For once I agree with Sir Mike Rake

It is a rare event indeed but for once I agree with Sir Mike Rake, BT chairman. Rake was the past CEO of KPMG and the man who had to go begging to the SEC not to kill off the firm following the tax fraud scandals in which it was heavily involved.

AccountancyAge says:

Speaking at last week’s Financial Director Summit, BT chairman Sir Mike Rake said: ‘It’s incredibly important we don’t have a knee-jerk reaction to how we manage events in the future. We must have a principles-based approach to regulation and it must be global.’

Sir Mike said it would be important to ask questions about moral hazard, fair value, risk management and executive remuneration schemes ­ but that the time for ‘intellectual debate’ would come later.

This is in marked contrast to reports emanating out of the US where the horsetrading around getting the bailout bill passed include attempts by financial industry lobbyists to ditch ‘mark to market’ rules. As I’ve said before, if there is no market for an asset then it has no value although it is possible to impute values that are conservative. It is therefore good to see PwC standing up on this one:

“We have all seen what can happen when institutions are allowed to mask huge losses in asset values,” PricewaterhouseCoopers LLC Chairman Dennis Nally wrote in a letter to Congress. Suspending the rules, he said, could “plant the seeds for the next crisis.”

Even so, companies around the world will need to prepare for whatever legislation comes out of the mess. This time, I hope the focus remains on the importance of getting it right and for accountability to be appropriately shared. It is for that reason I will be leading a session at TechEd Berlin that explores the GRC elements which might play out. There has for example been much talk about sustainability. Deep questions are being asked about who is ‘controlling the controllers.’ My sense is that while IT has a significant role to play in arriving at workable solutions, the way they are implemented , tested and certified will be different to what we have seen in the past.

Businesses need prepare for that now and in particular what I believe will be a firmer tax regulatory environment. I am therefore looking forward to meeting Sabrix, a company that provides indirect tax compliance, regardless of the jurisdiction in which you conduct business.

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Tagged as: KPMG, PricewaterhouseCoopers, Risk management, Tax avoidance and tax evasion, U.S. Securities and Exchange Commission