BusinessCompany NewsYes, it could happen here.

Yes, it could happen here.

Enron, could it happen here? That was, essentially, the question posed by Financial Services Authority chairman Sir Howard Davies at the World Economic Forum in New York at the weekend.

His answer? A simple yes.

Sir Howard’s conclusion was not based so much on accounting standards, which he acknowledged are very different between the UK and the US, but on the failure of auditors to prevent other – albeit smaller scale – corporate collapses on this side of the Atlantic: the likes of Maxwell, Polly Peck, BCCI and Barings.

Sir Howard was sober in his assessment. Yes, UK rules are tighter than in the US, he acknowledged. But no, the FSA could not afford to ignore calls to tighten them still further. How? Well, he and his colleagues would be looking at requiring rotation of auditors at a defined interval, requiring regular retendering of audit work and imposing limits on the amount of non-audit work an auditor can do for an audit client. These possibilities will surprise few Accountancy Age readers: all were flagged up as possible ways forward in our financial manifesto last week.

The underlying message of Sir Howard’s speech, however, was that the accountancy profession is already clearly guilty of one almighty clanger: it has conspicuously failed to communicate the ways in which it has tightened up its affairs in the last two decades.

Accountants are now consummate salespeople and long gone are the days when firms did not because it was not the done thing.

But there have been few attempts to explain accountancy to the wider public. With how many people outside of work could you hold an informed conversation about what an audit does and does not cover. A handful? And how about the intricacies of off-balance sheet financing? Probably none.

Communication is not about just going on Newsnight and the Today programme in the wake of the biggest scandal to ever hit the accountancy profession.

It is about continually explaining what you do and why you do it. And as much in good times as bad.

It also means not just employing professional communications advisers but listening to their advice as well. Again, something the profession has not been terribly good at.

But if there is one lesson already to be learned by UK accountants – and in particular regulators and institutes – from the Enron scandal, it is this.

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

3m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

7m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

7m Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

10m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

10m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

10m Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

10m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

10m Emma Smith, Managing Editor