Speaking at Treasury Questions in the House of Commons today, Mr Heath said that there had to be suspicion as to whether the concentration of audit of large firm in the hands of very few large accountancy practices had created too "cosy" a relationship between auditors and directors.
"I find it extraordinary that huge amounts of money are spent each year on audit of companies in order to protect the public from dodgy financial reporting, and yet those auditors can have cheerfully waved through the accounts of banks and businesses whose finances were so precarious or vulnerable to risk that they have crashed spectacularly at enormous cost to investors and the economy.
What's the point of having auditors if they don't ask the difficult questions and don't publicly warn boards of directors when things are going wrong? The big accountancy firms often have very lucrative contracts with these companies outside of audit work, and it's hard to avoid the conclusion that too often things are soft-pedalled too much.
If we are to avoid a re occurrence of recent weeks' events, we need much more rigorous regulation of accounts, and that has to start with auditing that works."
