EXCLUSIVE: Massive fraud risk in UK audit

Speaking as the Treasury issued new guidance concerning when workers in financial institutions should report money laundering, Richard Parlour, who sits on financial crime committees advising Tony Blair and Gordon Brown, told Accountancy Age: ‘The way audit functions gives big opportunities for people to commit fraud.’

Parlour said a major problem was the use of recently recruited, inexperienced staff to undertake audit work. He said some accounting practices have left him in disbelief and that there were ‘always accountants involved’ in frauds.

‘The accounting world needs to get its act together. It’s not doing itself any favours,’ he said.

The comments will come as a blow to the profession which has sought to rebuild its public standing since the collapse of Enron and the involvement of Andersen in the scandal.

The Department of Trade has already ordered a review of audit rules and practices which will involve the Financial Services Authority, the Accountancy Foundation and Treasury officials.

The Treasury has also begun a search to appoint a leading accountant to head the new anti-money laundering and terrorist finance unit set up at the National Criminal Intelligence Unit in the wake of the September 11 attacks.

Solicitor general Harriet Harmon has recently called for more resources for the Serious Fraud Office so it could pursue a wider range of ‘white-collar crime’.

Parlour, a partner at international law firm Richards Butler, said the solution to crime in the audit world was getting international accounting standards in place. He stressed the importance of getting anti-fraud and money laundering rules approved internationally.

‘There is no point in passing money laundering laws in this country when it is not done in other countries.’

Parlour is concerned that financial institutions view regulation only in terms of costs and ‘don’t see benefits’. He is due to chair September’s International Financial Fraud Convention conference in Dublin.