By David York, head of auditing practice at ACCA
The Higgs Boson is no doubt feeling rather exposed right now, which probably makes a change from feeling hunted. Even the Financial Times has gotten excited about the discovery.
The news recently has been full of the discovery of what some have dubbed ‘the god particle’, a fundamental building block of the universe that gives other particles their mass. Actually it is a bit more complicated than that – trust me I’m a physicist – or at least I have a degree in physics which is a starter. You will see from the job title that these days I am more of an auditing expert, so what is the connection?
When I joined the accountancy profession straight after university I was surprised to find that accountants were better experimenters than the scientists. A scientist reports the results of an experiment, plus or minus the margin of error, but an accountant can estimate the value of work in progress to the nearest pound. That is why financial statements balance - but in reality it’s all a bit of smoke and mirrors.
Auditors are also in an envious position in comparison to scientists because they can form a judgement, and report only that ‘in our opinion the financial statements give a true and fair view’. The auditor’s smoke and mirrors are hidden elsewhere in the report where readers are told that the evidence the auditor bases the opinion on is sufficient to ‘give reasonable assurance’. Actually it is a bit more complicated than that – trust me I’m an auditor.
In fact, it’s so complicated you would probably find the standard model of particle physics easier. To make a start on that you could do worse than the BBC's Q&As about the Higgs Boson.
But one thing in all the news coming out of the Large Hadron Collider (the Cern Giant) that I found strange yet charming was the life breathed into Sigma – a Greek letter that has unfortunately never been as popular as Alpha and Omega. The physicists analysing the results applied a test of statistical significance call 5-sigma – and achieved instant popularity because it would have been less catchy to have to refer to five standard deviations; although that itself might make a boson blush.
5-sigma means that there is a 99.99994% chance the results are right. Which seems pretty certain, although perhaps only what we should consider necessary for something so important.
So what about audit opinions? They are important too – just ask yourself how much the global capital markets moved on the announcement of the Higgs Boson discovery! Well as I said such things are complicated. But think 2-sigma (95.5%) or 3-sigma (99.73%) as a maximum – not quite the certainty the Higgs Boson has required.
Who has it right? You choose.
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