics showed half of money laundering cases involved funds handled by either an accountant or a solicitor.

Prem Sikka, professor of accounting at the University of Essex, expects more accounting and auditing scandals in the future, although not necessarily on the Enron scale. ‘I don’t see much hope of arresting the downward spiral, mainly because I think the auditing model is flawed,’ he says.

‘What the model says is that one bunch of capitalist entrepreneurs, accountancy firms, can be expected to regulate another bunch of capitalist entrepreneurs. In both cases, their success is measured by fees and profits. The public doesn’t form any part of that equation, yet the whole thing is held out as if it was for the public’s benefit.’

Wyman believes one positive outcome of accountants’ new notoriety is that people want to learn more about what they really do. ‘People who know me well but not through business think I sit in an office and spend all my waking hours pouring over ledgers. I think this has opened their eyes a bit.’

The harsh fact is that Enron et al has opened quite a few eyes. They won’t be closing in the near future. The question is whether accountants can handle an enhanced level of sustained scrutiny they won’t have known – or, welcomed – in the past.

Whatever the future holds, it won’t be boring.

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