Jason Nisse: The auditors weren't at the races, but investors might as well be

Worse things happen ...
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The Independent Online

Trust was a big word in the markets last week. Post Enron, post Allied Irish, post Global Crossing, no one believes what they read in the balance sheets any more. Companies with controversial accounting practices – such as Tyco and Sage – were pilloried, those with off balance sheet debt – such as Tyco and Rolls-Royce – were punished. Where will it lead?

For a start there is immense pressure on anyone audited by Andersen to review their relationship. Airtours, or MyTravel as it is now dreadfully named, gave a poor defence of its close relationship with the troubled accountant last week. Amves- cap may make a better fist of it this week, but it is under pressure to ditch Andersen.

While I'm not defending Andersen, I think we are in a baby and bathwater situation. Sure it looks culpable over Enron, and now that the SEC and FBI are inves- tigating Global Crossing, the sweat must be on the brow.

But other firms are not immune from criticism. In an excellent article, Business Week unpicked the links between PricewaterhouseCoopers and Gazprom, which the magazine describes as Russia's Enron. It does not make comfortable reading. All the big auditors have skeletons in their closets. And even if they didn't, if you take Andersen out of the equation, the choice if you are a quoted company and want an auditor is becoming horribly limited.

Ask Anita Skipper, head of corporate governance at Morley Fund Management. "With less choice, it is harder to avoid conflicts of interest," she told us. "I think there's not enough choice now, with the big five. PricewaterhouseCoopers audits around half of the FTSE 100; that looks pretty concentrated to me. It is questionable whether the regulators should have allowed such concentration, and whether it is in the public interest."

The regulators, though, may exacerbate the situation. The FSA is floating the idea of rotating auditors, say every five years. But with only four big firms, rotation could become a mockery.

I believe the only way to keep auditing clean is via some form of oversight regulation. Just as the taxman randomly checks self-assessment forms, the regulators could randomly audit the audit, fining or disbarring auditors that don't come up to scratch. Unless someone restores trust, investors might as well put their money on Lucky Lad in the 4.40 at Kempton Park.

So it's farewell "Dim Wim" Duisenberg, the European Central Bank chief whose lack of charisma has not helped the euro. But who is to replace him? The French want Jean-Claude Trichet, governor of the Bank of France, but the Gallic track record at European institutions is dreadful; you only have to look at the European Commission and the European Bank for Reconstruction and Development. Also, there is the small matter of the criminal investigation into Mr Trichet's role in the near collapse of Crédit Lyonnais.

The only people who can benefit from his appointment will be the "No" campaigners trying to stop Britain joining the euro and the speculators who bet against the unsteady new currency.

 

Few things can be more boring than a cruise. But the latest twist in the battle for P&O Princess is enough to test the patience of a driving instructor.

At least there will be some relief next Thursday when shareholders will be asked to approve the merger with Royal Caribbean. Given that Carnival is now bidding £3.8bn, a figure even P&O sees as reasonable, you'd have thought it would be a good idea to postpone this vote and see if the regulators allow the Carnival bid. If they do, then shareholders will end up with more than the Royal deal is offering. However Royal is threatening to walk if the vote is delayed. This is what is known in the trade as a Robert Robinson moment, because you don't have to be Brain of Britain to Call My Bluff. If Royal really wants P&O, it will not aban- don ship when the water gets choppy.

j.nisse@independent.co.uk

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