REFORM OF THE AUDITING INDUSTRY

That this House has no confidence in either the standards or the regulation of the auditing industry in the light of the rising tide of financial scandals such as Maxwell, BCCI, Polly Peck, British and Commonwealth, Levitt and Barlow Clowes, and the incidence of companies going bust shortly after receiving clean audit reports such as Coloroll, Parkfield, Sound Diffusion, Air Europe, Mint and Boxed and Dunsdale; deplores the fact that where auditors should act to protect and warn the public and shareholders too many have been drawn into a collusive relationship with directors by their desire to sell non-auditing services to firms; feels that the kind of passive auditing encouraged by the professional bodies is no longer adequate as a protection for shareholders or a defence against fraud; notes that while large firms such as Price Waterhouse, Coopers and Lybrand, Deloitte, Ernst & Young, Peat Marwick McLintock, Grant Thornton,and Pannel Kerr Foster have all been criticised for their audit work by Department of Trade and Industry inspectors, none of them has ever been investigated by the accountancy bodies nor has any partner of any major firm involved in audit failures been prosecuted or debarred; therefore suggests that self regulating means regulation by trade association, which can protect neither the public nor shareholders, so that the auditing industry should be indpendently regulated; and urges the Government to make early proposals for this.