A fair kicking for auditors?
Bill Michael, head of UK financial services at KPMG, is a combative fellow. After a dig at the England football team (he’s an Aussie) we’re into a lengthy defence of auditors before an audience of bankers at the British Bankers’ Association’s annual conference.
He’s never seen his colleagues suspend their scepticism when it comes to their audit work despite the criticisms of regulators. And suing auditors, well that’s just mean. “Classic deep pockets litigation,” he says, which is “unfair”.
He’s got a good point when he notes that ratings agencies have got off lightly by comparison – and Deven Sharma, the president of Standard & Poor’s could only say at the same event that the performance of ratings on US mortgage backed securities was “disapointing” which “we regret”. That’s an understatement in the extreme and its hard not to view his promises to do better with scepticism.
But Mr Michael, while his profession has had more of a kicking, is hardly more contrite. He thinks that “sometimes with each new review of auditors we start with the same premise: we dont trust you”.
And the consequences: “If we continue down this path intelligent people will not be attracted to or remain within the profession.”
Given the performance of some of the world’s auditors in the run up to the crisis you do wonder if that’s not what has already happened.
He’s got some good ideas – making audits more forward looking and assessing risks affecting financial institutions before producing a short snappy five page summary. This could even be published (cue a chorus of nos from bankers). But auditors have done a rotten job and it remains the case that big companies getting their accounts qualified remains very very rare.
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