Read Nicholas Ridge’s view of the recent referral of the Big 4 audit firms to the Competition Commission by OFT:

Can it really have been 1985 when the EU 4th Directive was transposed into UK Company Law.

As a Chartered Accountant, I felt then that my Institute and the UK Government had done business and the profession a huge favour by resisting attempts to segregate firms into those that performed audits and those that provided other professional accountancy services.

The resulting arrangement, a typically British compromise, permitted business to benefit from having their auditors use some of their insider knowledge to advise it about tax and strategic matters, wearing different hats and subject to certain safeguards protecting their independence as auditors.

I suppose that I held that view more or less up to the point of the Enron scandals and the associated Sarbanes-Oxley response to them. Since then, I have believed strongly that it is not possible to reconcile the conflict of interest posed by auditors also providing other professional services into a business, and I have looked forward to the day when the Institute split itself in 2, with a purely audit-Institute, and an Other professional services Institute.

Now we have a referral of the market for statutory audit services by the OFT to the Competition Commission. Already, the profession is protesting that any action absolutely prohibiting firms performing audits from providing other professional services would be against the interests of business in general, and hence against the public interest. They doth protest too much, methinks.

There is a golden opportunity for the profession to seize the initiative by recognising that commercial pressures cannot be reconciled with audit independence, however you seek to safeguard the matter, so long as accountancy firms are permitted to provide other services to audit clients and that the time has come to finally segregate audit providers from other parts of the profession.

Let us get ahead of the game. What is there to lose? What are we afraid of?

The Case for Corporate Governance

If you want to know what the point of being honest and direct in your Annual report and accounts is, take a look at Warren Buffet's explanation of why he has invested $10.7bn buying a 5.5% stake in IBM this year. "I don't know anything about IT operations", he says. "I was interested in learning about how they came to the decisions they did, what they might be doing three years from now or five years, and I got through it. They had a good business. They're honest with shareholders."

"I don't know of any large company that has really been as specific on what they intend to do and how they intend to do it as IBM".

Take heed. Clear ideas, coherently laid out, count for more than gimmicks and spin.

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