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PwC's Wyman: Back to the future

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25th May 2010
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“Today is the tomorrow you were worried about yesterday. Now you know why,” quipped Peter Wyman PwC’s global leader of public policy and regulation at the CCH conference this week.

In what the conference organisers billed as a swansong in his distinguished career as a driving force within the world’s largest accountancy firm and its oldest professional body, the former ICAEW president speculated on the future of accountancy by looking back at the changes that had happened since he was an articled clerk 40 years ago.

“Frankly self-regulation is over. And it’s not been replaced by something that is without its problems,” he said. “Forty years ago we lived in a world of self regulation, but that wasn’t such a bad thing. People setting rules had some understanding – it was all about substance. Today it’s around form and the rules are set by people who can’t understand what drives the professional mind. The rules are set by civil servants who have never been in practice.”

The forces affecting accountancy are the same as those that are shaping the global economy, he said: globalisation, industrial consolidation and technology. New systems, for example, will pave the way for organisations to report their performance in real time, and create an infrastructure that will let accountants outsource more and more of their compliance work to lower cost countries, he predicted.

“Regulation has not globalised and that’s still a problem. It’s national and set by quite a lot of people without breadth. Starting with Sarbanes Oxley, it’s running out of control. Regulation is duplicative. We’ve got to move to a world of proper mutual recognition, so if you are regulated by one location that will be recognised by other countries. It may be different, but will be accepted. Until that happens we’ll have massive duplicative, non-productive regulation.”

According to Wyman, “most people I talk to think auditors have had a good financial crisis”. With few significant problems around financial reporting, there haven’t been any problems with audit. Yet investors, politicians and regulators in Whitehall and Brussels continue to ask why auditors didn't warn of the impending crisis before it happened.

“They’re now saying that maybe there isn’t the right set of obligations,” he noted.

“We’re in the political spotlight. Forty years ago, as portrayed in the Monty Python sketch, accountants were perceived as boring. I now realise that boring is good.”

One of the profession's biggest issues is the purpose of financial reporting, where there is tension between the demands of stewardship, where a set of historical accounts can provide a degree of comfort, versus those who see its role as helping people to make investments.

Within the new European Commission, however, the view promoted by French finance minister Christine Lagarde that financial reporting has to be about financial stability is taking root. So if fair value is going to frighten investors, then it should be dropped.

“If you start to do that then you come away from transparency and then you  come away from the numbers. I hope we can see it off. If we can’t, what will be the utility of financial information?” Wyman said.

International standards - not fit for purpose
Resolving the future role of financial reporting will not helped by issues surrounding international standards, he continued. “[IASB chairman] David Tweedie has done a tremendous job getting us where we are with IFRS being used countries. But the detailed standards are not fit for purpose and David Tweedie would accept that. They’ve been driven by full time standard-setters that frankly lack real experience of the real world. They are people of an academic, theoretical mind, driven by trying to find theoretical purity for accounting stdards, because that is the only way you can get agreement with different cultures,” he said.

“I think we’ve taken a wrong turn.  Are you happy with a set of financial reports produced under the standards? I’ve never met anyone who was.”

Wyman’s world view is unashamedly that of someone shaped by life in the corridors of political and professional power at one point he quipped that it was good that three of the Treasury team were chartered accountants (and two from PwC) – “good heavens, someone in the Treasury understands finance?”.

But his career path had been shaped by partners who adopted a strategy 40 years ago that would enable them to retain listed company audits in a world dominated by just a few small firms. A series of mergers and acquisitions eventually saw them and their ambitious trainee join Deloitte Haskins Sells and ultimately PwC.

From his current vantage point, Wyman suggests that accountancy’s professional bodies could retain their influence while going back to an older model of regulation. “I’d like the ICAEW to get rid of its delegated regulatory responsibility and go back to being a self-regulatory body setting rules for us, battling against government and letting the FRC get on with the detailed regulation,” he said.

“For any profession, it has to set its own ethical code. We as a profession have to say there are things we have to set; we will decide who is fit to be chartered accountant and who we kick out.”

For details of next year's conference, see www.cch.co.uk/conference2011.

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