My Lords, I will be very brief in supporting the comments of the noble Lord, Lord Lawson. I have been interested in the relationship between the auditors and the regulator ever since Northern Rock went down in 2007. The question that the regulator should be keeping in mind in discussions with auditors on a yearly basis is, what is the point of an audit? The auditors tell us that it is to have a backward look at what has happened in a company, but there is a need to have a forward look at the risks that are happening, to issues like low risk and low probability, low risk and high probability, high risk and low probability, or high risk and high probability. These scenarios need to be included, because the auditors came to all the committees, the Treasury Committee in the past and the Treasury Committee now, and said that it was their business to look at the audit at that particular time. That is insufficient and there needs to be a greater engagement between the regulator and the auditors.
I reminded the Minister that previously the regulator did not look at the business models of companies. They had nothing to do with them. Thankfully, the new chief executive, Martin Wheatley, has said that the business models are very appropriate for regulators to look at because the business models that were ignored let the PPI mis-selling scandal go for 18 years. There is a lot of work to do between the auditor and the regulator—and the question that I repeat again is for the regulator to say, what is the point of an audit? Auditors can come up to the mark and not just have a backward look or even a present look at the business model of a company but can ensure that there is also a forward look.