IF YOU peer into the world of accounting in any given month, it is easy to get the impression that an epidemic of skulduggery and incompetence has broken out. Consider the month of August. A whistleblower at Monsanto, an American seeds firm, received a reward from the Securities and Exchange Commission, after spotting that the firm was misreporting its earnings for Roundup, a weedkiller. T. Rowe Price, an asset manager, launched a lawsuit against Valeant, a drugs firm which it accuses of fraud and misleading accounting.

The list goes on. PricewaterhouseCoopers, one of the Big Four accounting firms, settled a case involving Colonial BancGroup, a lender it audited which went bust after suffering fraud. The boss of Monte dei Paschi di Siena, an Italian bank, said that he was under investigation as part of a probe into false accounting. Shares in Orbital ATK, an American defence firm, tanked after it said it had made accounting mistakes, and an internet firm called ComScore replaced its top brass amid problems with its numbers.

The obvious conclusion is that the accounting industry has failed to clean itself up since 2001-03, when Enron and WorldCom, among others, blew...Continue reading