Fishburn Hedges

07.07.2010

Ok, maybe it’s not. But bear with me – it’s about auditors, and it’s really interesting, but it might not look that way it first.The FSA has published a consultation, you see. It’s about the contribution that auditors can make to prudential regulation, and asks for contributions on how the ties between audit firms and regulators can be improved.This is quite technical stuff that might seem a bit niche. But I would suggest that even if you’re not a finance fiend, there are five good reasons to pay attention:  

1. It's a very important field. There’s a lot of criticism about the way auditors handled themselves in the years running up to the crunch by failing to criticise risky behaviour. Every company has auditors, and regulators often rely on their numbers -  I’d even say the auditors’ ideal of ‘professional scepticism’ wouldn’t be a bad ethos for a regulator to adopt. Auditors might have a dull reputation, but we need them.
2. It's only going to get more important. As the consultation refers, the EU has made noises about auditors, and the recent Which? Future of Banking Commission also made recommendations on the area. Auditors can only move further into the spotlight. So watch this space.
3. It's a very open-ended consultation. Indeed, the very first question is effectively ‘Have we forgotten anything, chaps?’ Some consultation papers are exercises in obfuscation. This isn’t one. It’s designed to achieve something, and there’s wide scope for close input by financial companies.
4. The consultation explicitly references the work of the Treasury Select Committee. It’s another sign of what is increasingly obvious: the TSC is an essential part of our financial governance. You can’t imagine the politics of finance without them. And with an ambitious and experienced new chairman, don’t expect that to change.
5. The FSA ain’t dead yet. It’s tempting to treat its work like that of any doomed quango or regulator - largely irrelevant. But its functions are being sliced and merged with the Bank of England, which is not quite the same as simple abolition. And the retention of senior staff was quite a coup for George Osborne. So the FSA retains its clout for now.

In summary, it might just be one consultation. But it’s a sign of bigger things.Now, that maybe wasn’t the best blogpost on regulation, but it wasn’t too bad, was it?Posted by Gordon Hector