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ACCA president addresses IFAC
Credit crunch down to negligence not accounting, says Richard Aitken-Davies
14 Nov 2008
In an address at IFAC's annual meeting in Rome, ACCA president Richard Aitken-Davies has said that the supposed shortcomings of fair value accounting and regulation are being used as a convenient smokescreen by those who wish to deflect attention from 'irresponsible and negligent behaviour', which is the real cause of the credit crunch.
In his speech, Aitken-Davies referred to ACCA's policy paper, Climbing Out of the Credit Crunch 
, which has sparked considerable interest worldwide and has led to ACCA being a key commentator on the crisis. The paper argued that the main issues which have contributed to the credit crunch were failures in corporate governance and risk management, and inappropriate reward systems in banks.
He said he was alarmed at politicians entering the debate and talking about the alleged failures of fair value and mark to market accounting. While accountants must urgently agree a conceptual framework on the purpose of accounts going forward, the more immediate task in analysing the credit crisis is to examine the actions of those senior management responsible for the stewardship of the great financial institutions which are now suffering the effects of the global downturn.
The most important long-term issue, he said, was to promote - via educational, professional, legal and regulatory systems - the concept of ethical behaviour. ACCA supported the work carried out by IFAC in this area but more needs to be done to embed ethics in our global business culture, said Aitken-Davies. The worst outcome would be a regulatory overkill.
'We cannot afford to crush this entrepreneurial spirit if we are to allow humankind to benefit from wealth creation and economic growth. So our challenge is to create a control framework which is not a straitjacket. That is, arguably, where Sarbanes-Oxley in the US veered and where the more rabidly detailed and centralist solutions being touted in some quarters could take us,' he said.
He added that it is essential that no brake is put on the development and application of global standards, which are crucial for the economy and the accountancy profession.