There appears to be no evidence of wrong doing in connection with Northern
Rock. But the grilling of partner Richard Sexton by the Commons Treasury select
committee revised some questions. Namely, what is the purpose of audit and how
best can auditors clarify what their task is when working with complex
institutions like banks?
Sexton was reasonably clear that his role was to provide comfort on the
financial statements. The audit was not about giving public testimony on the
strategy adopted by the bank and the risks involved. That was a job for
executives and internal auditors. Analysts themselves should have known what was
going on, though I don’t recall any of them raising the alarm.
It is a measure of the public misunderstanding of audit that fingers are so
readily pointed at auditors. But auditors are partly to blame. While many will
privately agree they have failed to communicate their responsibilities, there is
little evidence of anyone putting that right. If you want understanding, you
have to help the process and auditors have avoided publicity for too long.
That’s the real problem here.
uditors have been guilty of allowing people to think what they want. There’s
a certain professional timidity, disguised as client confidentiality, that
If you really want auditors to deal with problems such as those at Northern
Rock, you have to redefine their role. Until the communication improves,
auditors can expect to remains everyone’s favourite whipping boy.