There's a great exchange on the Economia web site between journalist Ian Fraser and former Institute of Chartered Accountants in England and Wales President Mark Spofforth.
Spofforth is, I am afraid, boringly predictable in defence of his claim that accountants are trustworthy. His opening paragraph really says all you need to known about the vacuity of his arguments:
Margaret Thatcher once said: “There is no such thing as society. There are individual men and women, and there are families.” In a similar way, the accountancy profession is a combination of accountants, standard setters, regulators. In any group of individuals there will be a few rotten apples. But the question here is: can the vast majority of those individuals be trusted?
Fraser, on the other hand, speaks truth to power:
Mark Spofforth's “a few bad apples” argument won't wash. The problems with accountancy are endemic, institutionalised and self-inflicted. The profession sold out in the wake of “Big Bang,” as they tried to boost revenues by offering additional business services. This was spiffing news for the earnings capacity of partners at Big Four firms but damaging to the wider profession. .....
Any profession that subverts regulation and oversight to suit its own interests; that bullies government over LLPs; that's willing to peddle illegal tax shelters to make a fast buck; that is prepared to take audit clients' money to produce “independent” reports which are actually highly partisan; and which sometimes skews results of administrations to suit the interests of favoured clients is neither trustworthy nor professional.
Regarding the “failure to see the financial crisis coming”: the crisis was not an external event but the systemic insolvency of banks to whose books auditors had privileged access. Auditors either failed to spot that the banks were trading whilst insolvent — in which case they were incompetent and utterly useless; or they colluded with banks to disguise their insolvency — in which case they are corrupt. It can only be one or the other.
There is much more like that from Ian. Spofforth resorted to name calling in response. It was refreshing to see that it got published. I applaud Ian for his accurate analysis.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Can accountants can be trusted?
“You can count on Errol Flynn, he’ll always let you down” – David Niven
Margaret Thatcher once said: “There is no such thing as society. There are individual men and women, and there are families.” – Ye gods! Do they still wheel that one out?? You could have warned me, Richard, I would have had a sick bag within reach! The guff from these people never ends.
May I refer readers of this blog to an earlier inglorious post of mine, when I suggested, no insisted, that we accountants are no longer members of a profession, however that may be defined, but members of a multi billion dollar global industry, insisting that we are sufficiently independent and trustworthy to be allowed to be self-regulating….!
As a certain journalist would say, “you could not make this up!”
You know that I have been highly critical of the Accounting profession in many aspects. But firstly there several strands of opinion within the profession. It’s not monolithic one way or another
Yes the Big 4 have too much influence, but on the other hand they have been world beating service operations- they are much more than Accountants nowadays.
Secondly you know as well as I do (or should do) that the Audit of the banks was heavily influenced by the (Labour) Government. The Accountancy profession are reactors i.e. they are as good or bad as Government business or tax policy processes are, and the strength (or lack of it) of HM Revenue & Customs.
I am sorry – but if the auditors were worth their salt they’d have said no to the government
They did not
They are culpable
“Regarding the “failure to see the financial crisis coming”: the crisis was not an external event but the systemic insolvency of banks to whose books auditors had privileged access. Auditors either failed to spot that the banks were trading whilst insolvent — in which case they were incompetent and utterly useless; or they colluded with banks to disguise their insolvency — in which case they are corrupt. It can only be one or the other. ”
But that’s not actually what happened. The banks were illiquid, not necessarily insolvent. And the auditors went to government and asked, if they need support because they are illiquid will government solve the liquidity problem? The answer was yes: because if it wasn’t then the auditors were going to question the banks’ viability as going concerns. Given the answer that the government would back the banks then of course the banks were not illiquid: and were thus going concerns.
Another way of putting the same thing. Whether the banks were going concerns or not depended upon the likely actions of government. The auditors checked the likely actions of government and thus concluded that they were going concerns.
But that assumption would have needed to have been explicitly stated in the accounts
It wasn’t
So they did not give a true and fair view
“The auditors checked the likely actions of government and thus concluded that they were going concerns.”
This is a euphemistic form of ‘too big to fail’ state reversed -socialism for the financial sector -why didn’t the overnight ‘book balancing’ show the illiquidity problem. i can answer this myself: because most of it was hidden in the shadow banking world of circular rehypothecation and not on the books at all!
My recollection & please forgive me if I’m wrong, was that the standard wording was something on the lines of;
” The company relies on the support of its shareholders. We are advised that the shareholders will continue to support the company & on that understanding we consider it to be a solvent, going concern”.
I don’t ever recall a set of accounts that included the statement;
” The company relies on the support of the UK Government. We are advised that the UK Government will continue to support the company & on that understanding we consider it to be a solvent, going concern”.
If a bank’s accounts had been published with that statement I’d like to hope there would’ve been the most almighty public row.
Am I missing something ?
That should have happened because that is what did happen