New NAO chief defends audit of banks

The National Audit Office chief designate, Amyas Morse, has won the support
of the Commons Public Accounts Committee after launching a public defence of the
role of the auditors who signed off healthy financial statements for banks now
in need of massive state support.

A special report from the committee said it was ‘satisfied’ he is ‘highly
suitable for the post.’
Morse was challenged over the role of the audit arms of major accountancy firms
in the banking crisis by Labour critic Austin Mitchell, who said he would be
‘worried’ and ‘very suspicious’ if what he described as ‘the ethics of the big
accountancy houses’ came into the public sector.

Morse said that if the banks all had clean audit reports ‘ethics really do
not come into it,’
insisting the reports would have been ‘on a finite basis on the
evidence available’.

He told the committee at a special informal confirmatory hearing: ‘They are
not supposed to predict what happens if there is a major financial slump or a
crisis of the kind that we have got. They are a true and fair view based on the
assumptions that are appropriate at
the time.”

Mitchell has put down Commons motions highly critical of the alleged role of
banks and major accountancy firms in tax avoidance and evasion.

Morse made it clear under cross-examination that he is skeptical of excessive
hospitality, attending only ‘three or four’ private dinners or lunches at the
RAC Club in the past year as Commercial Director at the Ministry of Defence, the
job he leaves to join the NAO, turning down 40 of 51 invitations he received.

He said he did not regard this as excessive, adding: ‘I prefer doing business
over a sandwich at my desk in the office.’

Morse said he was ‘neutral’ on the merits of PFIs now coming onto state
books, observing that in current circumstances in the capital markets he
suspected they would be used ‘rather rarely’.

He backed MPs’ demands for the NAO to have free rein looking at the books of
the BBC instead of having to agree topics for investigation and to add the
exempt Financial Services Authority to the NAO’s responsibilities.

He promised to take a tough line with his current colleagues at the Ministry
of Defence where he claimed his direct responsibilities extended only to signing
the contract for the two new aircraft carriers and otherwise limited to setting
professional standards in espect of civil servants engaged on other programmes.

And he suggested the NAO may move to ‘get more out of financial regulatory
audits’ as well as value for money work by ‘getting a deeper view of the
entities we are auditing’.

Morse, who qualified at Arthur Young in Scotland, and rose to become global
managing partner (operations) at PricewaterhouseCoopers, expects to take over
from current C&AG Tim Burr in June.

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