In the same week, news of the first ‘billion pound annual fee income’ hit the headlines.
Self-regulation may not work, even when powerful organisations such as the SEC, are lurking behind the accountancy bodies. The big firms are too powerful to be regulated by the accountancy bodies, the relationship being cosy rather than adversarial.
In the UK, professional bodies have never been able to combine their regulatory and trade association rules. At the heart of the debate are conflicting approaches to auditor independence.
In return for state monopoly of external audits of corporations, the public believes auditors would behave in a watchdog role. Public welfare and corporate governance could be combined. But auditors are at the least glamorous outpost of global accountancy empires that are keen to increase their fees and profits. Pressures, especially from global companies, are intense. Auditor independence is just another commodity with a low price.
Legislators faced with the Limited Liability Partnership Bill will have to tackle these issues. Nor can difficulties be resolved by laying a one-way duty to avoid conflicts of interest only on the audited, and not on the auditors themselves.
Independent regulation and the threat of direct action can create the climate to set tough rules. Yet, in a climate of deregulation, and competitions between regimes of regulation, governments lack the will to take action.
But the issues will not go away. Audited financial information affects stakeholders across the world through its impact on dividends, taxes, wages, job losses, investments, stock markets and so on. That is especially so in the UK economy where dividend and interest income flows are the largest single component of the positive side of the national trade accounts.
Complaints will increase and the lively start to the millennium will continue.