Tim Worstall and his friends on the libertarian far right have had a fun time over Christmas. It would seem they have decided that I am to be their bogeyman, and the abuse has been flowing. Some has been blatantly offensive; when published on slightly more respectable sites such as the Spectator it has to be a little more polite.

Take this blog on the Spectator site written anonymously, but I am sure by Worstall, which he starts by saying:

"I rag on Richard Murphy a great deal. I think he's extraordinarily wrong headed but that's not normally enough to get my dander up. The unfortunate fact is that he's also get a certain amount of power in our current political system. He writes reports for the TUC, he gives evidence to Commons committees and the like. His pamphlets are approvingly noted by such luminaries as Nick Cohen, Michael Meacher, Polly Toynbee....and such luminaries they are."

He then proceeds to quote at length a blog, also written anonymously - these guys have such considerable belief in their arguments that this is their normal chosen modus operandi - in response to mine on the nature of the audit failures associated with the Madoff affair. The quoted blog is somewhat less polite - as is usual at this end of the political spectrum - but what is really interesting is that the supposed analysis of this blog apparently proves that "Richard Murphy's inability to master some of the most basic concepts of his profession" requires Worstall to ask "why does someone so spectacularly wrong on his supposed subject of expertise have such power and influence in our political system?"

Well, it's an interesting question, and it is kind of him to suggest I have rather more power and influence that I am aware of. Of course the question he asks may not be as interesting as asking why he is so obsessed with me if he thinks I am so wrong, but let's for a moment address the issues in these blogs that seek to question my professional ability.

They do so, if I summarise the considerable diatribe that Worstall offers to his reader, by saying that under current auditing regulations the audits of the feeder funds to the Madoff hedge funds were properly conducted. And, in between the abuse, they go on to argue that if that is the case then there is no audit issue to address with regard to the Madoff funds bar the apparent failure of the SEC to notice that the fund auditor was inappropriate for the task and not authorised to undertake it. As such Worstall and his crony argue that I entirely miss the point in my blog: there is no audit issue of concern here they say, it is a simple matter of regulatory failure which I have failed to point out, so showing I not only do not understand audits but also showing I do not understand regulation. I have probably saved you considerable time by summarising their argument in this way.

Except that this counter argument, in typical Worstall style, is constructed to suit his purpose and entirely misses the point. My argument was not that the feeder fund audits failed per se, but that over the last decade or so the combination of the introduction of almost universal mark to market accounting coupled with considerable revision to international auditing standards has meant that the checks and balances inherent in auditing before that change took place have been lost. My point was that when we had historic cost accounting and auditors were required to offer an opinion on the truth and fairness per se of the accounts on which they reported, rather than the truth and fairness in accordance with a specific set of rules - which is something entirely different - the auditor had to undertake two tasks when verifying the value attributed to an asset.

The first task was to determine the asset's cost. The second was to determine if that remained a fair estimate of its value - for which a number of possible bases of calculation were available, which were by no means limited to current market worth. In the process the auditor was likely to undertake some due diligence on the asset in question - and if it was material, as it would appear many of the Madoff investments were to the funds in question - that audit work might require that the auditor of the feeder fund procure a copy of its accounts and at the very least scrutinise them to determine whether underlying value existed.

Now, Worstall (who is a chartered accountant) and his anonymous auditing blogging ally might have audited in a very different way from me. Maybe they also look at accounts in a very different way from me, but when I was recently lecturing to some journalists on how to interpret accounts they presented several sets of accounts to me during the seminar that I had not previously seen. And one of the first things I told them to look out for was the audit, and who the auditor was - in the example in question because the first thing I noted was that the auditor of one of the companies in question had recently and rather notoriously gone bust. An immediate question about the credibility of the accounts was the obvious concern I raised. And so would I have done if I had been the Madoff feeder fund auditor and I had seen that the accounts in question were audited by a firm I had never heard of, and which I might (I suspect easily) have found was not registered to undertake the task.

But this is not what is asked of an auditor now, and that was my point. I did not say as a result that the audits were per se wrong, the point I was making was that the audit system was at fault. I happen to think the biggest firms of accountants are responsible for that, and by chance audited these funds, but that does not change my assertion that this was not therefore a system error, but a systemic error. Now the difference is fundamental here, and I am certain Worstall is aware of the difference (because he tells me, often, that he is much cleverer than me).

The fact is though that Worstall and his like are committed to their vision of 'free markets'. The whole 'fair value' approach to accounting coupled with the lax regulatory environment for auditing which international auditing standards have permitted is key to his vision of unaccountable capital. And so he is desperate to prove that Madoff is simply a rogue, a one off, a bad apple, and all the other descriptions used of Enron in the past. More than that, because he hates government with a vengeance, believing it can only do wrong, he wants to prove that the failure was the fault of the US government through the SEC (no doubt in turn to ensure government will be liable for compensating the investors, which I am sure he thinks is the only fair use of taxpayer money).

I on the other hand am saying that the failure is a systemic one resulting from the self-regulation of the accounting and auditing professions which have meant that they have failed to act in the pubic interest, and that this is simple demonstration of that fact.

Now does that prove I'm dim, as Worstall's source would argue, or does it maybe prove that I have asked a question which frightens the wits out of Worstall and which he knows he must challenge if his perception of unfettered capitalism is to survive?

And does it maybe prove that rather than tackle the issues of importance he does instead resort to his usual line of attack - which is to offer abuse in the hope that no one else will be so unwise as to join me in challenging him because of the rather nasty line in argument which he and his colleagues deliberately use; an approach which, I am sure, is used with the deliberate intent of frightening reasonable people out of the debate?

And is that maybe he answers his own question - because it seems to me that I and the few colleagues brave enough to join me in this debate, such as Prem Sikka, Francine McKenna, Dennis Howlett, and on tax John Christensen, have attracted so much notice because we have been willing to stand up against the thugs and bullies like Worstall who are more than willing to do the profession's dirty work, and raise the vital questions that must be placed before the accounting, auditing and tax professions.

That Tim is why I have the power you attribute to me. That's also, I suggest Tim, why you spend so much time seeking to argue with me despite your claim that I am so deeply ignorant that I am beneath your contempt. It's because you're deeply rattled because your whole world is (rightly) falling apart around your ears as society appreciates just how anti-social and dangerous the views you hold are, and that you are terrified that some more from the profession will stand up with us and say that it really is wearing no clothes.

Trouble is Tim, you've picked the wrong targets. There may not be many of us on our side, but the power of our arguments, and the courage with which we have presented them, are the precise reasons why we are listened to. And the exact reasons why you, your fellow libertarians and the Adam Smith Institute are heading for a very long spell in the wilderness.

You've got to start asking why tax havens exist, and cause so much abuse, why the accountancy profession so clearly mis-stated the results of our major companies, why auditors failed in their duty to protect shareholders, why the income distribution in our society is so clearly unjust, why Africa continues to get a bad deal and why the Washington consensus so clearly failed it, and more if you are to be listened to Tim. And you've got to provide answers that appeal to people's sense of justice if you are to have any chance of seeing your ideas implemented. Do that and you're in the debate. Right now it seems to me and others who have followed what you have written that you're just shouting abuse from the back of the stands, and not even from the sidelines. Which is why I'm going to be ignoring you until you have something useful to say.

PS For more on Worstall's inability to argue, see here.