First Big Five move to defend profession after Enron
The first public moves by the Big Five to defend the profession in the wake of the Enron scandal have been made by the UK managing partner of PricewaterhouseCoopers.
Speaking candidly following the spectacular $80bn collapse of Enron which involved the company auditor Andersen, PwC’s Kieran Poynter told AccountancyAge.com: ‘An auditor would have to be mentally ill to deliberately do an audit wrong. You would not knowingly run that risk.
‘Bad audits cannot cause company collapses. A big problem is the lack of public understanding of the audit process.’p>Poynter said: ‘We have a pretty low tolerance of [abuses of auditor independence].’
Since Enron’s collapse Andersen have admitted they made errors while working on the company’s accounts and shredded documents relating to the audit.
Poynter’s remarks form the first fight back by the accountancy profession after taking a heavy battering following Andersen’s shocking admissions.
Rodger Hughes, head of assurance and business advisory services at PwC, gave his managing partner his full support and insisted that few audit failures result from dishonesty. He said there was growing concern that the profession was already being hurt by commentators ignorant of the real state of auditing.
He said: ‘Of audit failures, how many are due to a lack of integrity? They are miniscule. I’m concerned that already ill-informed comments have the potential to damage the profession.’
The partners said there were strict safeguards within their firms to ensure auditors’ integrity and avoid damage to a firm’s reputation.
Hughes pinpointed bullying and intimidation as the greatest threats to auditors. But he said a tiered process in which auditors reported to partners, who have no involvement with the client, would ensure impartiality.
In the UK, PwC, the world’s largest audit firm, signs off accounts every 2 minutes.