Between a rock and hard place.

(From Financial Director)

Byline: Peter Williams.

There is a growing gap between the standard of the financial reporting process as set out in codes and guides, and the day-to-day reality in Britain's plcs. The inability or unwillingness to reconcile the two is puzzling. The corporate governance failure rate we see among companies is high enough in these relatively benign economic conditions to suggest that failure is not the exclusive preserve of the reckless or the hopeless - so much so that one wonders if the financial reporting standards we attempt to impose on companies are too high, or perhaps we expect too much integrity from the financial reporting process of organisations whose primary purpose is to create shareholder wealth.

It was somewhat surprising when the Mayflower Corporation, Britain's largest bus maker, announced last month that it had placed most of its operations into administration. The group was actually profitable but was saddled with debts of nearly 10 times profits. The group's lenders were already showing their impatience, as demonstrated by the announcement just days prior to the step into administration of the departure of three top executives, including the FD, and the appointment of an interim FD and chief restructuring officer.

The last straw for the group's backers seems to have been the problem with the accounting system. Mayflower announced it had discovered irregularities in its TransBus Division, relating principally "to delays in passing on payments from customers to one of the group's finance providers". The company said the adjustments required as a result of the irregularities were likely to increase the group's previously announced net debt figure by no more than GBP20m. The adjustments were not expected to hit profits, although investigations by PricewaterhouseCoopers continue.

The tale of yet another accounting crisis at a quoted company appeared at the same time as the wary non-executive director was being targeted with another shed load of advice, this time from the Institute of Chartered Accountants in England and Wales. As part of a series, the ICAEW has prepared advice for audit committees on monitoring the integrity of financial statements. One of the main roles of a company's audit committee is to monitor the ...