Besieged by number-crunchers: If someone does it, someone else is probably auditing it. And that worries Michael Power

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The Independent Online
OVER THE past few years millions of people in Britain have found themselves for the first time subjected to audits. As well as financial audits there are environmental audits for doctors and professors, teachers and police. There are value-for-money audits, management audits, forensic audits, data audits, intellectual property audits, technical audits, teaching audits, technology audits, stress audits, democracy audits and many others besides, all contributing to a substantial shift in power from the people who do things to those who police them.

This has happened with remarkably little debate or scrutiny of the central claims made for audits: namely that they enhance accountability and quality. Instead, even radical critics of government now often pose their demands in the form of a call for audits: green audits, social audits and citizen audits.

The true extent of the audit explosion is difficult to quantify but there are a number of indicators. The establishment of the National Audit Office and the Audit Commission in the early 1980s consolidated the auditing of central and local government respectively. Both these organisations have steadily expanded their work, bringing intensive scrutiny to many new areas, for example the various elements of the criminal justice system - police, forensic science, probation and Crown Prosecution Service.

Medical and teaching institutions are also soon to become subject to extensive auditing regimes. In the field of quality assurance more generally, the British Standards Institute has successfully promoted BS5750, its standard for quality assurance, helping it spread from business into universities and even schools. Business and financial auditors have been given more onerous responsibilities and, since 1992, charities have been subjected to much tighter disciplines.

In other areas, the audit explosion has taken different forms. Safety and hazard audits in industry have grown naturally from health and safety legislation. UK public science will soon find itself subject to value-for-money, intellectual property and technology audits as government seeks both to make science accountable to its funding public and to exploit its intellectual property base.

This quiet spread has had a huge impact on how organisations behave. People working in very different kinds of institutions have experienced the impact of increasingly formalised external controls. Quantifiable outputs have taken precedence over more qualitative ones, and formalised systems have taken precedence over personal judgements and relationships.

In general, simplified measures are being given more weight than complex ones. Value-for-money audits, for example, tend to prioritise that which can be measured and audited in economic terms - efficiency and economy - over effectiveness, which is by nature more ambiguous and local.

Many assume that auditing is itself subject to scrutiny. But, in fact, as a discipline it is largely invulnerable to failure. When it is seen to fail, as in the case of the collapse of BCCI or the Maxwell empire, few question the role of audit itself. Instead, the common response has been to call for more of it. As a result, and despite a good deal of hand-wringing among those involved in financial audit, the idea of audit has achieved a remarkable resilience.

One explanation for this fixation with auditing can be traced back to a shift in graduate demand during the 1980s. In that decade 10 per cent of all graduates in the UK went into accountancy - far more than in other countries - helping the big six accounting firms to meet a growing demand from industry and government. When many of these graduates subsequently diverged into other careers in industry, business or public services, they carried with them their belief in the usefulness of audit as a managerial tool.

A second factor has been the changing shape of government. With the devolution of responsibility down to agencies, governments have needed a new mechanism of control to replace the bureaucratic Whitehall control of the past. The audit of outputs - whether children's exam results or the throughput of patients - provides a neat solution, reconciling centralised control with decentralised responsibility.

A third factor has been the explosion of risks - not only environmental risks but the risks associated with medicine and new technologies and with more interconnected markets for capital. Audits offer the comforting illusion that things which may, by their nature, be beyond control can still be understood and managed.

The final factor is the most fundamental. It is the widespread belief that we now live in societies that have less trust for professionals and others. Audits formalise this distrust, offering external accountability in place of the self-regulation of the past.

This last point is basic, but it involves an irony. According to opinion poll evidence, politicians and accountants are distrusted far more than professionals. In practice much of the audit explosion has involved a very distrusted group - politicians - using an only slightly less distrusted group - accountants - to tighten control over groups which still enjoy relatively high public esteem, such as doctors and police. Worse, audits often fuel distrust. For example, if a teacher is more intensively audited, their response is often to adjust their behaviour to 'fool' the system. It is well known that those who feel themselves to be distrusted behave in ways that justify that distrust. This breakdown in trust is summed up in the idea that four people performing a co-operative task, say loading trucks, find that the risk of any one of them slacking is such that they hire a fifth to monitor their work. As a pervasive principle this is not healthy for any society. Yet anyone who questions the validity of audits is automatically cast as a defender of secretive privileges. A more mature approach would recognise that audits - and often very demanding ones - are needed. Without strict external oversight of the public sector and business there are strong tendencies towards fraud and waste. Our problem in the UK is simply that we have gone too far in extending a narrow conception of audit and in allowing it to displace other kinds of accountability.

Instead, in the second half of the 1990s our priority, throughout public and private sectors, should be to find a better balance between formal external audits and more public, local and face- to-face types of accountability: a better balance between doing and policing.

The writer is lecturer in accounting and finance, and Coopers & Lybrand Fellow, at the London School of Economics. His pamphlet 'The Audit Explosion' is published today by Demos, pounds 5.95, from 9 Bridewell Place, London EC4V 6AP.

(Photograph omitted)