Tuesday 10 June 2003

Too many accountants?

Concern has often been expressed over possible conflicts of interest when a company's auditors are also hired to provide other business services. More attention has been paid to this "problem" since the Enron affair:
Critics argue that auditors might be prepared to overlook accounting ruses when they have such a powerful extra financial incentive for retaining the client.
There is a simple reason why accounting firms are able to earn so much fee income from non-audit work and that reason is politics. Ever increasing amounts of red tape make it essential for directors to pay large sums for tax advice and also for ensuring compliance with regulations. Accountants have the necessary expertise and give company directors someone to sue if it all goes wrong. If politicians want to cut the amounts spent with the "big four", why not scrap some of the excessive bureaucracy?