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.
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