Almost one in three finance directors are unable to be objective about their company accounts, according to a survey that has prompted major concerns at a time when auditing and accounting standards are under government review.
The figures, revealed by the latest Accountancy Age/Reed Accountancy Personnel Big Question survey, have also reinforced worries that fat cat pay cheques may be clouding the judgement of directors and could be undermining the impartiality of FDs.
Given recent failures, profit warnings and restatement of accounts by companies, the results indicate major work is needed in corporate governance if the public is to be reassured about the integrity of accountants.
The survey showed 29% of FDs thought it was impossible to be objective about their company’s accounts.
Although almost two in three thought there was no issue around impartiality, many fear the statistics reveal a major problem. ‘You need to ensure directors are remunerated in a way that their objectivity isn’t compromised,’ said Andrew Harding, UK executive director of ACCA. ‘This demonstrates why there is an ongoing need for auditors, but the issue of corporate governance needs looking at.’
Harding said the offering of share options to directors is a major stumbling block to ensuring impartiality in the accounting process. Fred Edwards, chief executive of virtualfd the financial outsourcing company, said that even very senior people in a business faced huge internal and external pressures to stretch figures.
‘Accountancy doesn’t really prepare people to be FDs, even though most come from an accountancy background.
We need training that could enable FDs to stand their ground against the chief executive and other directors when tough decisions are to be made,’ said Edwards.
ICAS said regulation would not solve the problem.
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