New roles for auditors and
reporting accountants in UK
banking supervision under the
Banking Act 1987
David Collins
Essex Business School, University of Essex, Colchester, UK, and
Ian Dewing and Peter Russell
Norwich Business School, University of East Anglia, Norwich, UK
Abstract
Purpose – The paper aims to offer an exploration of the Banking Act 1987 which was passed
following the failure of Johnson Matthey Bankers (JMB) in 1984. This Act extended the role of auditors
in banking supervision by removing traditional confidentiality constraints and created a new role of
“reporting accountant”. The paper seeks to examine the origin and development of these new reporting
roles. In addition, the paper considers the extent to which the findings of this historical investigation
might contribute to current debates on the role of auditors in banking supervision.
Design/methodology/approach – The paper draws on official documents, personal accounts of
individuals responsible for dealing with the JMB crisis, and semi-structured interviews conducted with
audit partners and banking supervisors who had direct experience of implementing the supervisory
reforms instituted under the Banking Act 1987. Power’s explanatory schema of controversy, closure
and credibility is adopted as a framework for the analysis of documentary sources and interview data.
Findings – The failure of JMB generated sufficient controversy so as to require reform of the system
of banking supervision. The paper shows that JMB was a controversy since it disturbed what went
before and carried with it sufficient allies for change. To achieve closure of the controversy, agreement
by key actors about changes to the nature of the role of auditors was required to ensure legitimacy for
the reforms. Backstage work undertaken by the auditing profession and the Bank of England provided
the necessary credibility to renormalise practice around the new supervisory arrangements.
Originality/value – The paper develops Power’s schema which is then employed to analyse the
emergence of the new role of reporting accountant and extended role for auditors in UK banking
supervision. The paper provides empirical evidence on the processes of controversy, closure and
credibility that help to ensure the legitimacy of accounting and auditing change.
Keywords Banking supervision, Auditing, Reporting accountants, Financial crisis, Legitimacy,
Banking, Financial reporting
Paper type Research paper
1. Introduction
In the UK the 1980s are often perceived as dominated by market deregulation and
privatisation. This perception is not entirely inaccurate but it is certainly not the whole
The current issue and full text archive of this journal is available at
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The paper is developed from a research project kindly funded by the Scottish Accountancy Trust
for Education of the Institute of Chartered Accountants of Scotland. The authors wish to thank
the Editor, Professor Lee Parker, and the three anonymous referees for their helpful comments
and suggestions on earlier drafts of the paper.
New roles for
auditors and
accountants
535
Received 22 January 2007
Revised 2 February 2011
27 April 2011
Accepted 2 May 2011
Accounting, Auditing
& Accountability Journal
Vol. 25 No. 3, 2012
pp. 535-565
q Emerald Group Publishing Limited
0951-3574
DOI 10.1108/09513571211209635