Noticing this threat to their business, other members of the 'big five' accounting firms sought to alter their governance and corporate structures appropriately. PricewaterhouseCoopers (PwC) spun off its consulting arm and Deloitte Touche Tohmatsu (D&T) announced the separation of Deloitte Consulting from its main business. James Copeland, chief executive officer of Deloitte Touche Tohmatsu, said they 'came to this decision very reluctantly. I believe that, for our firm at least, the independence issue related to providing both auditing and consulting services is one of perception only.'

However, The Economist magazine, in exploring these troubles, concluded that 'accounting will always be as much art as science'. 1 Moreover, Harvey Pitt, the chairperson of the Securities and Exchange Commission in the USA stated that 'there is no true number in accounting'. The implication of this is that the social and economic context within which auditors work influences the financial 'reality' they uncover and report. One question this raises is how the existence of a financial relationship between the auditor and auditee affects the audit—a question that applies not only to financial matters but also to the social and environmental performance of a company. Some therefore question whether the growing reliance on social and environmental certification by commercial audit firms is advisable. Assistant Professor of Law at Osgoode Hall Law School in Toronto, Stepan Wood, notes:

The Enron scandal and the questions about the accountants' complicity illustrate in a stark way the importance of Garrett Hardin's question, qui custodiet ipsos custodes—who will watch the watchers? When verification and certification of compliance with environmental and social standards are entrusted to private professionals who depend for their revenue on the clients they are monitoring, who treat information about their clients' performance as strictly confidential and who have close working relationships with their clients, there are huge risks of 'regulatory capture'.

The issue of conflict of interest raised more questions about the role of the values and integrity of auditors and how the interplay of an auditor's own sense of accountability to client, employer, society and self might affect the quality of the auditor's work. This is a major challenge for a profession that has traditionally prided itself in seeing the process of accountancy as mechanistic and value-free.

In this context, a report from the International Business Leaders' Forum (IBLF) on the corporate responsibility of major professional services companies published in January was particularly timely. 2 Many of the companies reviewed, including KPMG, PwC and D&T, provide consultancy services on aspects of corporate citizenship, and so this was a chance to consider how they practise what they preach. The study found that professional services companies, the so-called 'guardians of market capitalism', could do more both to change their own practices and to leverage their significant experience in institution building, building human capital and strengthening local business systems to contribute to sustainable development.

While the accounting and auditing community was awakening to the importance of personal values, elements of the corporate citizenship community continued to professionalise service provision in traditional ways that reduced the focus on values. The Lifeworth Annual Review of Corporate Responsibility 2001 reported on the emergence of a group of 'practitioners, researchers and academics who have begun to relate [their] activities directly to a shared field known as corporate citizenship or corporate social responsibility' and warned that the increasing notoriety of this profession would bring greater scrutiny from critics and sceptics. 3 If and when legitimacy of professionals working in this area is challenged, what would be more important: personal and organisational purpose and experience, or certification to one of the new professional institutes in this area? And what form of organisation would be a more credible partner for a corporation: a professional services company or a non-profit organisation with a history of campaigning on related issues? It seems the practice of corporate citizenship could necessitate a redefinition of 'professionalism'.

By talking of the 'art' of accounting, The Economist gave voice to the socially constructed nature of accounting figures. In doing this, the magazine inadvertently put its finger on the pulse of an academic vein of work that has for sometime been rejecting the notion of pure objectivity and the existence of a single, scientifically rational truth. This is particularly important for the growing field of accounting for intangible assets, such as corporate reputation and social capital. Some accounting executives argued that, post-Enron, we need a completely new approach.

The chairman of KPMG LLP, Stephen G. Butler, said that his company had 'for several years' urged the modernisation of the current systems of investor information. 'It's finally time to move the auditing model of the industrial age into the information age. Specifically we can no longer ignore the intangible assets of knowledge based companies', he said. This was not news to people who have been working on initiatives such as SIGMA, which is an initiative looking at methodologies for quantifying the social and environmental assets of a company.

However, the challenge is that intangible assets such as corporate reputation are in the eye of the stakeholder, so the traditional approach of a company documenting its assets and inviting an audit of that documentation may not be appropriate. A new form of accounting will need to look outside as well inside the company. When these new forms of accounting develop, we will need to remember that there will be no one true reality to measure, and that some values may not even be quantifiable.

There is a danger here that we will be creating assets that can be seen only by those clever enough to measure them. The emperor's new clothes might prove no more 'real' than Enron's old ones. We are really asking the question 'what is wealth?'. It is a strange world where so much money tracks 'confidence' in securities and currencies, creating or dissipating that confidence as it moves, while billions live in money-poor economies. Will any of these debates about current accounting practices make any difference to sustainable development and social justice? Well, just maybe, if we reflect on how these debates provide lessons beyond individual company accounts. The Economist's analysis of accounting practices inadvertently forms a fundamental critique of national accounting systems, which we have increasingly used to measure 'wealth' and human progress over the last 50 years. Gross national product (GNP) measures only the gross amount of money changing hands in an economy, and not the social and environmental quality of that economy and the society it operates within. GNP measures the noise of an economy but can not tell whether this is in tune with society and the environment.

contents © jem bendell, 2002. site design by tim concannon. hosting by futureconsiderations.com.