This week, six years after the publication of the McCracken report, an inquiry and appeals process under the aegis of the Institute of Chartered Accountants in Ireland (ICAI) resulted in censures for two firms and one individual accountant, and a reprimand for another accountant.
The findings contain serious issues for the two firms concerned. Deloitte & Touche's objectivity "could not be assured" in conducting audits of Dunnes Stores companies because of the presence of two of its partners at Dunnes' board meetings, and its conduct of a Celtic Helicopters audit was also criticised. Given that independence and objectivity are the cornerstones of auditing, a Deloitte & Touche statement referring to the "technical nature of the findings" was somewhat disingenuous. Oliver Freaney and a former leading partner, Mr Noel Fox, were also censured over work done for Dunnes Stores, and Mr Michael Irwin, a former chief accountant of Dunnes Stores, was "reprimanded."
No doubt the committee chaired by Mr Justice John Blayney, which conducted the initial inquiry for the ICAI, and the subsequent appeals committee undertook their work thoroughly and judged their findings carefully. As the Tánaiste, Ms Harney, pointed out, the conclusions were " robust" and serious for those involved.
However there are a number of unsatisfactory aspects. Some of the issues and relationships involved were examined in the mid-1990s by the ICAI - and no action was taken at that time. Clearly, following the publication of the McCracken report, the whole investigation process took an unreasonable length of time, with much of the delay relating to court proceedings taken by parties involved. And it was all conducted behind closed doors, making it impossible to judge the merits of the arguments put forward by the companies and accountants involved to justify their conduct.
Also, the impact of the penalties is, at best, unclear. A "censure" will damage the public image of the companies concerned, but neither it nor their liability to pay the costs of the proceedings are likely to do lasting damage to their business. Meanwhile, without access to details of the hearings, it is difficult to assess the decision not to refer any of the cases to the ICAI disciplinary committee, which could remove a member's licence to practice.
These shortcomings underline the importance of the planned new regulatory structure for the profession, which involves a new oversight board, the Irish Auditing and Accounting Supervisory Authority, as well as reforms to the practices of the main accountancy bodies. This new structure, which is the subject of legislation currently going through the Oireachtas, is designed to leave in place a self-regulatory element, overseen by a new statutory body with extensive powers. Together with the new post-Enron environment for accountants, this should ensure a more transparent and responsive regulatory regime.