Sunday, July 15, 2007

Corrupt Scottish Accountants in the USA lecture on regulation

More From A Diary of Injustice in Scotland

Institute of Chartered Accountants of Scotland take their quest for corrupt practice to the US

With the forthcoming introduction of independent regulation for Scotland's legal profession, via the Legal Profession & Legal Aid (Scotland) Bill, it may well be a good time to consider taking a look at other self regulatory professions, which have buried the corruption of their members for so long.

One of those self regulating professions, which you know well I have covered (through personal experience) in the past, is Scotland's accountancy profession - ruled by the Institute of Chartered Accountants of Scotland.

ICAS, and the rest of the accountancy profession, have special deals with Westminster, to regulate their own members, throughout the UK. The issue is therefore not devolved to the Scottish Parliament, and any change to the current corrupt set up of accountant regulates accountant, would have to come from London.

Is this a fair deal for Scotland ? in our time of the Scottish Parliament and supposed right to self-determination ?

Well, I don't think it's fair at all ... having some issues we can amend the law or make laws on, but others we can't. That only confirms we are still run from Westminster, and that Holyrood is simply a fiddle-stamp Parliament for the wishes & controls of whoever is in power south of the border.

How could any Scottish politician honestly argue there are laws & things we can't touch, yet we have our own Parliament, have certainly paid for it (through the teeth), and continue to pay for the extravagances & mortgage fiddles of its many members .... so we should be able to vote on & change the law when its not fair, shouldn't we ?

Well, here is such a law - the right of the accountancy profession to self regulate itself, should be struck down, and its current crooked system, which produces Howitt after Howitt, should be replaced by an independent regulator, with wide ranging powers as envisaged in the new Scottish Legal Complaints Commission - to give the consumer and even company client, a fairer, more transparent deal, when it comes to accountancy regulation.

It may just cut down on the fiddles & frauds undertaken by plenty accountants too, from issues involving the collapse of the former US company Enron, to simply milking a few pounds out of small business clients, for their own ends & pockets.

Information on how the accountancy profession is regulated, is fairly hard to come by, since there is no set up like the Scottish Legal Services Ombudsman for complaints against accountants, and organisations such as the FSA and DTI are reluctant to become embroiled in how the very powerful accountancy profession regulates itself .. so the media basically have to rely on statements & snippets direct from the regulators themselves - which is akin to taking Goebbles word as the truth and printing it.

Tom McMorrow, General Counsel to ICAS (he used to be Legal Services Director), claims there are hardly any complaints against accountants at all .. and that we shouldn't worry our little hearts about the situation, because ICAS are doing an honest job.

Well, here is a good example of how ICAS and particularly, Tom McMorrow, do their honest job :

A picture is worth a thousand words - Images of fraud reveal corruption & deceit by lawyers & accountants in the Scottish Borders

Not very honest then, Mr McMorrow, are you ... and ICAS ... well, after reading through the Howitt case, and a slew of complaints which have never been answered by his firm, or ICAS ... oh and not to mention complaints to ICAS where apparently members fiddled cheques through banks of dead clients .... I'd say the Russian Mafia is more trustworthy than ICAS.

All those links to the Privy Council too, just to ensure the power to self regulate your own colleagues is retained ... and getting members of the Privy Council to interfere directly in complaints against accountants, to get them off the hook from further scrutiny .. well, I'd say that proves corruption on quite a scale, which we don't need in Scotland, thanks.

Another interesting point about the accountancy profession, is how it ensures it's members by way of Professional Indemnity Insurance.

Yes, you guessed it - almost duplicate insurance arrangements to which lawyers enjoy - a policy similar to the "Master Insurance Policy" where all members pay a subscription, which also seems to involve the infamously crooked Marsh Inc insurance & brokerage firm, but which has amazingly escaped the attention of the OFT, unlike of course, the insurance deals which the legal profession have with Marsh - which did merit an investigation.

Scotland has some 16,000 accountants, versus just under 10,000 lawyers.

There are 4000-5000 complaints against lawyers in Scotland each year (although the unofficial figures are much higher)

ICAS claims there are about 60 complaints against their accountants each year ... which statistically is a nonsense .. .and certainly from reading a few of your emails, where ICAS won't even acknowledge letters of complaint, and individual accountancy firms will harass a client who tries to make a complaint ...the evidence is that the true figure of complaints & dissatisfaction with accountants in Scotland is much higher than the figures made available from the regulators themselves ...

God only knows why the media is so willing to believe the likes of these statistics, when just about every other statistic in the UK is questioned to the hilt .. for instance, ... heard the one about the unemployment figures ?

Anyway, here is a story from the Herald newspaper, reporting on ICAS taking their "quest for principled practice" to New York.

Perhaps that means ICAS are trying to get the american accountants to steal pensioners bank books & pension books too ...

Quest for principled practice

Quest for principled practice
IAN FRASER April 09 2007

The Institute of Chartered Accountants of Scotland last week took the fight over the future of global accountancy standards to the belly of the beast.

New York will be the battleground in the struggle between the principles-based accounting standards favoured in the UK and the rules-based system favoured in the US.

And it was to New York that Sir David Tweedie, chair of the International Accounting Standards Board, took the message of "convergence".

Tweedie, a keynote speaker at the half-day conference in New York, entitled Principles into Practice, believes that as accounting standards converge, it would be preferable for the global profession to gravitate towards a principles-based approach.

He is a staunch advocate of accountants using judgment and professionalism rather than mere "box-ticking".

He and his fellow advocates of principles-based standards say their approach is less likely to lead to fraud and financial engineering than would a complex system of rules. Also, says Tweedie, a principles-based system is more likely to promote stable capital markets.

They also argue that convergence cannot be achieved if it is to be based on a detailed rules-based approach, which they say would prove to be very difficult to roll out across different jurisdictions and cultures around the world.

In a kneejerk response to the massive frauds at Worldcom and Enron, the US government tightened its rules-based approach through the 2002 Sarbanes-Oxley Act. With it came onerous reporting requirements for US-listed companies, which many claim has sapped the health of US capitalism and encouraged growing numbers of firms to list their shares on international stock exchanges rather than on the NYSE and Nasdaq.

Speaking at the conference, held with the American Institute of Certified Public Accountants, Tweedie said: "If people keep coming to me for clarification on the principles-based standards that are issued, then the game is up. Principles will then become rules. This is one of the last chances we've got to get this right. If the US fails to accept principles-based standards, then the IASB may have to consider a Plan B' on convergence."

David Wood, executive director of technical policy at ICAS, said: "We have reached a critical point, and there had been a risk that IFRS (international financial reporting standards) could start moving towards the US's rules-based system. That's why we decided to take the debate to the place that really matters. This is where the battle is going to be won or lost."

Icas believes that principles-based accounting provides a comprehensive basis for the preparation of financial statements in that it is the definition of flexible, and leaves auditors less scope to convince themselves that an inappropriate interpretation may be acceptable.

Wood says he detects some chinks in the armour of the Americans. Some prominent figures are beginning to question whether their overly rules-based approach may explain the exodus of stock market listings to London and other international markets. In March, US Treasury Secretary Henry Paulson argued in favour of lighter-touch regulation, indicating that a principles-based system might be preferable for the US markets.

Paulson said: "We should also consider whether it would be practically possible and beneficial to move toward a more principles-based regulatory system, as we see working in other parts of the world."

At the ICAS event, Bob Herz, chairman of the US Financial Accounting Standards Board (FASB), stressed that principles-based accounting standards would best serve users of accounts and the public interest.

Wood added: "We have heard widespread support from US and UK speakers for principles-based standards. Now the challenge is to put this into practice. To do that, the global profession must promote judgment through the training of accountants; reject a slide into the safety-net of rules and work with regulators to ensure that they accept properly documented decisions that have been arrived at using judgment, instead of blindly following the rule book."

At the ICAS event, principles-based standards also received support from US litigation lawyer Michael Young. An expert on financial reporting and financial fraud at the New York firm Wilkie, Farr & Gallagher, Young said that principles-based standards could survive in the US, despite perceptions that it is a highly-litigious corporate culture.

He said: "Principles-based standards, according to conventional wisdom, would increase liability for preparers and auditors. Rules would seem to offer more certainty. My experience suggests the opposite: if something fishy is going on, rules can't get you off the hook. Rules send corporate culture in the wrong direction - they say we don't trust you'. Finally, rules spawn more rules - not something anyone wants to see."

Michael McKersie, manager of investment affairs at the Association of British Insurers last year, says the idea of a global monopoly of financial reporting is not necessarily a good thing.

"We need to ask the question whether some degree of competition is necessary to achieve objectivity or better standards."

Speaking at an earlier Principles into Practice event, he said that Tweedie's IASB needs to stand up for non- US views around the world, adding that principles are absolutely right but there are "enormous grey areas" which may sometimes need rules.

ICAS intends to hold similar Principles into Practice events in Luxembourg in May and Brussels in September.

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