PROFESSOR ATUL K. SHAH www.atulkshah.co.uk
Globally renowned expert advisor and broadcaster on culture, accounting, finance, business ethics, holistic education and leadership
When things get tough, experts protect their own interests rather than the public interest. Is this any surprise when the experts earn million pound packages and have a strong commercial orientation where the private interest and culture dominates everything? Just as the world is meeting for COP28 we have failed to resolve our basic problems with independent auditing and accountability. Throughout the life of Wilko, auditors confirmed that the accounts gave a true and fair view, and the business was a going concern, even when it was limping for years.
Parliament asked me to comment on the collapse of a large retail chain called Wilko which was a nearly 100 year old family business, and 12000 employees lost their jobs and some of their pensions, not to mention big losses for creditors. Unlike audit firms, who have full access to all the financial records of the business, and are able to ask challenging questions to management and also witness any problems with suppliers or liquidity, all I had was the bare published accounts to analyse. I conducted a forensic analysis, drawing on my previous audit experience and research experience accumulated over three decades.
What I found was that there were two sets of auditors, all from the Big 4 firms, PWC and EY, and both spotted the problems well in advance, but did not provide clear and unambigous judgement on the future of Wilko. This is what I said in my Parliamentary interview by a panel of MPs – and there are now calls for significant reforms of the accounting and insolvency profession – Chair of the Panel Liam Byrne MP concluded that auditors fail to judge and warn in a timely way, and insolvency firms are like the Wild West.
The press covered this meeting widely, and the Mail on Sunday did a whole article specifically on the expert evidence, where the auditors were asked to defend themselves but did not comment. This parliamentary evidence session can make a good case study for the teaching of accounting, helping students appreciate the power of democracy. All the videos of my evidence are available on-line on Professor Shah’s YouTube channel including short bites which can help students to focus on key themes.
Let us work to transform our democracies so that Corporations are forced to be transparent and accountable, and the global Big 4 accounting firms use their expertise to challenge and report in a timely and public interested way the truth about corporate performance.