Dr. Prem Sikka
Professor of Accounting
University of Essex
Dr. Hugh Willmott
Professor of Management
University of Manchester Institute of Science and Technology
Dr. Patricia Arnold
Professor of Accounting
University of Wisconsin-Milwaukee
Dr. Alan Lovell
Reader in Accounting
Nottingham Trent University
What has doubled in Britain during the last eighteen years? Manufacturing output, the number of engineers, hospital beds, teachers, or the standard of living? None of it. It is the number of qualified accountants, now exceeding 240,000. Britain has more qualified accountants per capita than any other industrialised nation. Certainly, more than the rest of the European Union put together. There is no evidence that this large number of accountants in the UK, and the resulting ‘accounting think’ in corporate boardrooms, has boosted economic prosperity, business accountability or stability. Yet, their numbers will double over the next ten years as more than 10% of the university graduates are making a career in accountancy. With so much graduate talent and scarce resources going into economic surveillance, other industries are starved of resources.
Japanese and Germans, with a superior record of economic prosperity and family life, appoint engineers and designers to their company boards. Britain’s major companies appoint accountants who are pre-occupied with controlling and cutting costs rather than maximising investment, production and value added. Reflecting the stock-market pressures, company accounts glorify the value of financial engineering. Accountancy prioritises short-term expediency and paper profits. Anyone reducing investment, research and development, staff welfare and health and safety expenditure finds that their immediate profits increase. Stock market and financial analysts are pleased; and the demand for accountants increases as companies look for even more financial engineering. ‘Never mind the future, feel the cut’ has led to a steady decline of manufacturing industry, jobs and quality of life.
Consultancy is the fastest expanding activity for major accountancy firms. It now forms more than 50% of the fee income of five major accountancy firms who dominate the scene. Behind a veil of secrecy, they advise major companies and almost every government department. Over the last fifteen years, the firms’ income has risen from £300 million to £3,300 million per annum. Advice on cutting costs is the latest niche. British companies now spend less on research and development than their global counterparts. Even the Korean and the Taiwanese spend more. Staff training, health & Safety and employee welfare are considered to be ‘soft’ items and cut to the bone, as the recent reporting of rail incidents and accidents attests. Lives have been lost and many people have been disabled. But there is no accountability for the advice and efforts of consultants.
Advice on mergers is another expanding activity of major accountancy firms. Research shows that contrary to the rhetoric of economic efficiency, most mergers are far from successful. Mergers result in reduced consumer choice and competition. Most also give rise to redundancies as the water, electricity, ferries and other take-overs continue to confirm. The job losses blight community and family life. Who has the responsibility for taking care of the newly unemployed and their families? It is all left to the public purse, the purse which accountants and their City patrons say must be controlled.
Accountants enjoy statutory monopolies of external audit and insolvency work which provides the economic base for their growth. There are no such monopolies for engineers, designers and other wealth creators. Accountancy firms do not owe a ‘duty of care’ to any individual stakeholder. In the era of finance capitalism, they have aligned themselves with a new class of entrepreneur who invests little risk capital in business and receives huge financial rewards in turn. This is visible in utilities (e.g. water, gas, electricity) and other companies. Accountancy firms devise profit-related salary, bonus and share options packages for company executives. The same executives may then hire the firms as auditors. The result has been plenty for the fat cats and starvation for consumers and employees.
The more accounting and auditing practices have failed in the private sector, the more they have been promoted them in the public sector. Power has been shifted away from teachers, doctors, engineers and managers to accountants. Whether a doctor can prescribe drugs, a child can have a life saving operation, or access to books and learning materials is dependent not on citizenship rights, but on the cold logic of contrived accounting numbers. As Keynes once said, ‘accountants know the cost of everything and value of nothing’.
In the ‘accounting society’, there are few winners. In companies and
in the NHS, audits have become a way of preventing public accountability:
‘Don’t ask any questions, the auditors have given a clean bill of health’
has become a slogan for silencing public scrutiny. Present audits have
become a prime weapon for legitimising business secrecy. We know
more about the affairs of New Guinea tribes compared to the power, operations
and influence of major companies and accountancy firms. A stakeholder
society cannot be built upon the oppressive regulation of accountancy.
Instead, of relying upon ex-post audits and the accountancy industry, we
need to develop alternative, independent and open institutional arrangements
to check corporate power and logic of ‘accounting think’.