The list of audit failures is legion. In the last several years there have been blunders at Carillion, Conviviality, Patisserie Valerie and Thomas Cook.
The conflict between audit and other work, such as remuneration consulting done by the same firm, is there for everyone to see at Boohoo among others.
The business select committee has every reason to be frustrated about government delays on an audit shake-up.
Conflict on interests: The Competition & Markets Authority has proposed structural separation of audit and consulting arms at the big four auditors
There has been no shortage of reports on reform. John Kingman was savage in his criticism of audit and governance overseer, the Financial Reporting Council (FRC), and demanded it be abolished and replaced by a new, robust Audit, Reporting and Governance Authority.
Amid the delays, a determined new chairman of the FRC, Simon Dingemans, resigned.
The Competition & Markets Authority proposed structural separation of audit and consulting arms at the big four auditors.
A third review by Donald Brydon recommended total separation, a fundamental change in the ‘true and fair’ view sign-off on accounts to provide greater transparency and the opportunity for audit chairmen to be cross-examined by investors. In spite of obvious need for action, the shilly-shallying goes on.
There is no sign that the minister concerned, Lord Callanan, recognises the urgency of the situation.
He only needs to look at the collapse of Wirecard in Germany to understand how a corporate imbroglio can wreck a national reputation for probity.
Britain is a pioneer in governance but risks falling behind. Covid-19 has not been enough to calm rapacious bonus culture in the boardroom with the pay report at Tesco rejected by a stinging 67.3 per cent of shareholders.
It is hard to bring discipline to boardroom pay when the same firm that does the audit is also charged with setting remuneration.
In a statement of the obvious, the minister notes that the three audit reviews are ‘interlinked’ reforms being developed and that not all require legislation.
Amid excuses about pressure of parliamentary business, no timetable is given. The flaccid approach smacks of heavy lobbying by powerful accounting firms.
Too bad, it’s time for a reckoning.
Woodford return
Investors in Neil Woodford’s dismembered empire could be nothing but appalled that the discredited fund manager has washed up as an adviser at Juno Capital along with sidekick Craig Newman.
What makes the reappearance most perplexing is that Woodford is being deployed for his knowledge of biotech firms.
It was Woodford’s overexposure to unquoted biotech firms that was at the core of the implosion at the flagship Woodford Equity Income Fund (liquidated) and Patient Capital, trading as Schroders Public Private Trust.
Shares in the Schroder fund are trading at a vast 55 per cent discount to assets. Investors in former Patient Capital are victims twice over.
When Woodford was seeking to reduce the level of unquoted stocks, he dumped a package of shares into the fund. He was able to do this because of a compliant board and a web of conflicts.
If Woodford had any shame, he would have retreated from the investment world. The lassitude in Britain’s system of financial regulation allows such bad practice to take place.
Any executive who is at the centre of a full-blown probe should be suspended from the City or investment world until such time as the formal inquiry is completed.
Whatever the outcome of the probe, Woodford should not be allowed near anyone’s money except his own.
Dilatory and overly legalistic procedures at the Financial Conduct Authority open gaping loopholes which undermine confidence in the City.
The failure of the FCA to come to any firm conclusions about Andy Hornby’s management at HBOS allowed him to launch new careers at Boots, at gaming outlet GVC-Coral and now at the barely surviving Restaurant Group. Farcical.
Milk Tray romance
Nelson Peltz, father of Brooklyn Beckham’s amour Nicola, is no stranger to these pages.
The activist investor was a key figure behind the bitterly contested takeover of emblematic British chocolate group Cadbury by Kraft in 2009.
Peltz first forced Cadbury to split off its Schweppes soft drinks arm, leaving it vulnerable to the sale to Kraft, which he also supported.
Among the results of Peltz’s handiwork work were that great delicacy Dairy Milk-flavoured Philadelphia cheese spread, the departure of the Wispa bar to Poland and the firm’s tax base to Switzerland. Congratulations.
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