Advocates for audit and accounting reform made great strides this week. Although much of the attention will be directed at the OFT's conclusion that the audit market isn't working, a slightly less well covered but equally welcome development emerged from the back benches of the House of Commons.

New Conservative member for Wycombe, Steve Baker MP has published a bill which he hopes will "expose banks’ false profits, overstated capital and hidden losses". The Financial Services (Regulation of Derivatives) Bill was initially introduced to the House of Commons on 15th March 2011, shortly before the House of Lords Economic Affairs Committee published its own report recommending that prudence should be reasserted as the guiding principle for company accounts.

Baker believes that "Banks are living in a fools’ paradise in which their boards cannot get a firm grip on vital measures like capital and profit. That is plain wrong." With the help of the noted IFRS critic,  Tim Bush, Baker has created proposals which, if adopted, would:

• Require preparation of “prudent accounts of true capital and true profits”;
• Provide a right to return to preparing Companies Act individual accounts; and
• Cease to have effect if EU-IFRS provides for prudent accounts.

City support for the Bill in the house comes from former head of governance at Invesco Perpetual, Andrea Leadsom MP and Howard, (Lord) Flight. Baker himself has a strong financial services pedigree having worked for a number of global banks as a consulting software engineer. His last contract was for Lehman Brothers shortly before its failure in 2008.

IFRS critics haven't had an easy time and some have called them a vocal minority. However they should take comfort from Al and Mark Rosen, forensic accountants at Accountability Research Corporation and authors of  who said in May 2009: "Improper revenue recognition can affect any stock or bond, and by extension any mutual fund or pension plan. So, a major warning to investors exists when top executives claim that adopting IFRS distorts the economic reality of their companies. It seems a wiser choice to heed their concerns rather than listen to the auditors raking in fees and telling investors not to worry about the consequences of IFRS."  Source: http://tinyurl.com/6ycja9d