London and County Securities: a case study in audit and regulatory failure

Purpose – The purpose of this article is to look in detail into the collapse and its subsequent implications of the London and County Securities bank (L&C) in 1973, one of the most significant UK corporate fraud scandals and regulatory failures in recent decades. Design/methodology/approach – The article is a case study drawing on the report on L&C by the Department of Trade (DT) inspectors and the national and trade press, interviews with and the private papers of some of the major participants. Findings – The study identifies and explains the nature of the fraud, the shortcomings of the auditing of the bank, the poor performance of the DT inspectors, and the weaknesses of the subsequent changes in the regulatory system. Research implications – The implications of the article's findings are: that commentators, and the regulatory and legal system need to distinguish between different types of fraud; that commercial pressures impact adversely on the audit process; that DT inspections conducted by accountants are not independent in their judgements; and that self‐regulation is always likely to be ineffective. Practical implications – The findings are likely to be of interest to accounting academics and historians, practitioners and regulators. Originality/value – Provides an insight into the collapse of the London and County Securities bank.