[Fulltext] Hard cases, they say, make bad law. They also say the law is an ass. My sympathy with these statements is growing.
In one of the first comment pages I wrote, I suggested that the auditor is no longer a bloodhound nor a watchdog but rather has become the scapegoat of Irish and indeed international business. And of course there are reasons for this that we could explore - not least that of joint and several liability - but that's an issue for another day.
Let's get back to the law. In the past few years we have seen government react to revelations from the tribunals and elsewhere by introducing new legislation. Understandable, you might say; some might even say commendable. But there's a problem, and that is that the legislation is emanating from multiple sources, that it is creating so much red tape it is in danger of strangling enterprise in this country, that such are the risks associated with doing business here you'd be mad to take them on if you had any choice.
You think I'm overstating the case? Well, as the lawyers would say, let's take a look at the evidence. In particular, let's look at the reporting responsibilities of auditors and recount some of what has happened in the last two years. 2001 saw the introduction of two very significant pieces of legislation: The Company Law Enforcement Act requires auditors to report to the Director of Corporate Enforcement their opinion, and grounds for their opinion, that a company or its directors or agents have committed an indictable offence under the Companies Acts; The Criminal Justice (Theft and Fraud Offences) Act requires auditors and others to report to the Gardai where the accounts of a company being audited, or any books or records used in keeping or auditing those accounts, indicate that a specified offence under the Act may have been committed. When the Tanaiste published the Draft Heads of the Companies (Audit and Accountancy) (Amendment) Bill in 2001 they included a provision that would require auditors to report to the Director of Corporate Enforcement where the company directors' Compliance Statement and annual report are not, in the opinion of the auditor, fair and reasonable. Further reporting obligations are expected to be imposed on auditors by the proposed Central Bank and Financial Services Authority of Ireland (No. 2) B ill.
These new and proposed responsibilities for reporting to regulators and third parties add to those in place prior to 2001 and reflect an increasing tendency in recent years to impose by statute additional reporting requirements on auditors.
Insufficient consultation with the accountancy profession, combined with an inadequate understanding on the part of public servants, of the differing roles and responsibilities of directors and auditors, have resulted in unnecessary complexity. Too many cooks are spoiling the broth.
I've called before for "joined-up" Government. As we set out into a New Year my earnest hope is for that call to be heard. What Irish business needs is legislation that is predicated on the principles of simplicity, effectiveness, and balance. It is time for co-ordination on the part of Government. If, for example, future legislative changes in this area were to be routed through the Tanaiste's Department, or even through the new Irish Auditing & Accountancy Supervisory Authority, we might have some hope of achieving consistent and enforceable legislation for the future. We have proposed this in our submission to the Company Law Review Group.
A little foresight and planning, a little consultation and co-ordination would go a long way towards making better laws. If we can't achieve that, we risk allowing the law to make asses of us all!
Brian Walsh, FCA
Chief Executive
Accountancy Ireland, Vol. 35, No. 1 February 2003.