The Debate: Restoring public trust

No time for tokenism

By Peter Williams

Who in the accounting industry could possibly disagree with the notion that the big firms should be more open and transparent about their own figures?

So the news that KPMG has decided to publish more detailed year-end accounts should be seen as unalloyed good news. But the announcement has left me with a sense of unease. First because the move could be seen as a knee-jerk reaction to criticism of the global accountancy firms. Secondly, why did KPMG publicly urge other large firms to follow suit?

However well-intentioned KPMG’s move, it may be misinterpreted as one firm trying to score points off another. Again not the most useful of perceptions when public confidence in audit is somewhere near rock bottom.

And finally because it’s hard to believe KPMG’s unilateral move will help much.

So what should the firms be doing in relation to disclosing financial information in the public interest? There is an answer to hand.

Limited Liability Partnerships (LLPs) have to produce financial statements which follow all relevant accounting standards and which give a true and fair view.

The most helpful way forward would be for the big firms to announce they were adopting the disclosure requirements relating to LLPs as soon as possible, whether or not they were bound by law to do so. In addition the firms should agree among themselves additional disclosure requirements which they believe would help wider understanding of their finances – such as KPMG’s suggestions on percentage of fees from top clients and partners’ remuneration. Maybe they should even get some outside advice to avoid accusations of a cosy stitch-up. This co-operation is crucial.

Anyone who has tried to obtain financials from the firms, as Accountancy Age has done over the years, knows that getting figures that are comparable is not easy.

If firms are serious about satisfying legitimate public interest then they must be seen to be collaborating now in a rational logical way.

  • Peter Williams is a freelance journalist.

Getting our house in orderBy Ted Awty

Trust needs to be rebuilt across the board, not only in the activities of accountants, but also in the ability of governance mechanisms, in the accuracy of financial information, and in the motivations of analysts.

There are calls for reform with transparency and openness at their heart, and we are in the midst of a complex debate. But despite the need to ‘wait and see’ on the changes ahead, all accountancy firms act now to become more open and transparent in their own dealings.

It’s hard to understand why many large and medium-sized accountancy firms still do not produce even a basic annual report. If they want to credibly get behind a push for better corporate disclosure, they must cease to apply such a cloak and dagger guardedness to their own affairs. Otherwise, how can they hope to reassure clients? But this aside, for those of us who already produce an annual report, we cannot shirk the need for wider disclosure, so business can judge for itself on our integrity.

This greater openness must include more detailed information on the source of our fees and the profile of our clients. This includes where the greatest revenues come from, derived from what type of work. We will naturally be expected to provide greater granularity in reporting the advisory work we undertake, and in which sectors, and should be prepared to give it.

And we must be more open about the remuneration policies that we apply.

Equally, we need to continue to extend our reporting in broader, non-financial areas, of our responsibilities to our people and to the wider communities in which we live. And as clients seek to be reassured over how we go about our work, quality control procedures will need to be revealed more to the public eye.

The need to regain the trust and pride in our profession is paramount, and as the next financial year comes to a close, accountants need to get their house in order and prepare to offer a more open and fairer view of their financial performance and operations, in the same way that it is expected of corporates.

  • Ted Awty is head of assurance of KPMG.

Related reading

kevin-edwards rsm