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

“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.

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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.