This video was the result of a discussion with a journalist who moaned to me that he could not get civil society to comment on accounting issues. Some show interest in the tax dimensions of this, but beyond that, the engagement is very limited. And neither he nor I could work out why this was. After all, what is the point of demanding business be accountable if you take no interest in the way in which it makes itself accountable? This is an issue where change is needed.
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Civil society has been put in its places here for ages.
If our civil society really worked, then Extinction Rebellion would not have to exist nor would the anti-capitalists who emerged after 2008.
These movements should be co-opted into civil society by rights but it seems not when we are faced with the fascist tendencies of Boris and co.
Déjà vu or what? In February 2015 I responded to one of your posts with comments on the corruption (as I see it) at HSBC. In that response I referred to my post on another site three years earlier (2012) At that time the Chairman of HSBC was Lord Green who became Minister of State for Trade & Investment. The topic of my comments was HSBC was suspected of being engaged in aiding tax evasion through Switzerland. HMRC boss David Hartnett negotiated a deal with HSBC and they said it was “Not in the public interest” to prosecute. Mr Hartnett subsequently left HMRC and joined HSBC. I also listed other misdemeanours at HSBC PPI, rate swap abuse, Forex manipulation, gold & silver price manipulation and money laundering for which HSBC had apologised. The same names keep popping up. Since 2015 PwC have been HSBC’s auditors. Another company mentioned in Panorama’s reports is J. P. Morgan they have the same auditors. JPM have questions to answer about suspected dealings of around $1bn with anonymous offshore companies suspected of links to Semion Mogilevich, a Russian mafioso. The evidence of potential misdeeds comes from the banks’ own files so it would appear that the ‘honest’ state of affairs reported by them and passed by their auditors is as reliable as a chocolate teapot.
The usual mealy mouthed excuses about learning lessons, ensuring such things never happened again and making changes at the banks were issued. Presumably the auditors would be aware of those assurances given after HSBC were fined $192m. Here we are over five years later, the banks are issuing the same noises all over again and it would appear that all of their previous assurances were worth nothing. If the auditors did not at least keep a weather eye open for examples of a known problem was that negligence, incompetence or corruption? In the interest of fair play I will say I am open to different suggestions but it’s difficult to see what they might be.
Auditors would argue this is ‘not material’
Of course…
Richard
Thank you for this thought provoking piece.
As the FD of a not for profit (which is not an environmental charity but does care) I am responsible for the investment of a £40m portfolio of funds. We do this through 5 different investment managers, with some being in funds and some in discretionary equity portfolios. Whilst we do not, as a matter of policy, invest in fossil fuel extraction stocks, no other sectoral restrictions are place on our discretionary managers.
We probably hold direct investments in about 200 different companies at any point in time, in order to maintain appropriate spreading of risk.
Thankfully, I do not receive any accounts for these companies (even in summary) as there is no way that I would have the opportunity to review these or seek recommendations from our Finance Committee regarding any issues arising. Neither am I give the opportunity to vote on resolutions. Again, the workload in making informed decisions would be hideous.
I suspect this partially gets to the heart of one issue you highlight.
But in that case you are making uninformed decisions
Is that wise?
I am…… but then again, I am not very civil!
Amused…
Sorry, not viewed the video yet, but I suspect many people see accountancy as a technical and practical mathematics-based subject, like civil engineering or electronics, that they just expect to work without them needing or wanting to have a detailed understanding of the underpinnings.
Frankly, many people seem to be scared by mathematics, and scarred by their experience of maths at school. It seems much more socially acceptable to be unable to “do” or “get” maths or science more generally than it is to be unable to “do” or “get” reading or arts subjects, although no doubt the poets and musicians and art historians and classicists would say their subjects are neglected too.
I fear you may well be right
So this has to be overcome
There is not much higher maths involved in accountancy especially when it comes to accounts preparation. It is largely addition and subtraction.
The accountancy bodies have seen fit to build a mythology around accounts and accountancy in order to benefit their members job opportunities but company accounting is not particularly arcane.
The problem arises with the interpretation of the accounts and what lies behind the numbers. Unfortunately this is almost entirely left to the companies themselves and so a patina of worthiness is given in the words included in the body of the Financial Statements. Auditors to not provide any view on the statements provided in the accounts alongside the numbers. In fact there is little or no interpretation of the numbers themselves either. The auditors role is largely reduced to comments on Directors responsibilities and to assure that the numbers have been prepared in accordance with the rules. There is no interpretation as to what the numbers mean with regard to a company’s impact on wider society or the environment.
Because the numbers and the additional information included in the accounts are a marketing exercise to readers of those accounts the amount of useful information than can be gleaned from them is minimal.
As to how that can be changed I don’t know.
Discpoutj9ng is definitely required these days
And that’s way beyond most people
It’s also true that you do not need to know this to read accounts
You are right, Simon, it is not rocket science, but I think many people will struggle with concepts as simple as double entry (and debits and credits), depreciation, and accruals, let along discounting or options valuation.
I am a CIPFA accountant with a degree in accounting and Finance.
My definition of accounting is the effective communication of key economic and other information to the stakeholders of organisations.
Fact is , accountants work for who pay them.
If society doesn’t want to know you can either blame the accountants for not marketing their services effectively or you blame society for not taking information, accountability and control of the executive seriously enough.
Its the insurance problem: only those that afford it are protected leaving free riders to risk suffering the consequences.
Perhaps society gets what it pays for. Or perhaps there is no such thing as society.
Or perhaps some have captured accounting to make sure it does not communicate what society wants?
I think that the most likely explanation, don’t you?
I see it as a neglected tool ignored by the very people it could be most useful for.
The rich and powerful are not short of accounting advice and help.
Society is divided and it makes no sense to see things from a societal perspective.
We are not all in this together.
Front cover of Private Eye, headline ‘New Obama threat to America’:
Photo of Osama Bin Laden with bubble: ‘Forget terrorism, I’m going to become an accountant [Issue 1058, July 2002 ]
Enron had filed for bankruptcy protection on December 2, 2001, and the real story was coming out.
‘Unquestionably, the Enron implosion has wreaked more havoc on the accounting profession than any other case in U.S. history. Critics in the media, Congress and elsewhere are calling into question not only the adequacy of U.S. disclosure practices but also the integrity of the independent audit process. The general public still questions how CPA firms can maintain audit independence while at the same time engaging in consulting work, often for fees that dwarf those of the audit. Companies that deal in special purpose entities and complex financial instruments similar to Enron’s have suffered significant declines in their stock prices. The scandal threatens to undermine confidence in financial markets in the United States and abroad.’
[ https://www.journalofaccountancy.com/issues/2002/apr /theriseandfallofenron.html ]
One of the all time great covers!