Accountancy Age's editorial this week said (and I have shortened it without losing substance, I think):
Despite all the mud slinging that has come from politicians and columnists, The Financial Reporting Council's chief executive Paul Boyle went out of his way to deliver an early view of auditors in a speech at Mansion House. 'So far, at least, auditing has had a good crisis.'
He is, indeed, correct. The accusations that have so far come the way of auditors have been vague, amorphous and opaque. They deliver no detail, offer no particulars and appear to rest simply on the assumption that a financial crisis must have something to do with the auditors.
This really isn't good enough.
Since disaster fell on Northern Rock unsubstantiated accusations have been made about auditors, yet no one who makes them appears to have any way of standing them up.
The profession should not be complacent. The attacks will continue and auditors should ensure they are ready to respond.
I am staggered. Gob smacked. Incredulous. I normally have some time for Accountancy Age. But this comment piece is so ridiculous it is hard to believe anyone thought it, let alone let it pass scrutiny before being published.
Have they not read what Francine McKenna has to say? Has no one at Accountancy Age read a single comment by Prem Sikka? No one can ever accuse him of not saying enough.
But let's just deal with he glaringly obvious.Northern Rock failed. Its auditors gave no warning. Worse, they profited enormously from creating Granite: a key component in its downfall.
RBS failed, Lloyds TSB failed. HBOS failed. Bradford & Bingley failed. Alliance & Leicester darned nearly failed. Not a single hint, not one, anywhere in their audit reports that these companies were not going concerns, that they did not have the necessary liquidity to survive. But that is a basic duty an auditor has to fulfil: in each of these cases the auditors failed to note that the business could not and would not survive until the next year end came round. That is gross failure. Failure of the audits. Failure of the accounts. Systemic failure of the accounting architecture on which both were based. How can anyone, anywhere be so crass as to say auditors are having a good crisis?
And let's get absolutely blunt: as I told PWC in Norway recently when they addressed a conference asking if accountants were part of the problem or solution in this crisis, the Big 4 are not just a part of the problem: they created the problem; they marketed the problem and they facilitated the abuse. They did all that by creating their offshore facilities that allowed banks to operate offshore, that allowed offshore securitisation (most is), that allowed the opacity of sub-prime, that facilitated hedge fund abuse, that is being used to hide private equity debt. More than most the Big 4 have enormous responsibility for this crisis.
These are not vague, amorphous and opaque accusations: they are specific, detailed and fundamental, striking at the heart of the profession's business model.
Get real guys: you know the challenge is serious; you know the charges we have levied are backed by evidence, and you can't avoid the charge by pretending you haven't read the charge sheet. But if you do the public will believe you even more culpable and negligent than they do already.
I'd get ready to debate, now. Where and when, that's all we want to know? Answers please, by email to any of those named, or me.
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this is utter hokum, but it does not surprise me that you write it
Alastair
OK. Provide one shred of evidence to say I’m wrong.
How about arguing your case for a change?
Richard
“RBS failed, Lloyds TSB failed. HBOS failed. Bradford & Bingley failed. Alliance & Leicester darned nearly failed. Not a single hint, not one, anywhere in their audit reports that these companies were not going concerns, that they did not have the necessary liquidity to survive.”
Perhaps you might like to provide your evidence for this nonsense? You are entitled to your opinions, and I would fight for your right to express them, but I assume you have the intellect to understand that opinion is not the same as fact, and that your definition of failure in this case is unreasonable.
[…] accountant has responded to my blog entitled ‘Come on’, in which I challenged the idea that accountants have a good credit […]
[…] accountant has responded to my blog entitled ‘Come on’, in which I challenged the idea that accountants have a good credit […]
The failure of the banks is proof that the auditors were wrong.
A blindfolded mouse could have done a better job auditing the bank’s accounts. At the very least, the auditors added no value, at worst they were negligent. 👿
The auditor’s signature cost a lot of people a lot of money. I’m amazed there has not been more anger and litigation directed towards the accounting firms. I guess they are still too cosy with the banks to give a fully independent opinion.
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[…] agree. Which makes Accountancy Age’s own comments on the issue even more […]
[…] agree. Which makes Accountancy Age’s own comments on the issue even more […]
Maybe I used to be a simple auditor but one of the first things my head auditor at KPMG told me: If you sign an audit report your signature means that the company will be around next year. It will not go belly up because then you have a nightmare because your signature meant that is not going to happen. If you think the company will not be here again next year due to possible losses or whatever come to me and we we have to write a comment in the audit report otherwise both of our jobs are at stake because it is our duty to warn the shareholders, the creditors and financial Society. This is the reason why we are here and can charge those high fees.
Unfortunately, my head auditor was forced to early retirement not because he was not capable of the job he was just too honest and denied signing certain audit reports he did not totally comprehend or could go along with. However, that man was responsible for major groups in Switzerland for instance Philips Group, Crossair, Bauknecht, B?ºhler, Siber Hegner, Polygram and many more all so-called high quality and high fees clients of KPMG, Switzerland.
Audit is about taking a position and securing to the shareholders and creditors that the company will not go belly up within the next twelve months. That simple it is and therefore I am strongly convinced that audit companies have to carry an tremendous responsiblity for what has been happening now. All their risk models belong into the bin. They were the watch dogs but became the bloodhunds for ever increasing fees. Greed makes blind. High fees satisfies each bloodhund but does not serve the society.
I hope this is not too simple to follow!!!