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.
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.