Accounting news – July 2013

Posted on July 3, 2013 · Posted in Accounting & Business

UK news

 

Country-by-country reporting closer (lead)

 

Large companies will have to disclose profits, taxes and subsidies in each country in which they operate under proposals announced by European internal markets commissioner, Michel Barnier.  The move was opposed by the CBI, which said the cost would run into tens of millions of pounds, damaging growth.  Commissioner Barnier also announced that enhanced disclosure proposals published in April covering environmental, social, employee and human rights impacts have gone to the European Parliament and the Council of Ministers for approval.  ACCA chief executive Helen Brand responded: “ACCA fully endorses the suggestion that companies should rely on internationally-accepted frameworks to report this information. There should be a convergence of international, EU and national principles.”  These measures would apply to businesses with more than 500 employees.  Commissioner Barnier further revealed that listed companies will be required to have a policy on diversity, which ACCA also supports.

 

Hartnett joins Deloitte (lead)

 

HMRC’s former permanent secretary for tax, Dave Hartnett, lost “all sense of what is right” when he agreed to work as a consultant for Deloitte, according to Margaret Hodge, the chair of the House of Commons Public Accounts Committee.  The appointment was strongly defended by Deloitte.  A spokesman for the firm said: “Dave Hartnett will work as a consultant to Deloitte advising foreign governments and tax administrations, primarily in the developing world.  He has significant experience in advising such countries on the development of effective tax regimes necessary to ensure their continued economic growth.  He will not work with UK companies or with HMRC.”  Hartnett was appointed by HSBC as an advisor in January, having retired from HMRC in July last year.  He had been strongly criticised by campaigners who claimed he had been too close to major corporations.  The suggestion was rejected by HMRC and Mr Hartnett.

 

Investors lose confidence in reports

 

Investors’ confidence in the accuracy and truth of corporate reports has fallen since the onset of the global financial crisis, according to ACCA research.  More than two thirds of 300 investors surveyed say they have become more sceptical about company reports.  Almost as many suggest that managers have too much discretion over the financial information they report.  A sizeable majority of investors say they place more importance on information generated outside the company than on annual reports, while 45% regard the annual report as being of no use.  There was overwhelming – 93% – support for integrated reporting.

 

PRA blocks Tant

 

New City regulator the Prudential Regulation Authority has apparently prevented Legal and General appointing KPMG’s UK former head of audit, Oliver Tant, as their new chief finance officer.  It is reported that the PRA believed that Tant did not have sufficient experience of the insurance sector.  Senior positions at financial services firms, including finance director, are subject to approval by the PRA, which assesses whether a person is fit and property and has the appropriate skills and experience for that role.  Neither the PRA nor Legal & General were prepared to comment.

 

FRC reports on Big Four

 

Spot inspections from the Financial Reporting Council on audits conducted by the Big Four firms showed improvements in the last year.  Deloitte were told to strengthen revenue audits; ensure audit teams use the firm’s sampling methodology; identify threats to independence from non-audit work; increase partners’ rewards for high quality work; and respond quicker to FRC findings.  Ernst & Young were told to provide additional resources to audit teams where needed; ensure audit teams have adequate guidance and training; ensure partner appraisals are consistent; and speed-up internal quality reviews.  KPMG were told to review ethical policies; strengthen testing of IT controls; take a more rigorous approach to impairment provisions for finance businesses; review its sampling methodology; and strengthen quality control reviews. PwC were told to strengthen revenue audits; improve quality control reviews; improve compliance with personal independence requirements; and improve consistency of audit quality across the firm.

 

UK Uncut loses court challenge

 

UK Uncut has lost its legal action against the so-called ‘sweetheart deal’ with Goldman Sachs, which reduced the bank’s tax liability by £20m.  The High Court ruled that HMRC has the power to reach compromises with taxpayers over settlements.  It also decided that HMRC was permitted to take into consideration the bank’s threat to withdraw from the Code of Practice on Taxation for Banks, but not the embarrassment that would be caused to the Chancellor of the Exchequer if it left.

 

BDO takes top spot for AIM

 

The enlarged BDO firm has replaced Grant Thornton as the auditor with the most AIM clients, according to the latest Adviser Rankings analysis.  Following the merger with PKF, BDO has 159 AIM clients, compared with Grant Thornton’s 149 and KPMG’s 129.  PwC remains the firm with the most FTSE 100 clients, gaining an extra audit in the last year, while Deloitte and KPMG are equal second after Deloitte won a client and KPMG lost one.  KPMG replaces PwC as the firm with the most UK listed company audits.

 

Partners face higher tax bills

 

Partners in limited liability partnerships could be hit with higher tax and national insurance bills under proposals from the Treasury to tackle ‘disguised employment’.  The Government is consulting on the proposals, which are designed to prevent the LLP structure being used to reduce tax liabilities.  LLP partners would become liable for income tax and employee national insurance contributions if they meet tests for employment on a contract of service.  The consultation document states that unless reforms are introduced to eliminate abusive practices the continuation of the LLP structure is under threat.

 

RTI hits problems

 

Taxpayers face financial distress because of problems with the roll-out of RTI that have caused 40,000 people to have the wrong tax deducted, according to London accountancy firm Blick Rothenberg.  The firm’s Nimesh Shah said: “The problem is that the system could generate incorrect codes, which means that the wrong amount of tax may be deducted from monthly salaries….  a worker could see fluctuations in their monthly net pay, especially where the system isn’t operating correctly.”  HMRC also disclosed that its review of PAYE for last year is expected to reveal 3.5 million people who overpaid tax, with 2 million people paying too little.

 

FRC issues audit transparency guidance

 

The Financial Reporting Council has issued a revised auditing standard to increase the transparency of audit reports and improve communication with investors.  The revised ISA 700 requires auditors to explain more about their audit work where the client company is subject to the UK Corporate Governance Code.  The agreed revisions implement changes that were widely supported in a consultation.  Nick Land, chairman of the FRC’s Audit and Assurance Council said: “The provision of a fuller description of the work the auditor has undertaken will give far more insight to investors than the binary pass/fail model of the current audit report.”

 

G4 is Go

 

The latest generation of Sustainable Reporting Guidelines – G4 – has been launched at Global Reporting Initiative’s 2013 conference.  Large corporations are being urged to adopt the guidelines, which have already been backed by some of the world’s biggest businesses, including General Electric and Enel.  G4 adopts an increased focus on transparency and is more accessible for corporations that have not previously used sustainability guidelines.  GRI chief executive Ernst Ligteringen said G4 had been produced in consultation with hundreds of experts drawing on international best practice.

 

FRC amends going concern guidance

 

The Financial Reporting Council has amended its guidance to auditors and companies on going concern judgements, following responses to its consultation.  Separate, simpler, guidance will now be issued for SMEs.  Some respondents suggested confusion was caused by using the term ‘going concern’ to evaluate both the specific assessments in financial statements and also the broader assessments of risks affecting a company’s viability.  The FRC will consult on whether the UK Corporate Governance Code needs to create a clearer distinction. 

 

HMRC to close enquiry centres

 

Tax workers have begun industrial action to protest against the closure of HMRC enquiry centres.  According to the civil service union PMS all 281 walk-in enquiry centres are to close, though HMRC said that it had launched only a pilot programme in the North East of England to replace offices with a mobile support service. A spokesman for HMRC added that no jobs would be lost during the pilot exercise.  “This is not about cutting jobs, it’s about creating a better service for customers which is both flexible and affordable,” he said.

Complaints procedure for insolvencies

 

A new gateway for making complaints against insolvency practitioners has been launched by the Insolvency Service.  The Government announced in December its intention to launch the facility as part of its Red Tape Challenge.  The gateway should provide an easier and more transparent process for the complaints.  Changes are also being introduced to simplify insolvency procedures.  ACCA welcomed the moves.  Peter Large, executive director for governance, said: “The smooth resolution of complaints is central to maintaining trust and confidence, and to delivering public value.”

 

Lease accounting rethink

 

The IASB and the US Financial Accounting Standards Board have jointly proposed a revised Exposure Draft for the treatment of leases.  The revisions follow substantial criticisms from the lease finance sector of the previous Exposure Draft, which they claimed failed to recognise the substantially different types of lease arrangements that are used.   The existing standard has been criticised by investors as not ensuring an accurate representation of leasing obligations.   Under the new Exposure Draft, a lessee would recognise assets and liabilities of leases that are of more than 12 months duration.  Property leases would be treated differently from equipment leases.  Entities will be required to provide more information in their reports to improve transparency.

 

1 in 3 UK finance teams ‘too busy’

 

One if three CFOs says their finance teams are too overstretched to complete operations on time.  A quarter are worried they may not have sufficient commercial skills within their teams.  The findings emerged from a survey of 200 CFOs, conducted by recruitment consultants Robert Half.  One if five CFOs also reported a lack of cross-departmental co-operation.  There has been an increase in the use of temporary and interim staff to cover skills gaps, added the report.

 

Accountex success

 

More than 3,000 accountants attended this year’s Accountex – the UK’s only national exhibition dedicated to the accountancy profession and finance directors.  It attracted more than a hundred exhibitors over the two days in June, at Excel in East London.  The event was supported by ACCA.

 

Fiat Industrial moves to UK for lower tax

 

Fiat Industrial is planning to move its global corporate headquarters to London for tax reasons.  It was spun-off from the car manufacturer two years ago and is completing a merger with tractor maker CNH Global.  The merged company will list on the New York Stock Exchange.  The car making division expects to complete its merger with Chrysler later this year and move its headquarters to the United States. 

 

Accountants jailed

 

A Birmingham accountant has been jailed for three years for his role in a £1m VAT fraud.  Muhammad Butt, who owned the ABMG Business Services accountancy firm, underdeclared turnover and profits for two clients and refused to provide paperwork to HMRC when the clients were investigated.  A Nottingham accountant, Ronald Moncrieff, was jailed for 18 months in a separate trial for stealing £153,000 in an income tax fraud, having understated sales and overstated business expenses for a period of seven years.

 

Mazars takes six from RSM Tenon

 

Mazars is expanding its operations in the East Midlands through the recruitment of six RSM Tenon partners.  Those joining are Alistair Wesson, who was managing partner of RSM Tenon in Nottingham; Chris Darlington, the Leicester office managing partner; Julian Clough; Steve English; David Hoose; and Bob Johnson. Contract negotiations are taking place with other RSM Tenon partners and staff, who may join Mazars.  The new partners will start by working in Mazars’ Nottingham office, but the firm will open a new office in Leicester. 

 

RoW news

 

Country-by-country reporting closer (lead)

 

Large companies will have to disclose profits, taxes and subsidies in each country in which they operate under proposals announced by European internal markets commissioner, Michel Barnier.  Commissioner Barnier also announced that enhanced disclosure proposals published in April covering environmental, social, employee and human rights impacts have gone to the European Parliament and the Council of Ministers for approval.  ACCA chief executive Helen Brand responded: “ACCA fully endorses the suggestion that companies should rely on internationally-accepted frameworks to report this information. There should be a convergence of international, EU and national principles.”  These measures would apply to businesses with more than 500 employees and were widely supported by investor and other stakeholder groups at a roundtable organised by ACCA, Aviva and Eurosif.  Commissioner Barnier further revealed that listed companies will be required to have a policy on diversity – a move that ACCA also supports.

 

Deloitte seeks dismissal of audit case [lead]

 

Deloitte’s China member firm has applied to a US federal court for the dismissal of the attempt by the Securities and Exchange Commission to obtain its work papers for audits of former client Longtop Financial Technologies Ltd.  Longtop is based in China, but is listed in the US, where it is subject to a fraud investigation.  Deloitte claims that the papers can be obtained by request through an agreement that has now been reached between the Public Company Accounting Oversight Board, the China Securities Regulatory Commission and China’s Ministry of Finance.  The agreement provides a co-operative framework between the parties for the production and exchange of audit documents required in investigations in the other jurisdiction. PCAOB chairman James R. Doty, said: “This agreement with China is an important step toward cross-border enforcement co-operation that is necessary to protect the interests of investors in U.S. capital markets.”  

 

Investors lose confidence in reports

 

Investors’ confidence in the accuracy and truth of corporate reports has fallen since the onset of the global financial crisis, according to ACCA research.  More than two thirds of 300 investors surveyed say they have become more sceptical about company reports.  Almost as many suggest that managers have too much discretion over the financial information they report.  A sizeable majority of investors say they place more importance on information generated outside the company than on annual reports, while 45% regard the annual report as being of no use.  There was overwhelming – 93% – support for integrated reporting.

 

G4 is Go

 

The latest generation of Sustainable Reporting Guidelines – G4 – has been launched at Global Reporting Initiative’s 2013 conference.  Large corporations were urged to adopt the guidelines, which have already been backed by some of the world’s biggest businesses, including General Electric and Enel.  G4 adopts an increased focus on transparency and is more accessible for corporations that have not previously used sustainability guidelines.  GRI chief executive Ernst Ligteringen said G4 had been produced in consultation with hundreds of experts drawing on international best practice.

 

Apple in the eye of a tax storm

 

Apple avoided billions of dollars in US taxes by structuring most of its operations offshore and failing to return profits to the US, according to a Congressional investigation.  Some of the offshore operations that were a conduit for vast revenues did not have any employees and were run out of California, found the investigation.  Ireland was accused by the investigation of being one of the main ‘offshore’ jurisdictions that enabled businesses to operate as if they were “stateless”.  “[Apple] has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere,” said the chairman of the investigations committee, Senator Carl Levin.

 

SMPs told: ‘position for growth’


The seventh annual IFAC Small and Medium Practices Forum has been held in the Ugandan capital of Kampala, attracting 175 delegates from 30 countries.  The focus of this year’s conference was on trends affecting small businesses and how small and medium practices (SMPs) deliver their services.  IFAC SMP Committee chair Giancarlo Attolini said:  “There are vast opportunities for SMPs, including internationalization and expanded business lines. Now is the time to position SMPs for growth so that by the time the economic recovery gains more momentum globally, SMPs and the small businesses they serve can lead the way.”  ACCA was the event’s gold sponsor.

 

Digital bank closed for ‘money laundering’

 

The Liberty Reserve digital bank has been closed by the US Department of Justice and charged with laundering over $6bn of criminal proceeds.  An indictment issued by the DoJ claimed that the Costa Rica based online bank was a financial hub used by computer hackers, child pornographers and fraudsters operating Ponzi schemes.  Liberty Reserve claimed to offer a legitimate digital currency system, but in practice it was a device to clean dirty money, said US law officials.  Other digital banks are now reported to be urgently adopting revised money laundering practices.

 

Ex-Saab executives arrested

 

Three former executives of Saab Automotive have been arrested in connection with an alleged accounting fraud.  Swedish chief prosecutor Olof Sahlgren said the three were “suspected of aggravated attempts to avoid tax controls” and falsifying accounting records for 2010/11.  At that time, Saab Automotive was owned by the Dutch company Spyker, but has since filed for bankruptcy.   Lawyers for the three – the former CEO, CFO and general counsel – have denied any wrongdoing.

 

PwC wins Herbalife audit

 

PwC has won the audit for Herbalife.  The company’s previous auditor was KPMG, which stood down after the revelations of the leaking of insider information by the lead audit partner, Scott London.  London has since pleaded guilty to charges and KPMG has condemned his actions.  Herbalife believes that the unauthorised disclosure of confidential information did not to lead to any breaches of company listing rules.

 

Lease accounting rethink

 

The IASB and the US Financial Accounting Standards Board have jointly proposed a revised Exposure Draft for the treatment of leases.  The revisions follow substantial criticisms from the lease finance sector of the previous Exposure Draft, which they claimed failed to recognise the substantially different types of lease arrangements that are used.   The existing standard has been criticised by investors as not ensuring an accurate representation of leasing obligations.   Under the new Exposure Draft, a lessee would recognise assets and liabilities of leases that are of more than 12 months duration.  Property leases would be treated differently from equipment leases.  Entities will be required to provide more information in their reports to improve transparency.

 

IMF admits Greek mistakes

 

The harsh rescue package for Greece was based on mistaken assumptions by the Troika of the International Money Fund, the European Commission and the European Central Bank, a report from the IMF has admitted.  It says that the rescue and support program made over optimistic assumptions about the capacity of Greece to recover while an austerity spending plan was in place.  The report suggested that better risk sharing arrangements and faster sovereign debt restructuring should have been agreed.  There are lessons for the future, it said, in terms of ensuring adequate finance is in place, with strong ownership of rescue programs and sufficient capacity to properly design programs.

 

UAE economy grows fast

 

The UAE economy grew in real terms by 4.4% last year – the fastest growth rate for six years.  According to the official figures, growth was helped by strong oil prices and a boost in trade and tourism in Dubai, which is now beginning to recover from the property boom and bust.  The UAE’s economics ministry expects similar growth this year.  One positive sign for the region was the increase in passenger numbers at Dubai airport, which handled 13% more passengers, making it the world’s third largest passenger airport.

 

Chinese deals hit new high

 

Overseas investment by Chinese businesses has increased more than five fold in the past five years, according to analysis by PwC.  Cross-border M&A activity led by Chinese buyers was valued by PwC at $65.2bn in 2012, compared to $10.3bn in 2008.  Investment into mature markets from high growth markets now exceeds investment in the other direction.  Edwin Wong, PwC China outbound investment services leader, said: “Many mature market companies need an investor or a partner who can bring access to high growth markets. On the other side, HGM buyers are looking for access to sales channels, supply chains, resources, technology, know-how, brands or management experience.”

 

Government accounting ‘improving’

 

More transparent accounting practices are being adopted by governments worldwide, according to a PwC study.  A survey of 100 countries found that more than half of governments either use accrual accounting, or intend to do so within the next five years.  Jan Sturesson, PwC global leader for government and public services, said: “Public sector financial statements should reflect the full economic impact of political decisions – and this can only be fully achieved by applying accrual accounting.” 

 

SEC charges China-based executives

 

The US Securities and Exchange Commission has charged a husband and wife executive team running a China-based company with overstating company profits and diverting funds for personal use.  The SEC allege that the couple diverted $3.5m of RINO International Corporation’s company money to purchase a luxury home without disclosing it to investors.  The company became US listed through a reverse merger in 2007. The two executives have settled the SEC charges through the payment of penalties and by accepting a 10 year ban on acting as directors of any US listed company.

 

Politics

 

Apple in the eye of a tax storm

 

Apple avoided billions of dollars in US taxes by structuring most of its operations offshore and failing to return profits to the US, according to a Congressional investigation.  Some of the offshore operations that were a conduit for vast revenues did not have any employees and were run out of California, found the investigation.  Ireland was accused by the investigation of being one of the main ‘offshore’ jurisdictions that enabled businesses to operate as if they were “stateless”.  “[Apple] has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere,” said the chairman of the investigations committee, Senator Carl Levin.

 

PwC appoints Alan Milburn to health role

 

The former health secretary Alan Milburn has joined PwC as the chair of its new Health Industry Oversight Board.  The establishment of the board represents a “key investment… which capitalises on PwC’s existing strength servicing public health, private health and pharmaceutical and life science clients,” said the firm.  The board will assist PwC to provide services to health care providers and the public sector as funders of services.  In a statement, Alan Milburn said he will convene “a panel of industry experts to help catalyse change across the health sector and to help PwC grow its presence in the health market”.  Since leaving Parliament in 2010, Milburn has taken several paid roles in the health sector at board level.

 

Institutions ‘force pay restraint’

 

Institutional investors play a major role in restraining executive pay and linking pay to performance, according to analysis conducted by the Centre for Economic Performance, part of the London School of Economics.  Low levels of institutional investment correspond to a weak relationship between pay and performance.  Relationships between pay and performance are particularly strong where previous allocations of shares and options have not yet been vested, the study also found.  One of the report’s key findings was that executive pay outstripped average pay, including in the banking sector, despite the global financial crisis.  Co-author of the study, Brian Bell, said: “CEOs are often the target of criticism over high pay levels and there is an increasing gap between their pay and that of ordinary workers. But their pay growth over the last decade has broadly matched that of other top earners such as bankers, lawyers and management consultants.”

 

Treasury closes energy tax loophole

 

Energy companies are to be blocked from using a legal loophole that could have cost the Exchequer £900m.  The Treasury is introducing legislation to stop gas and energy distribution companies from claiming tax relief for costs that have already been met by business customers, confirming the principle that businesses cannot claim capital allowances for costs that are paid by other businesses.  Some energy companies recently attempted to claim capital allowances for costs met by customers, having previously not done so.  Had they succeeded they would have generated large windfall profits for themselves, said the Treasury. 

 

UK retailers’ 59% tax rate

 

Retailers are suffering from a shift in the burden of taxation away from corporation tax towards indirect taxation and business rating, according to a report from PwC.  While the average total tax rate for companies in the Hundred Group is 39%, for its retailers the rate is 59%.   Business rate contributions by retailers increased by 30% between 2008 and 2010, said PwC.  The British Retail Consortium is calling for a reform of taxation on the sector to level the burden between online and bricks and mortar retailers.

 

Public sector

 

London ‘should have tax powers’

 

London should have greater tax raising powers, according to a report from the London Finance Commission.  The city would be better able to promote its economy if it had greater financial and fiscal control, instead of relying mostly on grant from central government.  Existing funding models for infrastructure improvement are inadequate to cope with projected demand said the Commission, which fears that a lack of investment will constrain growth in the capital.  The report proposes all property taxes are devolved and the Mayor given authority to introduce additional small taxes.  The same approach could be adopted by all major UK cities, suggests the report.  The Commission was chaired by Professor Tony Travers, who said: “London needs greater financial autonomy to drive growth and deliver better infrastructure. Wales and, in particular, Scotland are moving towards far greater discretion over taxes. London should be treated similarly.” The proposals were endorsed by Mayor Boris Johnson.

 

Audit Commission ‘amber flag’ warning

 

The abolition of the Audit Commission and the introduction of enterprise zones have been given amber flag warnings in the annual report of the Major Projects Authority.  Royal Assent is not yet in place to enable the abolition to be completed on schedule in April 2015.  But redundancy costs have been below projections, as a result of successful staff transfer arrangements to the private sector.  Enterprise zones have warned that their objectives are difficult to achieve in current market conditions, which make it harder to attract finance to improve local infrastructure.

 

Corporate

 

Pension liabilities climb 60%

 

UK pension liabilities have risen 60% in the last five years, with asset value growth failing to match the rise in liabilities, says KPMG.  There has been strong performance across most asset classes since the 2008 financial crisis, but falling bond yields have caused liabilities to grow faster than asset values.  Lynn Pearcy, KPMG’s global head of IFRS employee benefits, warned: “Companies that previously used options available under either IFRS or UK GAAP to not fully reflect pension deficits on balance sheet are now having to accept the new reality: 2013 will see full recognition in IFRS accounts, with the implementation of IAS19 Revised, and by 2015 groups will also need to record pension deficits in parent or subsidiary individual accounts under the new UK GAAP, which may affect reserves or, at the extreme, the flow of dividends.”

 

Non executive fined £155k

 

A non-executive director has been fined £154,800 by the Financial Conduct Authority and banned from performing any role in a regulated financial services business for failing to disclose a conflict of interest.  The director, Angela Burns, has referred the matter to the FCA’s Upper Tribunal in a request to overturn the decision.  Ms Burns failed to notify two mutual societies where she was a director that she was seeking to be appointed as a non-executive at an investment manager being considered for mandates, or that she had notified the management firm of the mandate opportunities.  One of the societies provided the firm with a £350m mandate and the other was considering the award of a £750m mandate.

 

Practice

 

NT Advisors’ scheme closed down

 

A tax avoidance scheme that involved selling £6m of shares for £592 has been closed down by HMRC.  The scheme had been promoted in 2006 to 400 wealthy people by Matthew Jenner of NT Advisors, a consulting and advisory firm for the technology sector.  HMRC says the decision of a tax tribunal against the scheme has protected around £190m of tax.  The scheme was based on generating a massive loss on the sale of the shares, which did not manifest in an actual cost to the shareholders and was only a paper loss to avoid tax.  The Tribunal described the operation as one of “magic”.  Shares in a British Virgin Island company, set-up for the purpose, were sold to investors for millions of pounds more than they were worth. The users of the scheme were left owing money to offshore trusts created for their own benefit, so that it did not matter that they never paid for the shares.

 

Wilkins Kennedy and Matthews Mist merge

 

Wilkins Kennedy has merged with Southampton firm Matthews Mist & Co.  Partners John Mist and Christopher Matthews join Wilkins Kennedy as consultants.  Ian Talbot, a Wilkins Kennedy partner, says: “As a dedicated and growing mid-tier accountancy firm, Wilkins Kennedy is delighted to announce the merger with Matthews Mist & Co, a firm which serves a varied portfolio of clients across the South of England. We would like to extend a warm welcome to our new colleagues and their clients and we look forward to working together.”  John Mist said the combined firm offered a wider range of expertise, which recognised the increasingly complex legal and regulatory environment.

 

RoW sections

 

Corporate

 

PACCAR accused of accounting failures

 

Truck maker and Fortune 200 company PACCAR – which operates under the Kenworth, Peterbilt and DAF names – has been charged by the US Securities and Exchange Commission with accounting deficiencies that damaged the accuracy of their financial reporting during the financial crisis.  The SEC claims that PACCAR’s internal accounting controls were ineffective, causing it to not adhere to some accounting rules.  PACCAR failed to report the operating results of its aftermarket parts business separately from its truck sales business as required under segment reporting requirements, which are intended to provide investors with the same quality of information as executives. PACCAR and its subsidiary also failed to provide complete information about their loan and lease portfolios. PACCAR overstated some loan and lease originations and collections at two foreign subsidiaries in its statement of cash flows.  PACCAR has agreed to pay a $225,000 penalty, without admitting or denying the charges.

 

CEOs look to finance function for analysis

 

CEOs are increasingly looking to the finance function to provide them with analytical data to drive growth.  Key management information and risk data are becoming more relevant to provide a competitive edge, says Grant Searle, an associate director in PwC’s advisory division in South Africa.  “The finance function today is no longer that of the traditional score keeper sitting in the back-office counting the beans,” he told PwC’s 7th Corporate Audit Forum in Johannesburg. “Companies can no longer afford to take refuge behind historical management performance methods, such as financial statements to provide information about the organisation in a dynamic and ever changing future landscape.”

 

Practice

 

Deloitte acquires cyber security business

 

Deloitte has acquired leading US security monitoring and cyber threat consultancy Vigilant, strengthening its security consultancy business.  Vigilant provides consulting, managed services and information services to help organizations detect and respond to cyber threats. The combined practice will operate under the Vigilant by Deloitte brand.  The two operations are regarded as complementary, with Vigilant providing cyber threat management services, while Deloitte provides a broader security consultancy business.  Deloitte has been expanding its service to provide customised security solutions to large corporations operating in high risk sectors.   “The issue of cyber security is now one of the leading risks for our clients and for our country,” said Owen Ryan, national managing partner and risk advisory practice leader of Deloitte & Touche LLP. Ed Powers, principal and national leader of the security and privacy practice, added: “The severity of cyber threats has elevated the profile of security and has increased the complexity of protecting information and critical infrastructure.”

 

KPMG in $153m Fannie Mae settlement

 

KPMG is to make a substantial settlement to investors in Fannie Mae, the US government backed mortgage lender audited by the firm.  Fannie Mae and KPMG will together pay $153m to investors who bought stock in the lender between 2001 and 2004.  It was later recognised that Fannie Mae has overstated its income in that period and breached US GAAP.  A spokesman for KPMG said: “KPMG determined that it was in the firm’s best interest to put this matter behind us and avoid the significant additional cost, and the distraction and inherent uncertainty, of protracted litigation.”