The government’s manifesto promises to review the liability laws, and professional regulation is now being considered. Each will influence the kind of profession we will leave for future generations. Without liability reform, the profession could become a low-value compliance function – the same with heavy-handed regulation.
No regulatory system is entirely satisfactory. The regulated will complain that their regulators do not understand the business. Those whom the regulator represents will claim regulatory capture.
The Swinson proposals for external oversight of continued self-regulation strike the right balance for the right purpose. The current mood is to support self-regulation of companies.
It would be lopsided to impose a heavy hand in the regulation of auditors as an alternative to a companies regulator.
Regulation is an inadequate proxy for good business management that understands the needs of its customers. In our case, the public interest is at the forefront.
Even within the profession, some will say regulation should be externally controlled. Then, so the theory goes, the profession would have greater credibility. We would all sign up to the objective. But utilities or financial service companies do not gain respect because they have a regulator, but because management gets things right.
A good audit depends on an investigative mind. Regulators can regulate only through regulations, encouraging a ‘safer with the rule’ mentality.
Yes, we know the world is changing. Our competitive society puts increasing strains on individuals in all professions. Accountability, through the Swinson proposals, is right and proper. But a profession unable to regulate itself is undeserving of the name.
The accounting profession must be agile to remain relevant to the changing business world, not dependent on a regulator for its next step. Regulation, as an alternative to leadership within the profession, is not a good legacy for future generations.
The Swinson proposals deserve the wholehearted support of the profession to make them work in practice.
Roger Davis is head of professional affairs at PricewaterhouseCoopers.
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