The debate surrounding the conflict between investigating accountant and receiver continues. Bankers rely upon the professional judgement of reporting accountants to decide a business’ fate – it is perverse for the expert witness to be the executioner as well.
According to figures provided by the Independent Banking Advisory Service, 2,200 more firms would be trading every year, and 44,700 jobs saved, if all UK banks followed the example set by the Royal Bank of Scotland and separated the roles of investigating accountant and receiver. These figures make an unarguable case for change. It is for the UK’s economic well-being that MPs are starting to argue against this practice.
There is another aspect which has not yet been properly aired – I have seen both poor advice and lack of advice given by reporting accountants to companies, which has led directly to those companies failing, and the accountants then being appointed receivers. It is a strange situation where a professional firm can benefit from providing poor advice.
In his article (1 April, page 12), Scott Barnes of Grant Thornton makes reference to the Heritage plc case, where his ‘disgruntled guarantor’ (a director) was not shown a report produced for Lloyds Bank on the day he made a substantial investment. The report was never shown to the company or directors. Subsequently, the bank appointed Grant Thornton as receivers, even though the directors objected most strongly, because of a clear conflict of interest since the firm had previously been tax advisers. I have heard of similar examples.
Scott Barnes draws an analogy with other professions. I am sure nobody would allow a surgeon who had left a scalpel in an arm to conceal that negligence by amputating the arm.
The sooner all the temptations of the dual roles are removed, the better for all the companies that could continue to trade, as well as the profession itself.
Rudi Vis, Labour MP for Finchley and Golders Green, is pursuing this issue in the Commons.
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