What the savings and loan crisis failed to accomplish in the
United States, a disgraced Luxembourg-based bank may now accomplish:
fundamental changes in the way accountants do their jobs.
Ever since the extent of the savings and loan mess became
apparent, government officials have been debating the proper role
of independent auditors in the fight against bank fraud.
Until recently, the accounting industry and business groups
have thwarted one proposal after another that would have required
some companies' private auditors to work more closely with the
But now, the scandal surrounding the Bank of Credit & Commerce
International (BCCI) is magnifying the comparisons between
regulatory safeguards in this country and in Britain, whose
authorities took the lead in seizing many operations of the
worldwide bank earlier this month.
In particular, policy makers are pointing to the unusual way
the bank's auditors at Price Waterhouse helped to expose the
scandal as proof that the fraud-fighting role of auditors in this
country should be expanded along the lines of the British
prototype, which itself was overhauled in 1987. And much to their
surprise, the accounting establishment is putting up less of a
fight than previous skirmishes over the same issue.
"Under certain circumstances, we can live with it," said Joseph
Moraglio, vice president of the American Institute of Certified
Public Accountants, espousing a relatively new position for the
What intrigues everyone on the two sides of the debate is the
blistering report that the prominent accounting firm wrote about
its client on June 27 at the request of the Bank of England,
Britain's chief bank regulator.
Price Waterhouse partners in London not only detailed the
apparent fraud, but also billed the client for the time they spent
on the investigation, as is their right under Britain's new law
governing bank auditors.
Such an investigative role would be unthinkable in the United
States, where auditors prize client confidentiality and have
limited legal and professional responsibility for blowing the
whistle on clients.
But in Britain, and to an extent in Germany and Switzerland, it
is an expected part of the job for any auditor who has banking
"BCCI is probably the best example where you can say the
Banking Act has worked, and worked well," said a Bank of England
spokesman who would not speak for attribution. …