13 May 2002
I read with considerable interest the opinion about professional conflict expressed by Chris Lemar of PricewaterhouseCoopers in The Lawyer (22 April). I wish to offer an alternative opinion.
The opinion expressed was that conflicts of interest and independence should not be a problem for the large accounting firms. Lemar stated that expert witnesses know that they have a duty to the court and, provided they are sufficiently remote from the existing relationship, Chinese walls get over any possible conflict. He wondered why, if two barristers from the same chambers could work for opposing parties without conflict, there was such an issue with expert accountants.
Unfortunately, the above comparison is based on a false premise. Although barristers have a duty to the court they do not purport to be independent. They act as advocates for their clients and put forward their client's best case, but an expert accountant must act as an independent witness to assist the court. The fact that he is instructed by and paid by one of parties must not influence his opinion.
Recently, my firm was asked by the solicitors for both parties of a dispute to act as their expert witness. If Lemar's proposals are right, we could have safely accepted this work provided it was undertaken by two sets of partners and staff worked from separate rooms and agreed never to talk to each other about the case. I think this scenario is unacceptable.
In the Prince Jefri case, KPMG went even further. Its work for Prince Jefri and its subsequent work against him shared no fewer than 11 staff. KPMG's explanation, summarised in Lord Justice Millett's judgment, was: "KPMG contends that none of the 11 were in possession of information confidential to Prince Jefri." Chinese walls have a tendency to be porous. As Judge Millett rightly recognised, information could seep out and cause substantial irreparable damage to one of the parties.
The global accountancy firms wish to have it both ways. When it suits them, they are a global partnership able to move people and information at a moment's notice, with globally integrated systems and global and regional leaders providing a one-stop multi-profession service. KPMG's website boasts: "KPMG responds to clients' complex business challenges with seamless service across industry sectors and national boundaries." However, at other times, it claims that it has many separate entities in separate countries and it is difficult, if not impossible, for information to flow between them.
Sadly, the corporate failures of the recent past and my fellow professionals' alleged conduct in Enron have left the profession's reputation in tatters. Independence can no longer be taken for granted and must be demonstrated visibly to an increasingly sceptical audience rather than merely practised.
Given the widespread dissatisfaction with my profession - something we accountants rather modestly call "the expectation gap" - the conflicts issue needs strengthening rather than weakening. But then I would say that, wouldn't I? My firm has benefited handsomely from the big five conflicts. So you see, it's difficult to be seen to be independent, as distinct from actually being independent. People are quick to perceive self-interest.
Independence is said to be a state of mind. We must hope that not many minds are seduced by the prospect of a large fee to meet the increasingly challenging budgets set by some organisations, but there will be some. My profession is rightly highly regarded for imaginative solutions, but unless the rules are water tight, the creatives among my profession will be adept at finding ways around the conflict problem.
The trouble is that much of an expert accountant's work involves the exercise of judgement and there can be a range of valid opinions - two expert accountants can be tens of millions apart on a valuation. If accounting firms purport to act as independent witnesses for clients on whom they or other parts of their business already depend for substantial fees, or if they habitually act for certain law firms, it is hardly surprising that the public and the judiciary is sceptical about their professed independence. Conflicts are a vital issue for everyone and that independence must be shown rather than presumed. The days of "trust us, we're professionals" are over.
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