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Auditors in the dog house

Auditors in the dog house

Accountants will know that dogs generally bark at the least sign of danger but now Lord Lawson is suggesting that accountants should bark also! He has said that auditors were amongst the dogs that didn’t bark throughout the recent banking crisis.

A House of Lords enquiry, which has been looking into the audit profession, has found that accounting rules had a significant role to play in the crisis. Tim Bush, who is a member of the ASB Urgent Issues Task Force, pointed out that international accounting standards have forced auditors to stop being prudent when they carry out audits.

Bush said that accounting rules on contingent liabilities, impairment and securitisation were key factors in the collapse of the UK banks. He also suggested that we should reinstate UK GAAP.

Meanwhile, the Accountancy and Actuarial Discipline Board appears to have more on its plate than it can handle. The watchdog for the audit profession currently has 17 active cases to work through.

At the beginning of the week the AADB announced a new investigation into KPMG’s audit of BAE systems. The board has launched some high profile investigations since the crisis began including PwC’s JP Morgan Securities audit and an audit of Lehman Brothers by Ernst and Young.

The AADB team only consists of 5 members, two forensic accountants and three lawyers, and the heavy workload has meant they have to outsource a large proportion of the work, which slows down investigations. It is expected that further cases will be announced in the coming months.

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Image: In The Dog House Red Accent by skycaptaintwo

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