Pressure cooker of failing FDS

How many more revelations of finance professionals sharing responsibility for misleading information are waiting to burst onto the front pages?

I raised the question with a group of finance directors last week, with quite depressing results. There has always been pressure to present results in a favourable light, but that pressure has never been greater.

The need to produce analysis to justify a certain course of action has always existed. FDs of quoted companies come under pressure to keep the City happy by producing results ‘in line with expectations’.

In private companies the onus may be on keeping profits low to try and minimise tax bills. Accountants in practice are simply under pressure from clients.

Accounts are as much art as science. Specific treatment of some items is not clear-cut and an element of judgement is needed because there is no right answer. With forecasts, assumptions are all. That said, there are prudent assumptions and optimistic assumptions, but no one right answer.

But there is a point after which an answer is definitely wrong.

Every one of the FDs in my discussion group had either been put under pressure or knew someone who had. Some admitted to having given in. ‘If I hadn’t they’d have found someone else who would,’ they said.

But they all had one thing in common – they all wanted to be able to say ‘no’ if put under pressure.

How should we as a profession reclaim our standards and insist they be respected by employers and clients? Perhaps we need to train future FDs for these pressures?

Perhaps our professional bodies need to be more vocal on the need for standards? Perhaps they should also provide more confidential advice to accountants facing sometimes impossible decisions?

Or is it, as one finance director put it, just part of the way business is done today?

  • Pat Scott, co-founder, partner and executive coach with Woodbridge.

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