Mario Christodoulou, Accountancy Age, Wednesday 13 October 2010 at 14:40:00

"It would be a very brave partner which would unilaterally take thoseactions," academic claims during House of Lords committee


It was ?unrealistic? for auditors to raise the alarm about Northern Rock?sfinances in the lead up to the crisis, a leading city academic said at aninvestigation into audit competition.

Michael Power, professor of accounting at the London School of Economics,said it was unfair to expect an audit partner to raise concerns about bankfinances, at a House of Lords inquiry into audit competition yesterday.

Power told the committee it was almost ?unthinkable? for a single auditpartner to raise issue directly with regulators.

?If you are saying one lone partner should have blown the whistle on NorthernRock, I think that is unrealistic,? he said.

?If there is any contact with the regulator it is from the top of the [audit]firm?It would be a very brave partner which would unilaterally take thoseactions.?

Power was speaking on day one of the Economic Affairs Committee inquiry intothe competition issue. Auditors have come under pressure from the FinancialServices Authority to speak up about concerns they have about their clients.

The inquiry also heard from Vivien Beattie, professor of accounting at theUniversity of Glasgow, who said one way to promote competition in the top-heavyaccoutning industry might be to encourage companies to retain their non-Big Fourauditor as they grow.

?These small companies, If they could be encouraged to stick with a non BigFour firm you would get a more organic solution. [Audit firms] would grow astheir [clients] grew,? she said.

Further reading:

Lordsto probe audit market

EconomicAffairs Committee