FINANCE NEWS: Finance group assesses effect of auditing scandals on sector

LUCY MAGGS

The Charity Finance Directors' Group is likely to look at best practice for auditing in the sector in response to recent fraud scandals in the private sector.

David Sinclair, policy officer at the organisation, said: "We would like to put something together in the wake of this. We must make sure we are not open to the sort of allegations that the corporate sector has been involved in."

Auditors have come under fire for failing to blow the whistle on several of the world's largest companies including Xerox, WorldCom and Enron for fiddling accounts to boost share prices.

Charities do not have shareholders and so are not under the same pressure to show profits. But Ray Jones, policy accountant at the Charity Commission, expressed concern to Third Sector in April that pressure to show low fundraising costs could lead to "inappropriate

practices.

Murgaza Jessa, charity partner at chartered accountants Trust-ient, said there was a danger in the charity sector of auditors becoming too close to charity management and affecting the independence of the audit. Jessa said that many firms offered cheap rates to charities hoping to get consultancy work following the audit, or because they were connected to the organisation in some way. "This could affect their independence,

he said.

But Pesh Franjee, partner at Arthur Andersen, said that although his team will be transferring to Deloitte %26 Touche next month, charity trustees must not be too influenced by events in the corporate world.

"Audit failures in the voluntary sector are not usually due to charities trying to pull the wool over the auditors eyes. It's usually due to individual fraud which a charity would want the auditor to spot, he said."

Jones said there may be some lessons to learn from the scandals. "The 'profit drivers' in the commercial sector are different to the charity sector, although we are looking closely at the consultations for issues relevant to charities."

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