The Meddlesome Art of Minding Other People's Business
Sourav Mitra -
Tuesday, January 01, 2008 10:16 PM
If you were training to become a CA with me you would also have been able to sense that most audit clients wished that you should not meddle in their business - in the missing warps and wefts in their jute weaves, or in the mismatched fertiliser over-issues and tea garden plot sizes, in the 'inadvertantly' over-or-under-booked income or expenditure or in anything else. It was an era when not all businesses had computers. And some were happy if you only enjoyed their hospitality and complained only of totals in the handwritten books being done in pencil, not in ink or if we pointed out actual micro-frauds or inadvertant errors of the hapless underlings.
It seemed as if auditing was not a noble vigil on business but a pariah-on-a-pedestal's "meddlesome art of minding other people's business".
Now look up Wikipedia for Accounting Scandals.
It says: "All of the leading public accounting firms—Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, PricewaterhouseCoopers— and others have admitted to or have been charged with negligence in the execution of their duty as auditors to identify and prevent the publication of falsified financial reports by their corporate clients which had the effect of giving a misleading impression of their client companies' financial status. In several cases, the monetary amounts of the fraud involved are in the billions of US Dollars".
It also matches audit firms with clients entangled in accounting scandals:
PricewaterhouseCoopers: Bristol Myers, HPL, JP Morgan Chase, Kmart, Lucent, MicroStrategy, Network Associates, NKFS, Tyco
Deloitte & Touche: Adelphia, AES, Duke Energy, El Paso, Merrill Lynch, Reliant Energy, Rite Aid, Parmalat
Ernst & Young: AOL Time Warner, Dollar General, PNC Bank, Cendant, HealthSouth
KPMG: Citigroup, Computer Associates, ImClone, Peregrine, Xerox, Siemens AG, Banco Nacional S.A. (Brazil), BMW Group
It will appear as if instead of keeping an eye on the economic "affairs" of humanity the auditing profession is turning a blind eye or even turning accomplice in the shadowlands of finance.
BUT.
The big but is that Wikipedia can be edited by anybody. If these posts in it are the creatiivity of vandals, fictional rants of sensation mongers or the empty revenge of disgruntled stakeholders the entities named should rectify these. Or, audit firms can also create a section to put in details of fees and business they have sacrificed in their mission to tame or even abandon errant businesses. People would relieved to know if there are any.
In the aftermath of all these scandals the Sarbanes Oxley norms were created to enhance the vigil on corporate governance. Will it help?
I have enormous doubt. Because businesspersons have almost always proven to be 'rich' or clever enough to find or create holes in any net cast around them.
Corporate governance is likely to remain compromised unless:
a) All businesspersons become tough enough to take the rough with the smooth, or
b) Auditors and other enforcement agencies choose to meddle again seriously and mind other people's businesses with a vengeance to reclaim their otherwise fake honour.