Philip Fisher thinks it's a bit rich of Grant Thornton's CEO to say auditors don't look for fraud.
As so often, it is necessary to prefix this article by reminding readers that this accountant specialises in tax so has not been involved in audit, other than peripherally, in living memory.
Even so, on occasions, it is necessary to weigh in regarding a subject that is potentially threatening the reputation of the whole profession.
To say the very least, it came as something of a surprise to discover that Grant Thornton’s new CEO David Dunckley has told a Parliamentary committee that “We are not looking for fraud”.
You would guess that this flies against the expectation of every member of the public who has the faintest idea of what auditors do or are supposed to do. That will probably extend to many CFOs, members of audit committees and even, dare one say, representatives of our own profession.
Indeed, Mr Dunckley faced immediate contradiction not only from the politicians on the committee but also the departing head of the Financial Reporting Council, Stephen Haddrill. According to AccountingWEB’s report, the latter felt that auditors are “clearly responsible” for spotting fraud.
One can understand that the head of GT is currently feeling a little bit sore about this subject, having seen his firm receiving a media battering following the collapse and eventual closure of Patisserie Valerie, which was reputedly initiated by a fraud that the auditors were not looking for.
However, it seems a bit rich for the leader of one of the UK’s major firms to imply that auditors are quite capable of carrying out an in-depth project for which they are probably charging a six or seven figure sum and, at the end of the day, feel perfectly satisfied that they have done a good job while not even noticing financial irregularities that will have a direct impact on the stakeholders to whom they are reporting.
In the long run, most if not all of us will suffer as a result of frauds perpetrated on listed companies, since even if we do not invest in stocks and shares directly, those investing money on our behalf for example pension trustees certainly do.
One also can’t help but notice that when the banks brought Britain and the world to its knees in 2008, the auditors responsible for monitoring their affairs maintained a very low profile. It may well be that these failures entirely resulted from bad business practice rather than criminality, although that may be a moot point. Even so, over the years, companies have repeatedly gone under in situations where the man in the street might very reasonably have expected those responsible for reviewing their affairs to identify malpractice and misfeasance, thereby saving stakeholders and taxpayers from significant losses.
At a time when the profession is already under attack from those who believe that we are not doing a good enough job, it is unhelpful when a leader of our industry gives the impression that not only do we not do our jobs very well but are unwilling to take responsibility for obvious failings either.
I am interested to see what the future holds for both the profession and GT in these choppy waters and fear that without a very public change of attitude, there could be a backlash from which it takes decades to recover.