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Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale): As a chartered accountant who qualified through the Institute of Chartered Accountants in Scotland, I support the proposals in so far as they are set out here today. Does the Secretary of State agree that regulation of the profession is the key to restoring public confidence in financial statements? Does she accept that the current situation is a mish-mashnot even the accountancy bodies and professionals understand how it operatesand that until we have Government-sponsored regulation, the confidence of those who use accounts will not be regained?
Ms Hewitt: I agree with the hon. Gentleman that the current situation is pretty complicated. That is one reason why we are taking a fresh look at the whole structure of the professional oversight of accountancy, the regulatory framework and the oversight of that regulatory framework. I am not particularly attracted by the idea of the Government becoming, presumably, the sole supplier of audit regulation, but we will look at that as part of the review of the regulatory framework that I have announced this afternoon.
Mr. Jonathan Djanogly (Huntingdon): Will the proposals to have only independent non-executive directors on audit committees apply only to companies on the full list of the stock exchange? Generally speaking, I am concerned about the consultation period, in so far as it looks as though the proposals are being to some extent bundled up with the companies Bill. That Bill was sent out for consultation for several years and I am sure that it will be a lot better because of that. There is concern that the time in which these complicated issues will have to be reviewed by the profession and by other stakeholders will not be adequate.
On the speed of decision making, as I have said before, we should not rush into knee-jerk reactions to a problem that has arisen in the United States, where there is a somewhat different framework. At the same time, it is important that we build on the work already donein some cases, over a significant periodby the various existing regulatory and professional bodies. Where there is a clear recommendation from our co-ordinating group that action is desirable, we should take it. The measures that I announced this afternoon fit well within the much broader framework of company law reform that we are pursuing, and which was preceded by extensive consultation.
Mr. Jonathan Sayeed (Mid-Bedfordshire): Some have suggested that a WorldCom or an Enron could never happen here. It is instructive to note that the further away the proponents of that proposition were from the City of London or from company management, the more certain they were of it. I am less sanguine. Does the Secretary of State accept that accountancy standards bodies should look at the treatment of goodwill and capital asset valuation, particularly by those companies that have grown through multiple acquisitions?
Does the Secretary of State understand that an accountancy firm acting as an auditor has a principal responsibility to the shareholder, whereas an accountancy firm acting as a consultant has a responsibility to the company and its directors? As the interests of directors and shareholders often diverge, I am disappointed that she has not made rather more clear the view that there should be a separation of those two provisions.
Ms Hewitt: I agree with the hon. Gentleman's first pointwe certainly should not be complacent about the situation here. We are not, and that is why we are taking the action and commissioning the further work that I announced this afternoon.
The issue of how goodwill and capital assets are valued has not so far been raised in the reviews, but I am certainly happy to look further at it. On audit and non-audit services, it is precisely the different interests and responsibilities, and the conflicts that can arise between them, that give rise to people's concerns about the fact that audit companies are making so much money from selling non-audit services to their audit clients. There are arguments on both sides of this complicated issue. Not every non-audit service necessarily raises a conflict of interest with the provision of audit services as well. That is why we have asked the group to look at the matter in more detail and take further evidence before we make a final judgment on whether there should be tougher regulation.
Mr. George Osborne (Tatton): Further to the question raised by my hon. Friend the Member for Chichester (Mr. Tyrie), does the Secretary of State agree that the Government should lead by example on transparency of audit? Is she aware that the National Audit Office and the Public Accounts Committee, on which the Financial Secretary sits, are both very concerned about the fact that Network Rail's huge liabilities do not appear on the Treasury's books? When it comes to stamping out Enron-style accounting, should not the Government practise what they preach?
Ms Hewitt: As the hon. Gentleman will doubtless be aware, the judgment of the Office for National Statisticswhich recently looked at precisely this issue in respect of Railtrackhas been backed by Eurostat, an independent international body.
Mr. David Laws (Yeovil): Does the Secretary of State accept that, contrary to the impression given in the press and in her statement today, the Treasury Committee came out in favour not of mandatory rotation of audit firms, but of the principle of rotation, saying that the decision should be left to strengthened audit committees? Is that not precisely the sort of third-way solution that should appeal to the Government and to her?
Ms Hewitt: Of course it is already open to audit committees to choose to rotate audit firms but, as I said, there are strong views for and against mandatory rotation of audit firms. There is, on the one hand, a suggestion that some of the worst problems arise in the early years of a new auditor; on the other, there is the assertion that one finds what is going wrong with a new auditor or financial director.
It would be sensible for us, through the co-ordinating group, to look at the evidence more fully before judging whether to make the rotation of audit firms mandatory as well as the rotation of audit partners and senior audit teams, on which we have already decided.
Mr. Roy Beggs (East Antrim): On a point of order, Madam Deputy Speaker. I wish to raise an issue of which I have given prior notice to Mr. Speaker. I have also given prior notice to the hon. Member for Strangford (Mrs. Robinson), in contrast to her attack on my right hon. Friend the Member for Upper Bann (Mr. Trimble) in her speech on Monday night.
On 18 July this year, the Newtonards Chronicle published an article entitled, "Robinson lashes Belfast agreement in Commons", in which she also attacked my right hon. Friend the Member for Upper Bann, the leader of the Ulster Unionist party. The piece began:
The hon. Member for Strangford did speak in Monday evening's summer recess Adjournment debate. Another inspection of the Official Report revealed that her remarks were almost identical to the speech that the Newtonards Chronicle obviously believed she had delivered to this House almost a week ago.
Madam Deputy Speaker, I seek your ruling on two specific matters. First, do you consider it appropriate for an hon. Member to claim to have delivered a speech in this House when that was not, in fact, the case? Secondly, is it not a serious breach of parliamentary convention for an hon. Member to release to the press a word-perfect copy of their intended remarks to the House in advance of them actually being deliveredat least four days in advance, in this case?
It appears that the speech quoted in the press was given in the House after it had been printed in the newspaper. What is published in the press is primarily a matter for the newspaper and for the hon. Member for Strangford (Mrs. Robinson). But this is not a practice that the Chair would encourage.
Mr. Graham Brady (Altrincham and Sale, West): On a point of order Madam Deputy Speaker. This is further to a point of order that I raised yesterday about an incident in which a written answer to me was read out by a Minister in another place before it had been delivered by the Department to me. Baroness Ashton has written me a letter of apology, which I fully acceptI do not regard her as in any way responsible. None the less, may I seek a ruling from the Chair that such conduct is unacceptable and that Departments are expected to achieve a better standard in dealing with answers to right hon. and hon. Members?