Professor Eamonn Walsh:

The first thing they did was to say that financial statements should be prepared in accordance with this set of rules. That is probably not such a bad thing. In the absence of such a set of rules, and in the absence of somebody making sure that a financial institution had applied those rules correctly, one would have very little confidence in the reported financial information of a bank. It is a third party assurance that the financial statements have been prepared in accordance with a set of rules.

Let me outline the second aspect. I guess people are quite down on auditors and take the view that companies spend a fortune on audits but do not seem to get anything in return. One has to consider the counter-factual. If there were no audits then one would create a Wild West situation. That means one could create an asset on one's books and there would be no external attempt to verify that the asset existed.