Professor Paolo Quattrone, Co-Director, Centre for Accounting and Society, University of Edinburgh Business School, recently had a letter published in the Financial Times (FT) concerning the role of the Big-Four accounting firms.
The letter made the following statements:
Calls for the break-up of the Big Four accounting firms (“Carillion’s demise spurs call for action”, May 16) will not fix the audit function.
It is no coincidence that cases of boards subjected to a rigorous cross-examination of their accounts at AGMs are rare. This can be changed by re-making accounting numbers matters of concern and challenge the assumption they are matters of fact. Figures should prompt scrutiny and tensions among the various stakeholders interested in the process in order to understand that there is no such a thing as an accounting truth but truth cannot be stretched too much. Therefore a debate about such figures has to happen. The higher the proportion of guesswork, the more readers should be empowered to look at them with a degree of positive scepticism.
Auditing concerns both accounting processes and the truth of accounting content. The former is the realm of auditors and the latter is the realm of other stakeholders fighting for an accounting truth, a truth that does not exist. Therefore preparers will have to reach an agreement with other stakeholders on what counts as the “right” accounting valuations, and be accountable for those in front of the general assembly and society.
Companies will still fail, scandals will emerge and questions will be asked. But if we restore the true purpose of accounting, to hold society to account by making users ask the right questions rather than consume the wrong answers, we may move on from pointing fingers to a place where we can make better decisions in the future.