External auditors: watchdogs or bloodhounds?

Interesting article in Sunday Times Business section with the boss of former external auditors Grant Thornton (Sacha Romanovich, who lives in Exmouth and London). EDDC were forced by new government rules to change to KPMG recently.

The reporter quizzes her about several recent alleged failings at Grant Thornton (including a very high-profile law suit taken out against the company involving alleged pressure used by the company with the Serious Fraud Office to do with a property tycoon) and reveals that the Financial Reporting Council fined the firm £1m over flaws in its auditing of a Manchester building society.

She points out that the company has more than 40,000 clients so this should be put into context.

She ends her interview by saying: ” … audit is a watchdog, not a bloodhound. If people have deliberately gone about their affairs to hide things, it won’t always be found by a statutory audit … “

which then begs the question – so how will it be found?

Grant Thornton were criticised in East Devon for producing a very superficial consultants report into whether disgraced ex-councillor Graham Brown (who chaired the first iteration of the Local Plan committee and was Chairman of the East Devon Business Forum) brought too much influence to bear on the council after he was secretly filmed telling Daily Telegraph reporters how he could influence planning but “didn’t come cheap”.

Here is an extract from the Daily Telegraph front page expose almost exactly three years ago:

Another councillor in Devon appeared to use his position in a similar way. Graham Brown has been a Conservative councillor for Feniton and Buckerell ward on East Devon district council for more than 10 years.

He is also chairman of East Devon Business Forum, a member of the council’s overview and scrutiny committee and the business and tourism champion.

“I’m the best,” said Mr Brown at a meeting with undercover reporters in Devon last month. “If I can’t get planning, nobody will … I’m low-profile, have access to all the right people for the right clients. Don’t come cheap.” He said he was no longer involved in planning decisions and would need to be careful when talking to other councillors about projects he was involved in, but he was clear about what benefits he would bring.
“I know — without trying to be clever — I know more than most of the councillors, and I know more than most of the officers.”

When a reporter asked what his “strategy” was when it came to winning approval for a planning application, Mr Brown explained: “Where I’m good, I know all the different people to go to … Like if you came to me with a set of problems, I’d say, ‘Right the first thing we do, we need to go and talk to, say, the economic development manager’.

“So I’d pick up the phone to [name removed for legal reasons] and I’d say, ‘I’ve got a project, I want to talk to you about it.’ And it’s about almost kick-starting a dead motorbike”. Mr Brown told the undercover reporters that Devon had traditionally been one of the hardest areas in which to obtain planning permission for new developments, but that it might change because the council had not met its targets for land supply, meaning it was “quite vulnerable to any planning application that can be seen as sustainable”.
Mr Brown explained why this might be useful for the overseas developer the reporters were purporting to represent.

“What it means is — or what it could mean, and I can’t tell you definitely yet because it could get a deal worse or a deal better depending on — I’ve talked to three Government ministers about it because I’m reasonably — I sound terribly pretentious but I’m not — but you know, I’ve spoken to three individual Government ministers I know because I’ve been sort of in the Tory party for a long time and — how can I say it without sounding – I bet you go away and say, ‘that fat arrogant bastard’.”

“It sounds like you’re very well-connected?” the reporter suggested.
“Let’s take that for granted then,” Mr Brown said.

“Which means that whereas East Devon was traditionally one of the three hardest areas in the country to get planning permission, that will change … They will retain within the rules the ability to refuse things which fall down like if the design is poor, certain green belt areas, there will be certain areas so I don’t see it as the floodgates opening, but I do see a stampede coming.” His costs would vary according to the project, but he said he was normally paid £80 an hour or between £1,000 and £20,000 for a project.

His fees would vary “depending on the viability of the scheme, if we get it, like if I turned a green field into a housing estate and I’m earning a developer two or three million, then I ain’t doing it for ­peanuts … especially if I’m the difference between winning it and losing it.”

http://www.telegraph.co.uk/news/politics/9920971/If-I-cant-get-planning-nobody-will-says-Devon-councillor-and-planning-consultant.html