Standards enforcement call

Press, 6 August 1987, Page 31

Standards enforcement call

PA Wellington A major company would probably have to crash before there was any urgency in enforcing standards in the accountancy profession, according to the national chairman of KPMG Peat Marwick, Mr Peter Gray. Speaking to Rotarians in Invercargill, Mr Gray said New Zealand needed a mechanism like the Securities and Exchange

Commission in the United States to help improve accounting practices and standards. . "The Stock Exchange doesn’t seem too concerned, the Registrar of Companies doesn’t want to know and the Securities Commission wants to do something, but is totally under-resourced,” he said. “We have used our ultimate weapon, the audit qualification, with very

little result and too many qualified reports means a loss of effectiveness. "The 1955 Companies Act is hopelessly outdated. Look at how fast the market has moved in the last four years — and we have to adhere to the legalities of a 40-year-old act.” In the United States an audit qualification was taken seriously and companies tried desperately to avoid it, he said. In Australia standards

have legal backing and breaches incurring fines of up to $20,000 and or five-year jail sentences have already arisen.

In New Zealand the auditor could qualify the report to the shareholders - pointing out areas of disagreement or diversion from standards. And that was the extent of an auditor’s powers. “The accounts of a company are those of the directors. They can, and do, produce accounts in ways which differ from those set out in the standards.

“The directors’ main objective is the maintenance and increase of their company’s share price and for that reason if they can put the company in a good light, they will.”

Some companies anticipated profits, he said. Development margins and property revaluations wjre examples.