A House of Lords enquiry into the audit profession was told that a loss of prudence in accounting standards played a significant role in the banking crisis.
Accounting Standards Board’s (ASB) Urgent Issues Task Force member Tim Bush identified deficiencies in standards concerning over-valued assets, the non-disclosure of contingent liabilities and securitisations as major factors in the failure of banks.
He proposed a return to UK GAAP over the adopted international accounting standards which he labelled a ‘gimmick’.
“I do not see the sense in the UK giving up sovereignty in accounting standards,” Bush said.
Global business advisory firm FTI Consulting director Stephen Kingsley added that accounting standards had become more complex and were framed in a way divorced from reality, resulting in a loss of truth and fairness.
“The profession has almost slavishly had to follow the guidance which has been given through these accounting standards,” he said.
Bush and Kingsley were joined by Independent Audit director Jonathan Hayward and Oxera director Gunnar Niels as witnesses for the House of Lords Economic Affairs Committee’s ongoing enquiry.
The committee is expected to hear evidence from the Big Four next week.