The banking crisis
ACCA CEO addresses Treasury Select Committee
30 Jan 2009
Helen Brand, ACCA chief executive, has given evidence at the UK Treasury Select Committee hearing into the banking crisis.
Responding to questions on the role of auditors and audit, Brand said: 'There is an "expectations gap" about what auditors can provide. There is room for improvement within the audit and risk management functions, and this involves all stakeholders in the process.'
Speaking after the evidence session, Brand added: 'Over 100 years ago, an English judge said in the celebrated Kingston Cotton Mills case, in 1896, that "The auditor is a watchdog, not a bloodhound". I'd still stand by that. It was an interesting session and I’m very grateful to be given the opportunity to communicate what ACCA thinks about the role of audit and the banking crisis.'
ACCA's written evidence to the Committee contains eight recommendations to help frame the final report from the Committee:
- There is a need to separate the activities of retail (i.e. taking deposits and making loans) from all other forms of banking. We welcome the Government's moves to ring-fence depositor accounts, as this is key.
- ACCA recommends that remuneration design needs to be carefully thought through with a clear eye to any unintended consequences as far as humanly possible.
- Remuneration design should be linked to cashflow and clear performance measure, rather than profitability and less well-defined measures of performance.
- Banks are already heavily regulated, but the regulations are not supervised very effectively. ACCA recommends that existing regulation for banking institutions is more effectively supervised.
- Ethical behaviour and professionalism has to be at the heart of any solution.
- There is a role for regulators, credit rating agencies, institutional investors and analysts in understanding and better explaining to the wider world what the banks are doing. This has implications for the training of these professions and the effectiveness of their communications.
- There is a continuing need for convergence to international reporting standards.
- The principles outlined in the OFR should be considered, and organisations should think about how these can be injected into their reporting. ACCA is doing this and the principles are proving useful.