What's up with the AIDB?

Time to reflect on the Mayflower case, which has resulted in no charges being brought against PwC or members of the finance function at the transport group's subsidiary, Transbus. To recap, Transbus’s former financial controller Ian Shelton had been accused of iffy invoicing practices designed to retain cash in the business and flatter its cashflow; PwC was charged with failing to test those practices and thereby signing off a dodgy audit.

The case was the first big test of the Accountancy Investigation Discipline Board, the supposedly more open replacement for the behind-closed-doors Joint Disciplinary Scheme. But on Monday, the AIDB decided to drop the case against Shelton and yesterday decided PwC also had nothing to answer for. (Mayflower's FD, David Donnelly, is still waiting to hear how he'll fare on seperate charges.) In fact, Shelton's old boss at Transbus, FD David Berry, was out of the country when the hearing was held. Shelton admitted he'd done wrong by not blowing the whistle; but he blamed Berry, saying if he'd refused to manipulate various spreadsheets, he'd have been fired.

Two points. First, because the financial controller is the individual closest to the preparation of the accounts - and also has close proximity to the banks, the raw numbers and the grunts in the finance function - they're inevitably going to get caught up in any dodgy dealings. As Sherron Watkins, a group financial controller in all but name, showed at Enron, you have to speak up when you discover things smell bad because otherwise you're taking a hit that'll be worse than losing your job. Hell, that's what chairmen are for.

Second, what a disappointment the AIDB is. Check out its web site - its first big case is closed (albeit only partially, and not terribly conclusively) and it has nothing to say (as at 11.40am on the day after it dropped the charges against PwC). And the fact that a key witness can disappear to South Africa and thereby (seemingly) derail its case is a damning indictment of its effectiveness just at the moment that it needs to prove that it's an able watchdog for an accountancy profession struggling to re-establish credibility in many people's eyes. The much maligned JDS took over eight years to rule on Coopers & Lybrand's failure to audit Robert Maxwell's businesses. The senior audit partner involced had died before that case was heard; the JDS report blamed him and said anyone below him was "just obeying orders". So no-one was struck off. Sound familiar? There's no suggestion Berry was in on the fiddle (although as FD, if he didn't notice what was happening, he should have been fired anyway). But blaming someone who's not actually answering charges? It's deja-vu all over again.

Looks like honest FCs are the best guarantee we have of ensuring a clean and clear accounting profession...