Catching up with the House of Lords audit enquiry
Posted by Christie Malry on November 22, 2010 at 10:19 am
So we've had a few more weeks and a few more Tuesday afternoons with the Lords. On 9 November it was the turn of Philip Collins and David Stallibrass of the Office of Fair Trading, Baroness Hogg and Stephen Haddrill of the Financial Reporting Council, Sally Dewar and Richard Thorpe of the FSA. The uncorrected evidence is available here.
There's a peach of a quote from Thorpe, who was pressed repeatedly to give a view as to whether auditors failed in the crisis by not contacting the FSA to discuss concerns about their clients:
We have no evidence that there were examples of information that they should have given to us, which we didn’t get direct from their clients.
In other words, the disclosure regime seems to have worked properly. It's just that they got the information they needed from the banks themselves, not from the auditors. What's to complain about in that?
There's then an odd exchange between Lord Lawson and the witnesses as to whether auditors should have in some way raised the alarm earlier. I find this idea wholly unconvincing. There is a point in time, let's call it t, at which the crisis was obvious to all. So the crash happened. Does this mean that the crisis could have been averted if someone had said "there's going to be a crash!" at time t-1? Evidence suggests that it's the interpretation of the same information that changes, not the information itself. So any early warnings would simply be ignored. It's vital that we see auditors and their opinions as trusted. The suggestion that they become watchmen for the rest of society risks turning them into a Cassandra profession.
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