, chief executive, Small Business Service
Many thanks for the copy of Accountancy Age with your list of ten proposals. I think they are a valuable contribution to the debate.
It has always struck me that auditors get too close, as least in larger firms, to the people they are auditing. While this is understandable in smaller companies, where there is little or no distinction between shareholders and directors, it is unhelpful in larger firms.
Auditors need to attain and retain the confidence of shareholders. I am not sure how one does this – but it does seem sensible for example that auditors cannot also be the providers of consultancy support to the same people that, at some point, they will be auditing.
John Whiting, president, Chartered Institute of Taxation
I was very interested in the ‘Restore the faith’ feature and in particular, as you might expect, delighted to see at number ten you featured the Tax Practice Committee idea.
The need to gain control over the spiralling complexity of our tax system is, in my experience, acknowledged by a very wide range of people. I hesitate to claim that all those involved with the tax system would subscribe to the concept.
But there are few amongst those who make their living from the system who feel that the excessive complexity that we face is really a good thing.
In simple terms, too much time is spent by all concerned – taxpayers, employers, agents and tax authorities – in simply grappling with problems created by the minutiae of the system.
The TPC is a term that I think I can claim to have launched. In doing so, I was trying to suggest a way forward for the many people who clearly share our view that the tax system is beginning to run out of control.
The concept seemed to find favour with many people and I have continued to propound it in opportunities such as my Hardman lecture before Christmas.
The TPC term was carefully chosen: the initial draft was ‘Tax Policy Committee’ with the thought that this would in some ways parallel the Monetary Policy Committee.
However, it is not appropriate to suggest that a body other than parliament should have control over tax policy – hence the change of name.
Certainly I see the body as one that would be a representative grouping of experts – ideally involving the tax authorities – who would have a brief to look at the development of the system. They would look at new proposals not in terms of whether they made political or even, I suspect, economic, sense, but whether they had gone through a proper consultative process and whether there was a real cost/benefit involved in administrative terms.
The TPC would be able to suggest areas of the tax code that might usefully be revised. The TPC might also be a repository for the suggestions that the tax law rewrite group makes for simplification and which, because of its restricted brief, it cannot pursue.
Indeed, one scenario would be that the TPC took over the work of the overall TLRW Steering Group.
I shall continue to propound the idea of the TPC during my term of office and indeed thereafter if I have the opportunity. I very much welcome Accountancy Age’s initiative in putting forward your ten point plan (and particularly delighted that tax makes at least one of the points!) and would welcome the opportunity to participate in any debate on them.
I did have it in mind at one stage to set up what I termed a ‘symposium’ to debate the TPC idea – might you have it in mind to do something similar with your wider agenda? I would be happy to discuss this idea or indeed any way of keeping these items in front of the public debate.
John Wosner, chairman, PKF
I agree with you that the reputation of the auditing profession and their relationship with stock exchange listed companies is now essential.
There are, it seems, two critical issues which need to be addressed to take the debate forward.
The first is the public’s expectation of what assurances the auditor can realistically provide in signing a clean audit report.
The second is the public’s perception of the independence of the auditor.
Over the past 20 years public expectations have grown so that it is now widely expected that if an audit report on a company is unqualified, then the financial statements are correct, there has been no fraud and that the company will not fail in the foreseeable future.
More recently these expectations have also encompassed the notion that the auditors are reporting on the competence of the management and the company’s responsibility towards the environment and society.
Our profession has not succeeded in placing these expectations in a proper perspective. There is therefore a continuing educational need as to what can and cannot be achieved through the external audit and also need to clarify further the board’s responsibility for the governance of the company, the competence of the management and the company’s internal systems.
There is much the profession can do in communicating and explaining what precisely its role is in the auditing function as well as what can realistically be accomplished by auditors.
Senior management’s responsibility for ensuring adequate management systems and the minimisation of risks of fraud may require a new legislative framework.
Michael Groom, president, ICAEW
I welcome your initiative to begin a public and constructive debate on the future of the accountancy profession, and feel certain that Accountancy Age is uniquely well placed to lead those discussions. I hope that you will bring an objective and informed approach to the issues which you raised in your agenda, in contrast to some of the reporting we have witnessed in other publications over the last month or two.
As you will be aware the institute has been actively seeking opportunities to explain how the audit processes really functions, the standards and ethical guidance that underpin our members work and the differences between the UK and US regulatory frameworks and in particular the vital need for good corporate governance.
John McFall,Commons Treasury Committee chair
Many thanks for forwarding to me a copy of Accountancy Age. In light of our announcement last week to examine, in the light of the Enron collapse, the arrangements for financial regulation of public limited companies in the UK, your contribution to the debate will be extremely important.
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