I cut myself shaving last week when John Ormerod, the UK managing partner of auditors Andersen, turned in a performance of such breathtaking chutzpah on the Today programme that it would have been impossible to parody.
Ormerod had already appeared on Newsnight, where he had agreed that Andersen’s promotional literature sold the firm as speaking with one global voice – or some such hyperbole – while simultaneously claiming not to have known what was going on in the US, where his colleagues were rubber-stamping the accounts of energy trader Enron, ahead of its collapse and the biggest bankruptcy in corporate history.
This was fantastic psychological denial. Maybe accountants and auditors these days have abandoned bean counting in favour of behaviour that would make the proverbial three monkeys look like busy-body interventionists.
But more of the changing nature of accountancy in a moment. Ormerod was invited on to Today presumably to answer the fairly straightforward question as to how his company could have signed off Enron’s accounts without spotting any of the practices that are fast unravelling.
Ormerod’s answer was this: “We don’t run the business. Auditors comment on financial information – a little like journalists do. That does not make us responsible, just as it does not make you responsible.”
It was at this point that I took a chunk out of my top lip. Ormerod appears to be suggesting that auditors are there to express their opinions, in the same way that I occupy this space to express mine.
And there was I thinking that auditors were there to provide a professional analysis of a company’s accounts and to maintain standards of the highest financial probity. Surely they are supposed to act in the interests of shareholders by confirming that those accounts provide a “true and fair view” of their client’s financial performance? Silly me.
It turns out that auditors simply provide comments on accounts and bear no greater responsibility than your average journalist. This is intriguing, because Andersen was paid fees of some &£18m on its Enron account.
I know lots of columnists and very few of them earn fees of &£18m from their publications – even after fiddling their expenses. For my part, I’ve just worked out that I would have to write this column well into the next millennium to match the remuneration that Andersen earned for its learned opinion.
But then Andersen’s opinions are clearly worth a great deal more than mine. I might hold the opinion that auditors earn huge sums of money for doing very little. By contrast, Andersen is able to express the altogether more valuable opinion that Enron is a solvent company in no danger of collapse.
So, while Ormerod might claim that there is really very little difference between the responsibilities of journalists and auditors, I believe that such a difference might be this: Journalists take their responsibilities over accuracy more seriously than auditors, but are willing to be paid considerably less.
Was it always so? There is a case for thinking so. The accountancy and auditing professions have a long and undistinguished history of missing the true story behind the accounts of some of the biggest crooks around. The collapsed bank BCCI and Robert Maxwell’s looting of his companies’ pension funds are cases in point.
But it is perhaps unfair to make a general point out of specific instances. There will always be rogues who will evade the rigours of scrutiny. I believe a better case can be made for assuming that the accountancy profession has changed beyond recognition and for the worse over the past couple of decades.
Perhaps Lord Wakeham is a victim of that change. Wakeham is a non-executive director of Enron, sits on its audit committee and has resigned his position as chairman of the Press Complaints Commission, so as to concentrate on the Enron inquiries, but also to avoid being in the position of chief press regulator when he is wrapped up in one of the biggest stories around.
That is a characteristically honourable action. Wakeham had a long and distinguished political career with the Tory governments of the Eighties and Nineties and was the antithesis of the politician on the make that came to typify that era. He was and is primarily a rare creature – a dedicated public servant.
He is also a chartered accountant. But I suspect that the profession in which he qualified, getting on for half a century ago, bears little resemblance to the jet-setting global consultancy functions that exist today.
You can argue about Wakeham’s &£80,000 stipend from Enron, but you can’t argue with Wakeham’s assumption that a reputable auditor could be expected to do its job. Andersen spectacularly did not do so.
I blame the pursuit of globalisation and glamour in modern accountancy companies. Auditing and accounts long ago failed to satisfy the growth demands of professionals who wanted to keep pace with the burgeoning multi-nationals.
The old companies had to become management consultants. And what are management consultants paid for? The wretched Ormerod will tell you – they are paid for their opinions.
The trouble is that there’s no one left at such companies who knows or wants to know much about boring old accounts.
George Pitcher is a partner at communications management consultancy Luther Pendragon