AB – Sept 2011
UK news
China accounts warning
Weak accounting and corporate governance practices in China are opening international investors to higher risks than in other emerging markets, Moody’s has warned. Recent credit events in the non-financial sectors in China have seriously destabilised investor appetite for bonds and stocks in the country, says Moody’s. Red flag cautions have been issued by the agency in relation to concerns over auditors and the quality of financial statements; corporate governance weaknesses; risky or opaque business models; business strategies based on fast growth; and poor quality earnings or cash flow. In its report on China, Moody’s revealed that China has more red flag warnings than its emerging market peers and that most are not property related. PCAOB and has previously warned about the quality of some audits of Chinese companies. The SEC and PCAOB have accelerated negotiations with regulators in China that began in 2007 seeking to obtain approval for joint cross-border audit oversight.
Audit market to be investigated
The audit market is to be investigated by the Competition Commission, the Office of Fair Trading has announced, subject to consultation ending on 9 September. A final decision is due before the end of 2011. The OFT announced in May that the test for reference to the Competition Commission had been met, but a decision on referral depended on whether appropriate remedies would be available. The OFT now believes this threshold has been met. BDO said it was “delighted”. Steve Maslin, Grant Thornton audit partner, hoped the investigations would lead to “a market based on the quality of audit provision, rather than an arbitrary cut off point that restricts access to the market to just four firms”. Deloitte said: “any changes to the audit market must not be to the detriment of audit quality and should not harm the UK’s competitive advantages as a business location and centre for capital market activity.”
MPs slate HMRC
MPs have attacked HMRC for under-performance and dissatisfaction from taxpayers and tax professionals. The tax system is at risk of losing because of HMRC weaknesses, said the House of Commons Treasury Select Committee. MPs reported unacceptable difficulties in contacting HMRC at peak periods; endemic delays in responding to post; and an increasing focus on online communication, at the expense of postal mail. A spokesman for HMRC responded: “We know we have a lot more to do to improve our services to customers. But HMRC is in a much stronger position now than in 2010 and plans to go further.”
£1trn pensions liabilities
Whole of Government Accounts have been published for the first time, revealing a potential £1.1trn pensions liability. The Government’s balance sheet analysis has been made available as part of the Office for Budget Responsibility’s Fiscal Sustainability Report. As well as showing public sector pension liabilities, it reveals on-balance sheet PFI capital liabilities of over £35bn. The publication of the accounts was welcomed by ACCA. Head of public sector, Gillian Fawcett, said: “This is a major step forward for improving the transparency and accountability of public funds.”
Simple accounting for small firms
Small firms could be allowed to use simpler accounting processes, using UK GAAP, for calculating their taxable profits, under options published for consultation by the Government’s Office of Tax Simplification. The measures would affect three million micro-enterprises, with a turnover of under £70,000, who are not registered for VAT and have no employees. At present these businesses calculate profits using GAAP, but are then adjusted as required for tax purposes. The use of a flat rate expense allowance is also under consideration.
IASB work programme
The IASB has launched a public consultation on its future work programme to determine its future strategic direction and focus. It seeks views from key stakeholders on the balance between the development of financial reporting and the maintenance of already agreed standards and which areas of financial reporting are priorities for future improvement. IASB chairman Hans Hoogervorst said the first phase of the board’s work has been completed given the number of jurisdictions that have now adopted IFRSs and the general alignment of these with US GAAP.
BDO selects new CEO
BDO International has selected Martin van Roekel as its new CEO. Van Roekel has been managing partner of the firm in the Netherlands for six years, a member of the global leadership team since 2009 and is the firm’s first global head of network development. He takes over in October from Jeremy Newman, who steps down after three years to seek other roles in the accountancy profession.
KPMG’s new leaders
Incoming chairman of KPMG International, Michael Andrew, has announced the other members of KPMG’s new leadership team. Andrew becomes global chairman at the end of September 2011, based in Hong Kong. The global deputy chairman is to be Alan Buckle, who will have responsibility for executing the firm’s global strategy and be based in London. Mark Goodburn is the new global head of advisory and Greg Wiebe is global head of tax. Hideyo Uchiyama becomes chairman of KPMG in Asia Pacific in place of Michael Andrew.
Companies for sale ‘insolvent’
Many companies offered for sale through brokers use ‘tenuous’ high valuations that disguise the businesses’ insolvency, warns turnaround specialists K2 Business Rescue. In many cases, close inspection reveals that the firms have time to pay arrangements in place with HMRC, or are in arrears with both HMRC and trade creditors, says K2. It reports that the insolvency only becomes clear when careful due diligence is conducted.
Lease accounting reviewed
The IASB and FASB are to re-expose proposals for a common leasing standard, following strong criticisms of the exposure draft on leasing published in August last year. The two boards said that while the revised proposals have not been finalised, they are sufficiently different from the exposure draft that they will need to be re-exposed. Among comments on the previous ED, PwC said the proposals would increase costs for some preparers and reduce the usefulness of the income statement.
Broker-dealers face tougher audits
Broker-dealers will be subject to tougher auditing and financial reporting requirements under proposals published by the US Public Company Accounting Oversight Board. Two new attestation standards have been proposed for comment by PCAOB, relating to auditors’ examination of compliance reports and their reviews of exemption reports. The standards are part of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the proposed standards, auditors would be required to report on supplemental information accompanying financial statements.
E&Y calls for improved reporting
Ernst & Young has called for improvements to corporate reporting practices in its response to the Sharman Inquiry into going concern and liquidity risks. Suggestions include a clear published explanation on the relationships between prudential regulation and going concern assessments for financial institutions; improved narrative reporting; the de-cluttering of financial reports and accounts; and greater education of accounts users on what they should look for when assessing going concern statements. In its response to the Sharman report, ACCA argued that IFRS is fit for purpose, but should be amended to extend the future period that needs to be considered.
Deloitte’s high flyers non-execs
Deloitte has appointed two of the best known City names as independent non-executive directors. DeAnne Julius was a member of the Bank of England’s Monetary Policy Committee, conducted a high profile review of the public services industry for the last Government and is chair of the Chatham House foreign policy institute. She is a director of Roche and Jones Lang LaSalle. Gerry Grimstone is chairman of Standard Life and held senior positions with Schroders and the Treasury. He is an advisor to the Treasury on government efficiency.
E&Y wins Aegis from Deloitte
Ernst & Young has been appointed the new auditor of Aegis in place of Deloitte, following a competitive tender. Deloitte had been auditor since 2004 of the Aegis group, which is a leading provider of marketing communications services. Meanwhile, Ernst & Young lost the audit of Aviva to PwC. In turn, PwC lost the audit of Canadian Pacific Railway to Deloitte.
Lancashire returns to UK
The Lancashire Insurance group is to return to UK tax residancy from Bermuda, in response to the Government’s proposed reform of Controlled Foreign Companies rules. The group will remain incorporated in Bermuda. The company said it welcomed the Government’s approach to the reform of treatment of business written in the UK, but with little connection to the UK. By contrast, Virgin Enterprise – the holder of the Virgin brand franchise rights – is moving its headquarters from London to Geneva, saving the group millions of pounds a year in tax.
Fraud procedure reform
Civil Investigation of Fraud procedures are to be reformed, HMRC has announced. It proposes to create a Contractual Disclosure Facility to speed-up and strengthen civil fraud investigations. HMRC would contact taxpayers to advise of suspicions of serious tax fraud and offer contracts to disclose fraud within 60 days. In return, HMRC would remove the risk of prosecution and use civil powers to investigate. John Cassidy, PKF’s tax investigation partner, suggests the move will “encourage more petty tax fraudsters to come clean”, generating higher revenues from tax investigations.
RoW news
China accounts warning
Weak accounting and corporate governance practices in China are opening international investors to higher risks than in other emerging markets, Moody’s has warned. Recent credit events in the non-financial sectors in China have seriously destabilised investor appetite for bonds and stocks in the country, says Moody’s. Red flag cautions have been issued by the agency in relation to concerns over auditors and the quality of financial statements; corporate governance weaknesses; risky or opaque business models; business strategies based on fast growth; and poor quality earnings or cash flow. In its report on China, Moody’s revealed that China has more red flag warnings than its emerging market peers and that most are not property related. PCAOB and has previously warned about the quality of some audits of Chinese companies. The SEC and PCAOB have accelerated negotiations with regulators in China that began in 2007 seeking to obtain approval for joint cross-border audit oversight.
Deloitte wins Canadian Pacific
Deloitte has won the audit of the Canadian Pacific Railway from PwC. Canadian Pacific operates in the United States as well as Canada, with a 14,000 mile network running from Vancouver to Montreal and connects with New York, Washington, Philadelphia and Buffalo. In a statement the company said that its audit, finance and risk management committee, with the board’s approval, had “decided that it was the appropriate time to have a competitive bidding process” to select company auditors. PwC, Deloitte and other firms were invited to bid. “Following written and oral presentations by each firm, management and the Audit Committee evaluated each firm against specific criteria. The Audit Committee recommended the appointment of Deloitte & Touche LLP to the Board of Directors.” In other changes to audit engagements, Ernst & Young lost the audit of Aviva to PwC, while Deloitte the audit of marketing communications agency Aegis to Ernst & Young.
Dubai improves corporate governance
Corporate governance standards in Dubai are to improve under changes to its standards code proposed by the state’s Financial Services Authority. Changes include a requirement that firms must implement remuneration structures that are appropriate to the ‘nature, scale and complexity’ of their businesses and are aligned with the long term interests of the company. Corporate policies should align the risk outcomes for senior employees with those of the company. Companies will have to include information on this in their annual report and in regulatory returns.
IASB work programme
The IASB has launched a public consultation on its future work programme to determine its future strategic direction and focus. It seeks views from key stakeholders on the balance between the development of financial reporting and the maintenance of already agreed standards and which areas of financial reporting are priorities for future improvement. IASB chairman Hans Hoogervorst said the first phase of the board’s work has been completed given the number of jurisdictions that have now adopted IFRSs and the general alignment of these with US GAAP.
More pension plan disclosures
US employers must provide more information on their financial obligations to multiemployer pension plans under a revised accounting standard approved by the Financial Accounting Standards Board. Employers were required to disclose only total contributions to multiemployer plans. Additional disclosures now include the amount of employer contributions to each large plan and the total to all plans; whether a contribution represents more than 5% of total plan contributions; which plans are subject to funding improvement plans; the end date of collective bargaining agreements and related minimum funding arrangements; and information on how well funded plans are.
BDO selects new CEO
BDO International has selected Martin van Roekel as its new CEO. Van Roekel has been managing partner of the firm in the Netherlands for six years, a member of the global leadership team since 2009 and is the firm’s first global head of network development. He takes over in October from Jeremy Newman, who steps down after three years to seek other roles in the accountancy profession.
KPMG’s new leaders
Incoming chairman of KPMG International, Michael Andrew, has announced the other members of KPMG’s new leadership team. Andrew becomes global chairman at the end of September 2011, based in Hong Kong. The global deputy chairman is to be Alan Buckle, who will have responsibility for executing the firm’s global strategy and be based in London. Mark Goodburn is the new global head of advisory and Greg Wiebe is global head of tax. Hideyo Uchiyama becomes chairman of KPMG in Asia Pacific in place of Michael Andrew.
Lease accounting reviewed
The IASB and FASB are to re-expose proposals for a common leasing standard, following strong criticisms of the exposure draft on leasing published in August last year. The two boards said that while the revised proposals have not been finalised, they are sufficiently different from the exposure draft that they will need to be re-exposed. Among comments on the previous ED, PwC said the proposals would increase costs for some preparers and reduce the usefulness of the income statement.
Russia seems English speakers
English speaking accountants with a good understanding of IFRS are in strong demand in Russia, with salaries growing, according to reports in the Russian media. Demand is also increasing from overseas companies based in Russia. The Hays recruitment agency in Russia confirmed that it is able to place English speakers who have knowledge of IFRS at a senior level. However, its consultant, Olga Kondratyeva, said that many chief accountants at large international companies in the country do not speak English and have responsibility only for Russian financial and tax accounting.
KPMG Jordan joins Europe
KPMG in Jordan is joining KPMG Europe, extending the European firm to cover 18 countries. Other countries outside Europe that are within the firm include Saudi Arabia, Kuwait, as well as Turkey and CIS (Russia, Ukraine, Kyrgyzstan, Kazakhstan, Armenia and Georgia), which are only partly within the continent of Europe. The expanded firm will have more than 30,000 partners and staff, 120 offices and total revenues of €4.7bn.
Broker-dealers face tougher audits
Broker-dealers will be subject to tougher auditing and financial reporting requirements under proposals published by the US Public Company Accounting Oversight Board. Two new attestation standards have been proposed for comment by PCAOB, relating to auditors’ examination of compliance reports and their reviews of exemption reports. The standards are part of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the proposed standards, auditors would be required to report on supplemental information accompanying financial statements.
African leaders accused
Three African leaders have been accused of using international aid to buy luxury homes in Paris and to maintain extravagant lifestyles, an article in the French newspaper Libération claims. Quoting an investigation by Transparency International France, Libération said that the named presidents owned portfolios of Parisian apartments and houses, that one president owned private jets and yachts and that all three had accumulated millions of pounds in bank accounts linked to them and their families. The countries concerned receive millions of pounds in foreign aid. Transparency International France did not respond to a request to comment.
Fears over reserves accuracy
The US Securities and Exchange Commission is concerned that relaxations in the estimating of energy reserves – approved by the SEC in 2008 – are undermining the accuracy of energy companies’ financial reports, the New York Times claims. The relaxation allowed energy companies to expand their estimated area of reserves further away from their drilling points. Concerns are growing that reserves may be smaller than some companies report. Third party auditing of reserve sizes is not required. As well as boosting balance sheet, more optimistic estimates of reserves boost reported profits as they allow companies to spread site development costs over a longer period.
New government accounting standards
New accounting standards issued by the US Government Accounting Standards Board will improve transparency in the reporting of pension liabilities. Two exposure drafts on pension plans will strengthen the reporting of costs and obligations. The GASB also issued statements dealing with the reporting of the ongoing impact of past transactions and to clarify the circumstances in which hedge accounting can continue to be applied when there is a change in swap counterparty, or when a credit support provider is replaced.
US move against tax havens
The US Congress is considering approving sanctions against tax havens. The Stop Tax Haven Abuse Act would close tax loopholes for individuals and companies, strengthening controls against accountants and other tax professionals who facilitate money laundering and tax evasion. The US government would be empowered to take action against un-co-operative tax havens; require investment vehicles to vet clients; and require US-listed companies to report annually on a country-by-country basis. It would also treat offshore entities as controlled by the US taxpayers who formed them – or who transfers assets to or from them – unless the taxpayer can prove they do not benefit.
IASB establishes Emerging Economies Group
The International Accounting Standards Board has established an Emerging Economies Group, which met for the first time in July in Beijing. The group will act as an advisory body to inform the IASB on the adoption of IFRS in economies with less well developed capital markets. Members include all emerging market economies within the G20, plus Malaysia. The chair is Wayne Upton, who is also the IASB’s director of international activities and chair of its IFRS Interpretations Committee.
Politics
Auditors ‘not sceptical enough’
Auditors have been told to display greater professional scepticism and improve the quality of their audits in the financial services sector, particularly in relation to UK subsidiaries of international groups. The criticisms were made in the annual report of the Professional Oversight Board’s Audit Inspection Unit. “Some firms have more work to do than others to demonstrate that professional scepticism is appropriately embedded in their processes and culture,” said the AIU. The report was worried about audit quality in the financial services sector. “Of particular concern was the audit of loan loss provisions where improvements were required in the majority of the audits reviewed. Insufficient evidence of the challenge and testing by audit teams of the techniques adopted by management to assess the level of collective provisions was a common issue. The adequacy of audit evidence supporting the audit team’s assessment and challenge of specific loan impairments was also a recurring issue.”
AIU criticise top six
The six largest firms have been told to improve the quality of their audits by the Audit Inspection Unit in its annual review. Grant Thornton fared worse, with only two of its10 reviewed audits regarded as of good standard: six required improvement and two significant improvement, one regarding asset valuation and going concern and the other relating to income, payroll and asset impairment. Thirteen Ernst & Young audits were reviewed, seven required improvement and one significant improvement, relating to goodwill impairment. Fifteen PwC audits were reviewed: seven required improvement and one significant improvement regarding audit evidence. Of eight BDO audits reviewed, three required improvement and one significant improvement, regarding audit evidence. Of 14 KPMG audits, two required improvement and two significant improvement – one regarding revenue and profit recognition and another relating to loan impairments and IT controls. Thirteen Deloitte audits were reviewed, three requiring improvement and one significant improvement regarding audit evidence.
Big Four ‘would be allowed to fail’
None of the Big Four firms is regarded as ‘too big to fail’, the Government revealed in its response to the House of Lords Economic Affairs Committee’s report on the audit market. The Government will discuss with firms in the coming months possible requirements for them to produce ‘living wills’ in case they cease trading. Business secretary Vince Cable also said that he wants companies to tender more frequently for audit work, but it is wary about making this mandatory.
New corporate governance code
A new corporate governance code for central government has been published by the Treasury and the Cabinet Office. The code draws heavily on the Financial Reporting Council’s Corporate Governance Code and stresses that good governance is a pre-requisite for good financial management. Changes to the previous code include greater ministerial involvement in departmental business, including secretaries of state chairing board meetings; and specifying that about a third of board members will be non-executives from outside government, particularly from business.
Enterprise zones announced
Four more enterprise zones have been announced in England, in Birmingham, Bristol, Leeds and Sheffield: other zones in Nottingham, Liverpool, Manchester and London’s Royal Docks were revealed in March. A further 10 new enterprise zones are yet to be announced. Enterprise zones are intended to create over 24,000 jobs and will benefit from discounts on business rates, new superfast broadband, weaker planning controls and enhanced capital allowances.
Public sector
Audit Commission break-up ‘next year’
The break-up of the Audit Commission will be in place by the end of next year, communities secretary Eric Pickles has confirmed. This opens the way for staff to form an employee-owned mutual – probably called DA Partnership – to bid for local public audit contracts. Government said that steps would be taken to prevent the staff mutual having an unfair advantage in tendering for work. All local public audit contracts will be in the private sector by next year and are expected to be for either three or five years. Research from KPMG revealed that 70% of councils want to take control of the auditor appointment process, but that 68% say they are not prepared or only fairly prepared for this. A report by the House of Commons Communities Select Committee concluded that there are opportunities to improve value for money through councils choosing their own auditors, but there are significant risks to audit independence.
Eight government accounts qualified
Eight government departments’ accounts have been qualified by the Comptroller and Auditor General. HMRC, the Department for Work and Pensions, the Department for Education, the Ministry of Defence, the Skills Funding Agency, the Department for Environment, Food and Rural Affairs, the Rural Payments Agency and the Department for Transport all had their 2010/11 accounts qualified. DWP’s qualification was because of the scale of fraud and error, estimated at £3.3bn; the Department of Transport because it spent £335m more than was authorised. HMRC accounts were qualified because of the level of error and fraud regarding tax credits, but the department was praised for improvements.
Corporate
Willis fined
Insurance brokerage Willis has been fined a record £6.895m by the Financial Services Authority for failings in its anti-bribery and corruption systems and controls. The previous record was a £5.25m fine imposed on Aon in 2009. The FSA said that weaknesses in the Willis systems meant there had been an unacceptable risk that payments to overseas third parties could be used corruptly. Willis had made payments of £27m between 2005 and 2009 to overseas third parties to assist in winning and retaining business from clients, particularly in high risk jurisdictions. But Willis failed to establish and record an adequate rationale to support the payments; failed to conduct adequate due diligence on its third party partners to evaluate the risks of doing business with them; nor did it adequately review its relationships on a regular basis to consider if it was still necessary and appropriate to work with them.
BUPA FD goes Continental
Tom Singer has been appointed as chief financial officer of the InterContinental Hotels Group PLC, moving from his role as group finance director at BUPA. Singer takes over at InterContinental from Richard Solomons, who became chief executive in July. Prior to working for BUPA, Singer was chief operations officer, and before that group finance director, at the William Hill betting shop chain. He has also been finance director at Moss Bros and previously was with McKinsey and Price Waterhouse. Neil Taylor, Bupa’s care services’ finance and development director, will serve as acting group finance director until a permanent successor is appointed.
Practice
Dishonest agents targeted
HMRC is consulting on its approach to dishonest tax agents. A discussion document, ‘Working with Tax Agents: Dishonest Conduct’, proposes issuing dishonest conduct notices where there is evidence a tax agent has dishonestly advised or assisted clients. This would give HMRC a right of access to an agent’s working papers, subject to approval by the First Tier Tax Tribunal, and enable HMRC to request working papers from third parties where they are no longer in the possession of dishonest tax agents. The paper also proposes a civil penalty on dishonest tax agents and publication of agents’ details on the HMRC website. Dave Hartnett, tax permanent secretary, said: “HMRC needs to be able to take effective civil action against a small number of dishonest agents. Tackling dishonesty reassures the public, supports honest tax agents and protects them against unfair competition. HMRC has worked closely with the representative bodies to develop draft legislation which provides a fair, balanced and proportionate response.”
Tax demands missed
Half a million self-assessment taxpayers did not receive their half yearly payment demand in July. HMRC said the cause had been “more self assessment statements than usual to issue this year”, but that the majority were sent out on time. Media reports suggested that HMRC had run out of forms to despatch, but HMRC did not confirm or deny this. Taxpayers who did not receive demands and would normally have to pay by 31 July have been given 30 days from receipt of the statement of account to pay.
Financial services
IAS19 ‘to cost £325m’
The used of the revised IAS19 for accounting periods from January 2013 will increase costs in the finance sector by £325m a year, or 2.7% of total profits, a survey of FTSE350 companies conducted by actuaries Barnett Waddingham concludes. The firm says that while the revised standard will improve the quality of disclosures, it will cut disclosed profits of companies with defined benefit plans. Companies will no longer be able to set expected returns on schemes’ assets based on the assets held by the plan. Instead they must assume all assets are invested in AA-rated corporate bonds, which typically produce lower returns than equities. Barnett Waddingham says that use of the new standard would have cut profits in the latest accounting periods by around £2bn. A report by pensions advisors Mercer suggested that companies will respond by adopting more cautious investment strategies for pension plans as companies will no longer be able to use pension plan investment returns to increase reported earnings.
Capital directive published
The European Commission has published the Capital Requirements Directive IV, implementing Basel III in Europe. The Directive lifts capital adequacy requirements of banks and investment firms from 8% of total balance sheet to a higher level related to the risk profile of the particular institution. It seeks to ensure that the capital adequacy requirements are sufficient to meet actual potential losses and that institutions are protected from high losses from derivatives exposure. Capital buffers should be built-up on a counter-cyclical basis, accumulated from profits to protect banks during tough trading periods.
RoW sectors
Financial services
Capital directive published
The European Commission has published the Capital Requirements Directive (CRD) IV, implementing Basel III in Europe. The Directive lifts the capital adequacy requirements of banks and investment firms from 8% of total balance sheet to a higher level related to the risk profile of the particular institution. It seeks to ensure that the capital adequacy requirements are sufficient to meet actual losses and that institutions are protected from potential losses from derivatives exposure. Capital buffers should be built-up on a counter-cyclical basis, accumulated from profits to protect banks during tough trading periods. The Directive also stipulates stronger corporate governance controls at banks. The European Commission says that the CRD adds to the framework of Basel III by ensuring that EU banks and investment firms not only meet minimum capital adequacy levels, but that these are also related to real needs of liquidity, while ensuring adherence to a sensible leverage ratio.
Russian banks fined
The Central Bank of Russia imposed fines on 450 companies and their employees in the first half of last year for breaches of money laundering rules. From the beginning of this year, the bank has been required to levy fines automatically in the event of rule breaches and does not have the power to exempt companies from being penalised. According to the Russian newspaper Kommersant, it is expected that this will cause the number companies to be fined to increase substantially this year. Fines vary from 20,000 to 300,000 roubles ($714 to $10,714) for banks, or 10,000 to 50,000 roubles ($357 to $1,786) for employees.
Practice
Deloitte’s high flyers
Deloitte has appointed two of the best known names in the City as independent non-executive directors. DeAnne Julius was a member of the Bank of England’s Monetary Policy Committee, is chair of foreign policy institute Chatham House and conducted a high profile review of the public services industry for the last Government. She is a director of Roche and Jones Lang LaSalle. Gerry Grimstone is chairman of Standard Life and has held senior positions with Schroders and the Treasury. He is currently an advisor to the Treasury on government efficiency. Other firms have also recently appointed non-executive directors. PwC appointed Dame Karen Dunnell, Sir Ian Gibson, Professor Andrew Hamilton, Sir Richard Lapthorne and Paul Skinner, who came from a variety of professional backgrounds. Ernst & Young has selected former PCAOB chair Mark Olson, ex CBI chief Sir Richard Lambert, and one time Daimler chief Klaus Mangold. KPMG has established what it terms a ‘public interest committee’ – consisting of Sir Steve Robson, Tom De Swaan and Dr Alfred Tacke – as its equivalent to a team on non-executive directors.
RSM Italy expands
RSM Italy has merged with PA Audit Practice to form a top ten firm in the country, which has been admitted to the RSM International network. The headquarters of RSM Italy will be in Milan, with offices in Agrigento, Bologna, Brescia, Empoli, Palermo, Paldova, Rome and Torino. The firm has eight partners and 65 staff. RSM is the sixth largest international network in the world.
Corporate
SOX ‘is opportunity’
Corporations should consider how to improve their Sarbanes-Oxley compliance, says Ernst & Young in a new report, ‘Think outside the SOX box’. Too many organizations see SOX as a compliance obligation, rather than as an opportunity to innovate, automate and gain competitive advantage, suggests E&Y. The firm conducted a survey of 225 global executives about their SOX compliance functions, concluding that the best corporations take the most enlightened view about SOX, believing that it gives them a chance to add value to their business. Some 56% of those interviewed said this was a key challenge for their operations. The report suggests that corporations can empower their SOX functions by automating controls; offshoring to lower cost jurisdictions; leveraging IT investment; and innovating strategically.
No more rules, plead risk managers
The European Union should give the financial services sector a break by announcing a moratorium on corporate governance rules, pleads the Federation of European Risk Management Associations (FERMA). The focus should now be on ‘implementation and robust enforcement’ of existing requirements, rather than legislating for more, FERMA has said in a response to a European Commission green paper on corporate governance. FERMA argues that aspects of the green paper dealing with board duty on risk management and risk disclosure overlap with the EU 8th Company Law Directive, which has yet to be fully harmonised across the EU. This potentially means that existing and new rules will not be applied equally in all EU countries. “Member States’ implementation should be further analysed before the Commission takes any further action to regulate this duty,” said FERMA.