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Thursday, September 01, 2005
Reporting season brings bafflement
The holidays are over in more ways than one. The accountancy profession faces a tough autumn and winter on several fronts. In particular, it will face difficulties over its audit role, the scrutiny of the quality of published corporate information and also the value and integrity of the new figures published under the incoming financial reporting standards regime.
The first problem is audit. As ever, it is a common bugbear of companies that bemoan a lack of competition in the sector. It is a service delivered, when it comes to the largest companies in the land, by only four audit firms. You can sense these firms' vulnerability to the argument.
PricewaterhouseCoopers has been running a media campaign stressing the value of audit, complete with a huge poster running across the frontage of London Bridge station alongside its one-time headquarters. This campaign argued that an audit was "one of this year's best investments". Certainly in a post-Enron world investors should agree that tough independent scrutiny is worth having.
But it is the post-Enron measures which, curiously, have undermined confidence in the audit. The huge increase in audit-related work carried out by the Big Four audit firms under the Sarbanes-Oxley legislation has meant an equally large increase in fees. Not for nothing is the Sarbanes-Oxley legislation known colloquially among audit partners in the US as the "Send my Children to Harvard Act". Figures released last month by Deloitte in the UK showed audit fees as powering past other disciplines as a proportion of the firms' total fees.
posted by Anonymous @ 8:08 AM
 
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