The former Thatcherite Chancellor Lord Lawson makes an unlikely radical hero. But he was leading the charge in voicing concern at the role of the UKs biggest auditing companies in approving the accounts of the big banks in the run-up to the banking crisis.
You see, all company accounts are supposed to include a judgement about whether the firm is a “going concern” – that is, can it continue to trade for the next twelve months.
But, as Accountancy Age ( another unlikely source for radicalism) reports
THE BIG FOUR have defended their role during the financial crisis, arguing it was not their job to sound the alarm in the lead-up to the near collapse of the banking sector. The heads of KPMG, Deloitte, PwC and Ernst & Young said they did not raise red flags because they knew government support would be on offer – a view scrutinised by the Lords.
That is, the banks were NOT going concerns – they could only continue to function with Government support.
I’m not an accountant, but I suspect that if a small local firm of accountants acted this way when auditing your own business, they’d be on the end of a professional misconduct charge, and if you colluded in that as the business concerned, you’d be up in court.
Our big banks were not just “too big to fail” , but everyone concerned acted on that basis.
On a not entirely unrelated note. The new Government is getting rid of the audit commission and letting Councils arrange their auditors directly from the private sector. Guess which firms will be the main providers of future local government audit services?
Hat tip to “Though Cowards Flinch”