Monday 18 December 2017

Fatigues to sharp suits and ethical campaigns

How an Army veteran took on the new territory of accounting, rapidly conquered it, and has now set the future of auditing in Ireland firmly between his cross hairs. By Peter Flanagan

CPA chief executive Eamonn Siggins: 'In truth, there aren't many audit firms who have the scale to audit financial institutions and other big companies and there aren't many who want to upscale and take on the risk'
CPA chief executive Eamonn Siggins: 'In truth, there aren't many audit firms who have the scale to audit financial institutions and other big companies and there aren't many who want to upscale and take on the risk'

THE DEFENCE Forces are a revered institute and rightfully so. In many countries, especially the US and Australia, veterans are valued in the world of business, particularly for their strategic thinking and communication skills.

That is less the case in Ireland, where the profile of the Army is a lot smaller than in some other parts of the world. Still though, there are a good number of people in Ireland's boardrooms who have swapped fatigues for a sharp suit.

One such person is Eamonn Siggins. The chief executive of the Institute of Certified Public Accountants in Ireland (CPA) is a 14-year veteran of the Irish Defence Forces.

A captain who served in the Lebanon among other hotspots, Mr Siggins retired from the military in 1989 and took up a spot with the CPA before becoming chief executive in 1993.

For a man without any formal training in accountancy, the head of an association for accountants seems a strange choice of career, but the lack of accounting skill may have actually helped his rise.

"When I joined there weren't many non-accountants in the associations, so I was something different all right.

"At the same time, I was able to look at the overall picture if you like, and bring the public interest into the institute's thinking.

"After all, the ethic of the profession is to protect the public interest."

That public interest may have been lost sight of in recent years, as companies have time and again been given a clean bill of health by their auditors, only to have them nearly collapse months later.

Audit process

Mr Siggins is quick to accept that there is a disconnect now between the audit process and the public.

"There's no doubt that the expectation gap between what the public and stakeholders want and what the audit delivers is as wide as it ever was.

"We as a profession need to state clearly what can be delivered so there isn't an over-expectation of what auditors can do. The concept of an absolute audit is not feasible.

"Unfortunately the industry's reputation has been damaged by the actions of a few, but we are working to help resolve that problem."

To that end, the EU has launched a green paper on the audit process and the European Commissioner for Internal Market and Services, Michel Barnier, has said the status quo is not an option.

"We know there has to be some change to how audit is arranged and understood. The green paper includes a range of questions and is undergoing a consultation process at the moment.

"We anticipate changes in the communications process surrounding the audit, particularly when it involves finance institutions."

The paper covers a number of topics, but also includes what Mr Siggins describes as some kites being flown that may or may not be feasible.

The Enron scandal 11 years ago brought down Arthur Andersen, but since then the accountancy practice has remained dominated by the "Big Four" -- Ernst & Young, Deloitte, Pricewaterhouse Coopers and KPMG.

The EU may be looking at ways to bring in more competition at the top end of the sector, something he is sceptical of.

"In the consultation process, the commission uses the term 'bias' in relation to the Big Four, and I think they are in the wrong space when using that term.

"The commission should focus on preserving competition and not distort it.

"In truth, there aren't many audit firms who have the scale to audit financial institutions and other big companies and there aren't many who want to upscale and take on the risk."

Competition issues

In other words, there is no question of competition issues at the top level because there is nobody willing or able to muscle in at that level.

"Another thing you have to realise is that a business based in Dublin can have a huge number of subsidiaries based overseas; that is too much for most accounting firms to do an effective job.

"Everything needs to be geared to high quality audit and some of the suggestions they've thrown out would take from high quality audit, not help it."

One suggestion that has got Mr Siggins's support, however, is the need for financial statements to be simplified, and made more legible for the investor who may not have a financial background.

All one needs to do is pick up the accounts of any big company to realise the amount of jargon and largely irrelevant language used in the reports.

"Some financial statements run to 700 pages. They aren't statements; they're brochures with figures attached.

"Investors want clear, concise financial information complemented by a clear narrative and probably more integration in financial reporting around the sustainability of the business.

"For most people, the biggest concern is always the capacity of the business to be a going concern and the best way to do that is for the businesses to identify risk on their books and move from there."

It is instructive that Mr Siggins believes it's up to the company itself to know its risk and draw it to the auditor's attention, and not the other way around.

Time after time during the financial crisis, neither the auditor nor the company knew what risks they had on their books.

Only yesterday, PwC was roundly criticised in the UK parliament over its auditing of Northern Rock, while Deloitte and KPMG were slammed as well.

Nevertheless, it is true that an audit can rarely be anything more than a "historical snapshot" of where a company is and the communication lines between the auditors and audit committee need to be open.

"Regular meetings, in private if necessary, need to be had between the audit committee and auditor.

"The lines of communication need to be kept open," says Mr Siggins.

It's not all about the big firms, however. Small business plays a critical role in the economy and provides invaluable income for accountants.

Many of the problems facing SMEs, such as access to credit, are well-known, but Mr Siggins believes more tax incentives and less regulation are needed for SMEs to thrive.

"One of the things we hear from our members regularly is that small businesses spend too much time dealing with compliance and regulatory issues when they should be focused on keeping their business going.

"The tax structure needs to be looked at from a strategic point of view as well. The tax base had to be widened and I think we did that, but we need to look at the consequences of the Government's actions.

Tax environment

"When capital gains tax was increased, it brought more money into the Exchequer immediately, but it encourages entrepreneurs to move overseas where the tax environment is more welcoming to start-ups."

More than 17 years in the one job is a long time for anyone, and Mr Siggins is no different. What does the future hold for him?

"It would be a long time if it was the same job. But there have been so many changes it's almost like having had three or four jobs in that time.

"I'm one of those people who loves getting up for work in the morning, and as long as I have that, I want to stay in this position."

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