Dismay as auditors call in lawyers
Worried auditors have provoked dismay by taking the controversial step of turning to lawyers for help in interpreting international financial reporting standards.
Link: Tweedie forecasts ‘blood’ over new standards
A Big Four firm, speaking on condition of anonymity, told Accountancy Age that it had resorted to consulting a QC over the interpretation of one of the new standards, in relation to a particular client.
The prospect of lawyers lecturing accountants in their own specialist field provoked an outburst from Sir David Tweedie, chairman of the International Accounting Standards Board.
Describing the idea as ‘ridiculous’ and ‘unbelievable’, he said: ‘What are accountants there for? If we have to go to lawyers, what are we doing? We might as well pack it in. My message to them is: “Get some backbone”.’
But Mark Watson-Gandy, a barrister with Thirteen Old Square and an accountancy specialist, suggested it was a ‘canny move’ by the Big Four firm to turn to law, because the courts only see standards as ‘best practice’.
Lawyers were better-placed than accountants to second-guess judges, even on the interpretation of international standards, he said.
In news likely to further anger accountants, it has emerged the case is not isolated. Jonathan Symonds, chairman of the influential Hundred Group of Finance Directors, said he was ‘aware that some of the accounting firms‘ had consulted barristers.
But Cathryn Cearns, consultant accountant at law firm Herbert Smith, said: ‘I would see that as a very unusual situation, both under UK standards and IAS.’
She added that the use of lawyers by accountancy firms was actually likely to diminish under international standards as their interpretation and enforcement gravitated to international and European level.
Others hinted that the international tiers could fuel uncertainty.