PracticeConsultingView from the House – 5 Nov

View from the House - 5 Nov

By Jim Cousins

Just how long does it take an elephant to produce something?

It certainly is a lot less than the time taken by the English ICA to investigate cases of real or alleged audit failures and malpractices.

Still no reports on audit failures at Maxwell, Levitt, Polly Peck, Resort Hotels, Wallace Smith, Barings and many others. Possibly because all these cases relate to major firms and the English ICA cannot afford to antagonise the major firms, can it?

The English ICA has a habit of waiting until the partners responsible for audits have retired or left the country. Then it becomes macho and frightens them by derisory fines. Despite claiming to be a regulator, the institute offers no compensation to those who suffered from malpractices.

It does not owe a ‘duty of care’ to anyone. This hardly provides any economic incentives to act in the wider social interest.

None of the major audit failures have led to any investigation of the standards of the firms involved. No questions have been asked about the role of the regulators and accountancy bodies in creating an environment where audit failures have become a common place. They do not ask any questions about the routine falsification of audit work by trainees. It is well documented that, rather than working evenings and weekends for little or no pay, many trainees falsify the work.

The instinct of the accountancy bodies is to cover up the failures. After all, they are trade associations. On numerous occasions when the DTI inspectors have pointed to audit failures, the English ICA has argued there was no failure. Yet the institute has failed to publish the results of any of its Investigations Committee’s Reports.

Thus no public evidence has been provided to show how the English ICA arrived at its conclusions, except on one occasion – the English ICA Report on the Agip affair involving allegations of money laundering. It shows the English ICA attached no importance to any evidence sent to it by third parties.

The poor state of affairs is damaging to accountants and non-accountants alike. The only way to deal with it is to transfer all the regulatory powers of the accountancy bodies to an independent statutory regulator. Jim Cousins is Labour MP for Newscastle Central

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