No loss of trust, says LSCA President

In the wake of the Carillion scandal, LSCA President Malcolm Bacchus argues that the public and smaller businesses still turn to their accountants for trusted business advice.

June 2018

My year of office as President of the London Society will be nearly over when you read this. It has been fun as those of you who follow @BaccmaConsult will know.

I have met a lot of interesting accountants in a lot of interesting and sometimes unusual jobs. Memorably, I have a met a lot of younger members who are enthusiastic not just about their jobs but about the profession as a whole. And that is hugely important at this time.

I had hoped to avoid the subject of trust in business again. The fallout from Carillion makes it impossible to do so. We have seen the collapse of a significant number of big businesses this year, many without any obvious public warning either from their boards or their auditors.

The big four firms of auditors have not covered themselves in glory. The chairman of one of these firms has said that the current position is “unsustainable” and agreed with parliament that they are “undeniably” an oligopoly. And while directors have managed to avoid much of this public gaze – oddly being less regulated than the auditors – the primary responsibility for those failures rests with them.

No loss of trust

Let us remember, however, that many of our members work in private businesses and in smaller auditing and accounting practices. Contrary to what might be thought from the press, there is no loss of trust there. The general public still looks to them as trusted business companions as, indeed, they should. And while the audit process is under fire, it is undeniable that many, many more businesses, knowingly or unknowingly, would produce poor and unreliable financial information if audit did not exist.

In the light of Carillion, I suspect we may see the total separation of audit from other functions and tighter regulation from a re-vamped FRC. But, in all this, we should be careful not to upset the infrastructure that supports smaller firms. It will be in nobody’s interest if increased regulation and cost forces firms out of audit and makes the cost of audit prohibitive for SME and mid-tier clients.

We can question whether larger firms have brought the position on themselves or whether globalisation and client cost pressures made the current position inevitable, but we should not doubt that there are a lot of accountants, in business and in practice, who work hard, often for relatively low reward, to make the UK still one of the safest places to do business in the world.

There are challenges ahead and the London Society of Chartered Accountants will be there to help members through them.

Malcolm Bacchus is President of the London Society of Chartered Accountants.

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