Former chancellor demands action against bank auditors

Former chancellor Nigel Lawson has demanded to know why the government is not
suing the auditors of collapsed banks.

Lord Lawson was questioning financial services secretary Lord Myners during
House of Lords Question Time when he made his demands.

He claimed there was a precedent for such action

‘When Johnson Matthey Bankers went bankrupt a quarter of a century ago, I
authorised the Bank of England to sue the auditors. It did so and won. Why are
the government not doing the same with the companies that they have had to bail
out?’

Lawson’s comments came after the former Tory party chairman Norman Tebbit
had launched an attack on auditors.

Lord Tebbit asked the government to look at the issue of competition among
auditors.

He said: ‘How have the auditors managed to stay out of the firing line? Many
people bought shares in these banks on the basis of the published accounts that
had been certified as accurate by the auditors.

‘Will the government look at audit practice and at there being so few large
firms of auditors with large clients, which makes them vulnerable to pressure
from the clients?’

The profession was then only partially defended by Myners, financial services
secretary to the Treasury, who said auditors had questions to answer.

He said: ‘In some ways, in classic business theory, the fact that there are
few providers and many purchasers ought to provide oligopolistic powers to
auditors.

‘In practice, the auditing profession has been rather good at placing
responsibility for accounts on directors: the audit certificate is deemed fair
and reasonable on the basis of assurances given to auditors by directors.

‘One cannot distinguish and separate out entirely responsibilities here, but
the auditing and accounting profession clearly has questions to answer. I am
very pleased that the communique from the OECD finance ministers meeting last
weekend identified the need to get to grips with accounting issues, particularly
around off-balance sheet items and derivative exposures, which are at the core
of many of these accounting problems.’

Partners from PwC, auditors to Northern Rock, appeared before the Commons
Treasury Committee last year to defend their work.

The committee made no major criticisms in its report but expressed concern
about ‘comfort letters’ written by the firm.

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