Time to restore public trust in the profession
Accountancy faces a crisis. It may be one of perception but it is a crisis nonetheless.
Much of the regulatory and business community believes the Big Five’s integrity can be compromised when providing audit services to clients.
It is a familiar and largely unsubstantiated argument. But the scale of the problems hurting the profession’s reputation, in the wake of Andersen’s admission of errors in its audit of Enron, is unprecedented and demands decisive action.
By and large auditors do a good job and there is no evidence of an auditor ignoring wrongdoing and putting a firm’s interests before shareholders’.
Accountants are seen as dogged and upstanding but financially self-interested.
The latter lies at the root of the current problem. The profession argues its interests are the same as the market’s: remuneration depends on the quality of work and ensures integrity.
But outsiders see it as a handicap: auditors could face pressure to ignore ‘difficulties’ rather than risk a multimillion-pound client relationship.
The profession must fight back. Publicly. In response to the audit scandals of a decade ago, accountants improved checks and balances – but largely behind closed doors. And in response to last year’s SEC drive to persuade firms to sell off consulting arms, firms failed to trumpet the moves as driven by transparency.
The profession must act swiftly and boldly. Greater transparency – at least publishing annual reports – is a must. But no cows should be sacred.
Publicly calling for deeper disclosure in auditor reports should be supported and even – gulp – compulsory rotation of auditors considered.
Andersen CEO Joe Berardino has pledged to restore the public’s trust in his firm. But every audit firm should play its part.