Auditor: Watchdog, Bloodhound or Scapegoat?
Author:
Brian Walsh
[Fulltext] The headings in the media coverage following the publication of the Report of the Review Group on Auditing (RGA) on 11th July last said it all. "Tigerish Mitchell rules out "pussycat" penalties", "No jailings, it's just an oversight" and "Auditor watchdogs face closer scrutiny" were just some examples of the press reaction to the Report. The church, politicians and the banking industry are all going through or have gone through what the accountancy profession is going through now. Accountants, politicians, and bankers are not all bad. We all know that. But, that does not prevent the media condemning a whole institution, industry or profession because some, a very few, may have brought it into disrepute. Like it or not we must accept that we are where we are and work to change government and public attitudes towards our profession. The report of the RGA is very comprehensive and deals in detail with many complex issues. It is about 250 pages long and contains 80 recommendations. (The document can be accessed on the internet at www.irlgov.ie/entenp - links to the document are on the Institute's website (www.icai.ie). If you do not have the Adobe Acrobat reader you will need to download it from www.adobe.com)
The recommendation in the report that has attracted most attention is the establishment of an independent statutory Oversight Board to assume a supervisory role over the recognised professional bodies. In its submission to the RGA, the Institute recommended the establishment of "a new independent Oversight Board which would subject the regulatory regimes of the recognised accountancy bodies to an open, regular and rigorous scrutiny and would help reassure the public of their effectiveness on an ongoing basis". Such an Oversight Board exists in the UK and, in our submission, we went on to suggest that there should be close co-operation between the two jurisdictions which would avoid duplication of resources and effort. It looks like this is not going to happen and so we may now face paying our share of the costs of two Oversight Boards. However, money, though important, is not the real issue. More fundamental is the size and scope of the proposed Irish Oversight Board and the extent to which it will intervene in the investigatory/disciplinary processes of the Institute.
The Oversight Board which we described in our submission was one which carried out a watchdog role, reviewing the activities of the accountancy bodies in monitoring the work of accountants and auditors, in handling complaints and in the conduct of investigation and disciplinary cases. It would review the procedures, checks and balances within the regulatory system to ensure that these were capable of producing the right decisions. If the Board was unhappy with the procedures it would insist on changes but it would not second-guess decisions of Complaints Committees and Disciplinary Tribunals if there had been compliance with the approved procedures.
The recommendation of the RGA is that "the Oversight Board should be invested in law with a right to intervene in relation to any decision of a recognised accountancy body in a case involving the alleged misconduct of a member." This creates a fundamental difference between what we proposed and what is envisaged. If the Oversight Board continually second-guesses decisions made by Complaints Committees and Disciplinary Tribunals consisting of senior members in business, a majority of whom will be non-accountants, the Institute would have to reconsider its continued role as a regulatory body.
However, let us look at the bottle as being half full rather than half empty. Potentially the Oversight Board could improve greatly our interface with government. The members of the Board will become expert in the accountancy profession and will develop a high level of understanding of our role, the work we do and the difficulties which we and our members face in dealing with issues on a day-to-day basis. We have never had this before and this, in part, has led to the negative perception of government towards our profession.
The Report warrants careful scrutiny, not just by the Institute but by members in every sector as it will have profound and far-reaching effects on the future of our profession. The President has written to all the members seeking comments and suggestions and these will be taken into account in making a further submission to the Department within the proposed timeframe of two months from date of publication. There is a lot of work to be done. In particular we will be making representations on the role of the Oversight Board, the circumstances in which a regulatory body could be sanctioned and/or fined, and the proposed Annual Report by directors on the company's compliance with its obligations under company law, taxation law and other relevant statutory or regulatory requirements.
It can only get better.
Brian Walsh FCA
Chief Executive
Recent Comments:
At
4/25/2009 6:37:26 AM
asha
said:
i know whether auditor is watchdog or bloodhound