Newspaper article The Evening Standard (London, England)

Inquiry into Auditors That Doesn't Count for Much; CITY COMMENT

Newspaper article The Evening Standard (London, England)

Inquiry into Auditors That Doesn't Count for Much; CITY COMMENT

Article excerpt


TRADE Secretary Patricia Hewitt will this week announce an investigation into auditors. The review will be a joint venture between the DTI, the Financial Services Authority, the Treasury and the Accountancy Foundation - which shows how overstocked we are with regulators, meddlers and people whose job seems to be to tell others how to do theirs.

This body will examine what measures can be introduced to ensure the independence of auditors. It is apparently not part of the brief to determine whether there is a need for the inquiry. Nor does it appear to be required to produce evidence that auditors in this country have been regularly compromised or that there is an unacceptable level of audit failure. The purpose is to make recommendations about how things will be changed in future. The conclusions are probably already written too - compulsory rotation of auditors being the main idea.

If this is introduced it is likely to be a waste of time. There are now only five accountancy firms of any size so rotation would hold no fears for them - it would be Buggins' turn. But it also fails to address the root cause of the very few failures we have had and will make doing a good job harder.

All the auditing scandals of the past 30 years have occurred when a strong chief executive has intimidated the auditor or committed fraud, or both.

Rotating auditors will not stop the weaker characters in the profession from being browbeaten, but it will make it easier for the chief executive to deceive or mislead them because for the first two years of any assignment the new auditor will not know where the bodies are likely to be buried.

To the extent that auditors in

Anthony Hilton other countries are not subject to rotation, the British end will be working with unfamiliar auditors handling far-flung subsidiaries, making it harder to get an overview of the entire business. …

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