Search for a scapegoat

It is perhaps time for our profession to take stock of the governance that
surrounds us.

Not that many years ago, our professional bodies had total responsibility for
entry criteria, examination curricula, members’ conduct, accounting and auditing
standards, ethical standards and discipline. They took this responsibility
seriously and, for the most part, it was effective.

By pointing fingers at dirty deeds done at Maxwell, Barlow Clowes, BCCI, de
Lorean and Barings, to mention but a few, our ruling bodies’ own
responsibilities were gradually, yet inexorably, eroded and subsumed within the
workings of an expanding, faceless standard setting and regulatory machine
supported by consumer-oriented statutes of one sort or another.

The result is that the accountants’ true function as the objective recorder
of market-driven transactions has now lost its neutrality and deeply influences
­ both fiscally and perceptionally ­ the activities it is supposed to reflect.

Preference shares being reclassified as debt in a hitherto healthy balance
sheet, with the consequential treatment of dividends as (tax unrelieved)
interest, is but one of a host of examples of accounting being hijacked by
unrecognisable and incomprehensible techno-speak that dissembles every number of
genuine interest to users.

Standards and ethics are set by a majority of those with no practical
experience of what is involved. This is not to say they are not knowledgeable,
professional, independent and well meaning. It’s just that they don’t seem to
comprehend exactly what each of their pronouncements means in practice.

The profession’s disciplinary process has suffered a comparable fate: conduct
of auditors under scrutiny should be judged by those who have a proper
understanding of what is required of them; in other words, other auditors.

Yet vague concepts of ‘transparency’ and ‘public interest’ have led to
lawyer-dominated tribunals. In a recent controversial case, the only auditor on
the tribunal issued a dissenting finding. Says it all.

Michael Snyder is senior partner at Kingston Smith

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