BusinessBusiness RecoveryGovernment urged to change receivership laws

Government urged to change receivership laws

The government has been urged to consider changing the law to end the conflict of interest that arises when accountants, who report to a bank on the financial state of a client, are then given the job of acting as receiver to the same client.

The call came form Aberdeen Central Labour MP Frank Doran, who raised the issue in the House of Commons after local carpetmaker Richards, went into receivership earlier this week, with KPMG appointed receiver by the Bank of Scotland.

Doran told MPs: ‘I find it very difficult to understand. As a lawyer I am very conscious of the rules of conflict of interest. I have brushed against them myself in the past.

‘Here we have the closest and I think the clearest example of a conflict of interest.’

Doran called on the government ‘to look at this particular practice’ adding ‘I know this is something, which is on the government’s mind because of the collapse of Enron and their relationship with their accountants.’

He said he knew there were ongoing discussion about whether or not auditors should be allowed to do consultancy work.

‘This falls in to the same territory. There are clear conflicts of interest. It is not good for the accountancy profession. It is particularly not good for manufacturing in this country,’ he said.

Doran claimed the RBoS had a policy of not using the same accountancy firm to do both reporting and possible receivership work at a company whose value exceeded £1m – in this case applicable to the Richards receivership.

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