Examination of Witness (Questions 320-326)|
TUESDAY 2 JULY 2002
320. What happens if there are no international
standards by 2005? In your opinion what are the implications?
(Ms Keegan) There is a risk, there must
be a risk, that those international accounting standards which
were inherited by the IASB from its predecessor body will not
be of the quality of UK financial reporting by the time 2005 arrives.
We at the ASB have as our number one priority though to work with
IASB to try to minimise that risk and to make sure that the financial
reporting solutions for UK companies come 2005 will be every bit
as strong if not stronger because there will be things like revenue
recognition standards by 2005.
321. Has there been communication between the
Government and yourselves over issues such as revenue recognition
and FRS 17?
(Ms Keegan) I ought to explain the fact that at every
board meeting of the ASB I have two observers: one from HM Treasury
and one from the DTI. That means there is very regular communication
on what we are doing and where relevant I can receive encouragement
to move faster in one area or another. I also work at regular
communication with the FSA in their role as market regulator.
Therefore we exchange views on which topics demand urgency and
which need priority.
322. Do the minutes of your Board make it clear
what the nature of either the encouragement or the discouragement
from the Treasury representative to you is?
(Ms Keegan) )Yes, the minutes of the Board record
the decisions made at the Board as to what our priorities should
323. I think the answer is in fact not yes,
but no. Your minutes do not record encouragement or discouragement
from the Treasury representative to you in your work. Do they
or do they not?
(Ms Keegan) No, they do not.
324. What message, what reassurance can you
give to the general public on the accountancy profession in the
light of Enron or WorldCom and the implications for the UK, given
that a number of eminent professional accountants have stated
to us that the profession is in crisis? What is your message?
(Ms Keegan) A general message is: yes, there is a
need to re-examine the role of every party in the whole process
of providing good information to the markets. I would not necessarily
place any more emphasis on the accounting profession, the auditing
profession, than I would on the role of management, the role of
corporate governance and no less on the work of the standard setters
whose job it is to make sure that the guidance is there to get
transparent financial reporting into the marketplace.
325. Do you have any advice to give on corporate
(Ms Keegan) On a personal basis I have always felt
very strongly about the importance of the role of the audit committee,
of emphasising that role and providing guidance for business and
for the audit firms, of the issues which should be brought in
front of the audit committee and how those should be dealt with.
I think that guidance should almost certainly include very careful
scrutiny of the accounting policies adopted by the company and
views from the auditor as to the prudence of otherwise of particular
accounting policies; potentially also views from the auditor on
any accounting decisions which have had to be made outside current
accounting standards where perhaps guidance has not dealt with
the particular situation the company has encountered. If there
were guidance for audit committees in looking at those things
and asking difficult questions of the auditors, the process of
internal control within the company might be a little more transparent.
326. May I thank you very much for coming along
this morning? It has been very valuable to us and we wish you
well. We look forward to international accounting standards being
very comprehensive by 2005. We shall invite you back then.
(Ms Keegan) We shall do our best.
Chairman: Thank you.