Long story with some relevance. When I started as accountant it was with a one man firm in Tibb Street mostly preparing accounts from shoeboxes of cheque stubs and invoices. So not actually relevant at all.
Then the firm was taken over by Tansley Witt, a medium sized firm where I was introduced to risk analysis based audits for the first time which basically determined the extent of transaction testing, amongst other things. Quite a strict process which determined the scope and severity of transaction testing on a combination of the most significant transactions with a sample of smaller transactions. I don't remember any cases where the risk analysis and subsequent testing was found deficient.
Then that firm was taken over by Arthur Andersen's and I was introduced to a much more "scientific" (dare I say American) approach to risk assessment which was pretty much designed to reduce the amount of work in favour of depending more on the risk assessment. They were more interested in those bloody doors (if you know, you know) than robust process. That may be an unfair description, it was a long time ago now, but I couldn't believe how weak the system was compared to that I was used to and it was no surprise to me that Enron happened and completely did for Andersen's.
In the meantime, I was spending my last ten years as an audit manager with Coopers where I oversaw risk assessments, process definitions, audit conclusions and opinion approvals from the partners. I even signed a couple of opinions under proxy.
My point is - you can't really say you can't trust auditors. It depends who the auditors are (which firm and which people). After Enron, risk procedures were tightened up everywhere and procedures increasingly standardised. I am pretty sure that BDO, in the case of a high-profile and high-risk (at the moment) client like City, have received enough satisfaction from the Board to support their audit procedures and their "true and fair" audit opinion. If they hadn't, their opinions would have been qualified or they would have resigned.
Or maybe not :) Who knows?
