One of the great failures of accountancy education is that it does not prepare accountants to meet emerging challenges. They are instead encouraged to rely on a plethora of official answers, such as accounting and auditing standards.
All accounting problems arise from the social, economic and political context. Virtually everyone agrees that the world’s affairs have become more global. Western economies are shifting from industrial to finance capitalism. Unlike the previous era, ‘risk’ itself is now seen as a business opportunity. It is packaged, bought and sold, just like any other commodity.
Derivatives and hedge funds enable companies to place ‘clever bets’ on the movement of interest rates, exchange rates, inflation and sundry. These can only make money if there is permanent instability and volatility in the markets.
The above scenario has huge implications for auditing and accounting for a whole range of things from pensions, financial instruments, contingent liabilities and business solvency. Yet most accounting and auditing textbooks are oblivious to it. There is not even recognition that many of the scandals (for example, BCCI, Yamichi, Barings) are connected with the world of finance.
Plenty of space is devoted to verification of inventories and cash counts; some even urge auditors to observe the weekly distribution of wages. But little attention is given to the global economy or emerging problems.
Case studies of auditing and accounting failures might cause reflection on outdated accounting technologies, but they rarely form any part of professional examinations.
Professional accountancy courses seem to be more concerned with training greyhounds in techniques, and ignoramuses in any social analysis. Many emphasise the latest technical material rather than reflect on the changing social and economic environment. The result is that accounting and auditing failures continue to make headlines. Perhaps the best way forward is to take the education role away from the accountancy trade associations altogether.
Jim Cousins is Labour MP for Newcastle Central
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