April 2024
We need a formal inquiry into the role of accounting and auditing in the Post Office scandal, says Lord Sikka (pictured).
He has already called for an inquiry in the House of Lords, and he said he will now be pushing further on this.
In his keynote speech at PQ’s recent online conference – ‘The Accountant’s Odyssey: How do we shape the future?’ – he said the corporate governance of the Post Office has been brought into question, and that the board members, the non-executive directors, and both the internal and external auditors all need to be brought before an inquiry.
Lord Sikka explained the introduction in 1999 of new computer system, called Horizon, shows the huge scale to this kind of project. In all, 40,000 new computers needed to be connected to the system, and 67,000 people trained in how to use it to handle billions of transactions. However, as we all know now, the Horizon system was prone to errors and crashes, and between 1999 and 2019 Jujitsu, who supply the system, changed the software code 19,842 times. You can see the huge scale of problem, stressed Lord Sikka.
So, where were all the accountants he asked, when screens froze, or sub-postmasters encountered the ‘reversal bug’? And remember, he said, at the same time Jujitsu itself was able to change any transactions being submitted. He explained that between 2000 and 2023 the Post Office had more than 80 directors, and he feels all must have known that the system was flawed. Why did they keep quiet, he asked: was it so they maintained their bonuses?
Then there were the non-executive directors, the chairs of the audit, risk, compliance and remuneration committees. Lord Sikka stressed the key role of the NED is to challenge management, including the CEO, on financial and operational matters. He felt so far there is little evidence to show any of these NEDs asked any questions. The Post Office also has an internal audit department, reporting to the audit committee. Lord Sikka wondered: “What did the internal audit do? Did it never notice the money in the suspense account and any of the press clippings, did it never notice that the Horizon system was fundamentally flawed. Or maybe someone reported it all, but then someone else sat on it. Again, lots of questions to be asked.”
hen there are the external auditors, EY. Lord Sikka claims they knew there were problems, pointing to management letters to the Post Office Board (2011), and internal reports from the head of product (2010), and forensic accountant’s Second Sight’s sidelined report (2013-2015). Lord Sikka stressed accountants can’t shape the future if they can’t learn from the past. He said there were huge consequences for thousands of individuals for the accounting failures, yet no accountants have been brought to account. That has to change.
You can check out all of what Lord Sikka has to say on the Post Office scandal at: https://www.youtube.com/watch?v=jkCWvJt0l6A .
