Firms face ‘vicious’ accountability rules

MOVES to make companies more accountable in the post Enron and WorldCom environment are “quite vicious” in their implications, a leading business analyst said yesterday.

Kevin McConnell, head of research at Bloxham Stockbrokers told a conference on the accountant in business that chief executives and chief financial officers are now personally liable for the company figures produced in the public domain.

Such a move has attempted to introduce a “whole new ethic” in how businesses treat investors, he said.

It is also significant that the two “most highly incentivised executives” in US companies have been made directly responsible for the authenticity of the accounts, he said.

One negative will be the marked slowdown in the flow of market sensitive information as top executives ensure their backs are covered before they issue any statements in future. But Mr McConnell said this was likely to be a teething problem rather than a long-term issue.

Pierce Kent, Irish representative of the International Federation of Accountants’ ethics committee said Enron’s collapse made it “incumbent on all accountancy organisations to assess how they can ensure the soundness of financial reporting worldwide and to support accountants in their efforts to protect the public interest”.