City Talk: Auditors treading on dangerous ground

Auditors have always come under fire, especially so when things go wrong. John Maynard Keynes, the economist, renowned as much for his rudeness as his civility, once addressed the hapless auditor of a company where he was a director: "Everyone knows that auditors attempt to mislead, but do you seriously hope you can also deceive the directors?"

Reporting accountants to companies that float on the Alternative Investment Market are perilously close to entering some very murky territory. The now notorious use of financial projections in prospectuses for start-ups seeking AIM listings to provide some guidance to their level of future earnings has proved, in retrospect, to be misleading and has hardly painted a fair and accurate picture of a company's prospects.

Accountancy firms should think carefully about what use a projection serves, if it has no connection with reality. It is no good the accountant pointing to the caveats which adorn these prospectuses; in many cases, the projections serve as the basis for valuing the company.

One must ask, too, what sort of investor would put any faith in these illustrations, which seem of no more use than a finger in the wind. Investors have said that it is better than nothing, but the recent shenanigans leave a nasty smell in the air. Better that auditors wake up to the need to protect their reputations, and are only associated with an illustrative projection after its merits have been subjected to the most rigorous scrutiny.

Elsewhere, deals are still going through the market. A slight delay to the agreed pounds 297m acquisition of Midland Independent Newspapers by Mirror Group Newspapers came when Margaret Beckett referred the deal to the Monopolies and Mergers Commission. The referral was mandatory, and it is unlikely to cause more than a hiccup in the progress of the deal. But there is talk that Midland's weekly newspaper titles will be up for grabs once the deal goes through. MGN, which owns 46 per cent of Newspaper Publishing, publishers of the Independent on Sunday, dismissed the gossip.

The demerger of Fine Art Developments continues the fad for groups to unbundle, and split themselves up into their component parts. Fine Art is splitting itself in two with a new company, Creative Publishing, being listed on the Stock Exchange. Shareholders in Fine Art will receive one new share in Creative Publishing for every one share of the original business they own.

Creative Publishing in turn will have two divisions: publishing and stationery. In publishing, it will be Europe's largest publisher of greetings cards. Sales of pounds 163.3m and operating profit of pounds 20.9m will create a sizeable business in its own right.

The new shares in Creative Publishing are likely to trade at a substantial premium to those in Fine Art. But the value may lie in Fine Art, and there may be more incentive to snap up a few shares in the mail-order business.

According to the house broker Beeson Gregory, biotechnology start-up Alizyme will have used up all its cash by the end of 1998, and will be showing a deficit of pounds 3.56m. At its interim results last week, the company announced a breakthrough in its drug to treat mucositis - the condition of a dry oesophagus, created by chemotherapy - which is entering pre-clinical trials. The shares still look attractive in the long run.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies