A study of the evolution of the form and content of UK audit reports over, say, the past 50 years would make nostalgic but intriguing reading because it would at the same time reflect changing public and investor expectations of the audit function. Under the Companies Act 1948 audit reports were required, positively, to include […]

Auditors focus on methodology rather on the underlying facts in front of them

UK accounting standards are celebrating their 40th birthday: Statement of Standard Accounting Practice No.1 on associated companies was issued in 1971. The initiative was given a boost in 1973 following exposure of Robert Maxwell’s deceits at Pergamon Press. In a hotly contested takeover battle Pergamon’s share price was supported by accounts that included a wildly […]

We are approaching the tenth anniversary of the collapse of Enron. Have the lessons been learnt? Enron was the US energy giant that failed only 12 months after its share price rated it seventh largest corporation in America. A handful of tenacious journalists penetrated the miasma of filed data and revealed that the bulk of […]

Litigation warning – remember the cycle!  The pattern of litigation tends to be cyclical since it shadows the economic cycle. When there is general prosperity and businesses flourish there is still plenty of litigation (when is there not?) but its character reflects boom-time activity. Businesses buy other businesses and then claim that they overpaid. Although […]

How sustainable is the alleged economic recovery? A brighter outlook certainly appears to be in evidence in parts of the City. Construction work on glitzy office buildings has resumed. A stroll through the Royal Exchange takes you past packed wine bars, expensive restaurants and boutiques displaying the most opulent array of branded merchandise – jewellery, […]

  One of the defining features of the economic crisis is disclosure of high-level fraud on a breathtaking scale. Although the auditors’ traditional mantra (“it is not the purpose of audits to detect fraud”) is repeated at every opportunity, somehow those who rely on audits as a safeguard do not get the message. The battle […]

Time for a reformed regulatory framework – auditing included   The economic collapse is merciless in its revelations of failure, whether evidencing spineless regulation, ignorant policy-making, ineffective auditing, incompetent rating or wimpish governance. There’s nowhere to hide – as Warren Buffett puts it, when the tide goes out you can see who’s been bathing naked. […]

Now we know: the booming economy was a huge Ponzi scheme Bernard Madoff’s $50 billion Ponzi fraud is now legendary. Yet the fabric on which our entire credit explosion rested was just as illusory as Madoff’s investment fund. It existed in appearance only. The toxic financial instruments, so neatly packaged by investment houses before being […]

Every sizeable organisation puts procedures in place for ensuring that outlays of large sums are given prior authorization and that expense claims are supported by original receipts to show that the expenditure was validly incurred. If such procedures are ineffectively monitored they are open to abuse. Indeed, many of the forensic assignments I have been […]