Advanced Search
MyIDEAS: Login to save this paper or follow this series

Auditors and the supervision of retail finance: evidence from two small-sized building societies, 1976-1978

Contents:

Author Info

  • Batiz-Lazo, Bernardo
  • Noguchi, Masayoshi

Abstract

This study adds to the accounting history literature by looking at features common to major defalcations in two small-sized building societies (namely the Wakefield and the Grays). These features were the dominance of an individual over a building society’s systems, and poor systems of internal control and supervision. Because they failed to recognise the significance of these factors sufficiently, auditors of both societies were criticised for failing to discharge their duties as expected under the Building Societies Act 1960 (BSA60) (which had introduced a new auditing regime by requiring the auditors to examine whether the directors of a society complied with its requirement to establish and maintain a system of internal control and, if not, to report thereon). The cases of the Wakefield and the Grays were a turning point in the supervision of retail financial intermediaries. Prior to them the Chief Registrar of Friendly Societies (CRFS) had adopted a reactive approach to supervision, which effectively delegated the monitoring of the societies to external auditors. After the defalcations were uncovered, they showed there was a lack of productive communication between the Registry and external auditors. As a result, it was felt there was a need to reform and adopt a proactive approach to supervision of the societies under which the CRFS was to directly examine the quality of the auditor’s work. The professional accountants, as represented by the Institute of Chartered Accountants of England and Wales, initially resisted such reform. But ultimately, accountants could not help but to accept it.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/32193/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32193.

as in new window
Length:
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:pra:mprapa:32193

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: corporate governance (the system of internal control); building societies; the Chief Registrar of Friendly Societies (CRFS); the Treasury; supervision of retail financial intermediaries; delegated monitoring; UK; accounting history; financial auditing;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(6-8), pages 613-673, August.
  2. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, American Economic Association, vol. 81(3), pages 497-513, June.
  3. Slovin, Myron B. & Sushka, Marie E. & Hudson, Carl D., 1990. "External monitoring and its effect on seasoned common stock issues," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 12(4), pages 397-417, March.
  4. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 401-19, June.
  5. Peter Scott & Lucy Ann Newton, 2012. "Advertising, promotion, and the rise of a national building society movement in interwar Britain," Business History, Taylor & Francis Journals, Taylor & Francis Journals, vol. 54(3), pages 399-423, June.
  6. Benston, George J & Smith, Clifford W, Jr, 1976. "A Transactions Cost Approach to the Theory of Financial Intermediation," Journal of Finance, American Finance Association, American Finance Association, vol. 31(2), pages 215-31, May.
  7. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(1), pages 101-19, Winter.
  8. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report, Federal Reserve Bank of Minneapolis 45, Federal Reserve Bank of Minneapolis.
  9. Batiz-Lazo, Bernardo & Noguchi, Masayoshi, 2011. "The disciplinary power of accounting-based regulation: the case of building societies, circa 1960," MPRA Paper 28374, University Library of Munich, Germany.
  10. Swank, Job, 1996. "Theories of the Banking Firm: A Review of the Literature," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 173-207, July.
  11. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(11), pages 2945-2966, November.
  12. Tim Congdon & Charles A.E. Goodhart & Robert A. Eisenbeis & George G. Kaufman & Paul Hamalainen & Rosa M. Lastra & David T. Llewellyn & David G. Mayes & Geoffrey Wood & Alastair Milne & Marco Onado & , 2009. "The Failure of Northern Rock - A Multidimensional Case Study," SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum, number 2009/1 edited by Morten Balling & Franco Bruni & David Llewellyn, July.
  13. Aidan Hollis & Arthur Sweetman, 2007. "The Role of Local Depositors in Controlling Expenses in Small-Scale Financial Intermediation: An Empirical Analysis," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 74(296), pages 713-735, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:32193. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.