Opinion - In the bad old days of audit.
One of the standard lines from senior accountants whenever an audit scandal raises its ugly head is that the events under scrutiny all happened years ago in the bad old days.
Standards, they say, have improved over the last decade or so and such things do not really happen any more.
But recent events show this is not the case. It is true that old corporate disasters such as Maxwell and Barings continue to hit the headlines as the various enquiries and court cases rumble on. But new cases have also arisen.
The latest is at SSL International – famous for Marigold gloves and Durex condoms – which over the last few weeks has revealed accounting irregularities worth tens of millions of pounds.
And the company has indicated that fraud is possible.
Investigations are ongoing, but the clean audit report given by Arthur Andersen to its accounts for the year to 31 March, 2000 is likely to come under inspection. And Ernst & Young still faces scrutiny over its audit reports on Equitable in a saga where the risk to the insurer’s financial well-being was very much in the public eye.
Investors and members of the public will be hoping that the bad old days of audit have not returned to haunt us.
Partners – a question of trust Chantrey Vellacott’s clash with its former partner David Montgomery and his new firm Kingston Smith raises some crucial issues for practising accountants that cannot be overlooked.
Montgomery is being sued by Chantrey Vellacott for damages because he allegedly attempted to persuade old clients to move with him when he left last November for his new job.
His predicament raises a key question about who owns the clients. For a client the question is who do you put your trust in – the firm or your contact partner.
There is a case for arguing that accountancy is more than just an amorphous mass of technical skills and qualifications. Crucial to the job is an ability to win and retain clients.
One thing is for sure. That a firm should be seeking damages is a sure sign that there is real pressure to retain clients. And what has to be clarified for everybody’s benefit is where a partner stands in relation to his clients when he changes firm.
In terms of the overall issue, it may not be the details of Montgomery’s particular contract that are in the end important. But perhaps some fundamental rules need to be established in this area by which all players can abide.