Global markets, global audit

Regulators across the globe are working away at the ethical standards that auditors should adhere to. It is in the US where the external environment for the auditor seems least benign – and where the relationship between the profession and the government-backed regulators seems most fraught.

If you want evidence you need to look at a recent speech by Arthur Levitt, chairman of the US Securities & Exchange Commission, to the National Association of State Boards of Accountancy (NASBA) – the bodies responsible for licensing individual auditors.

He told NASBA: ‘Like no other profession the accounting profession has been handed an invaluable, but fragile, franchise’. The ‘franchise’ is the need for accountants to function as independent auditors.

The heart of Levitt’s argument is that auditors in the US have become wealthy on the back of that franchise but have forgotten, or are in danger of forgetting, about the responsibilities which it brings.

In his speech he talked about: ‘A willingness to reap the benefits of this publicly-mandated franchise but largely ignoring the premise of its responsibilities.’

As exasperated auditors would no doubt point out, Levitt is rehearsing old arguments and ones for which the profession in the US and elsewhere has plenty of counter arguments. Whether the arguments are sterile or not, the more important issue is where this is all leading.

The fact is that the chairman of the SEC is prepared to carry on making those arguments – and it seems that in the last few weeks there are signs he is beginning to win this battle of attrition.

In Europe we should not be under any illusion that the ethical standards, structure of the practices, and even the audit methodologies of auditors can be ring-fenced from the US influence.

As the search for capital becomes increasingly global, so the audit of international companies is also internationalised, and opened up to the influences of the world’s strongest capital markets.

Ian Plaistowe suggested regulators across the world should be able to put their heads together to come up with a common set of standards for auditors which could be adapted for the individual circumstances of different territories.

That would be a sensible and logical move, but while the profession is viewed so differently across the globe that seems a distant prospect.

  • Peter Williams is a freelance writer and director of Kato Publishing.

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