UK news
TUI turmoil continues
KPMG has stood down as auditors to TUI Travel. The decision follows months of turmoil at TUI, relating to its restatement of its results for the year ending September 2009 because of a failure to properly reconcile transactions on different IT systems. TUI’s directors are recommending to its AGM on 3 February that PwC are appointed replacement auditors. The company said it “has had a good working relationship” with KPMG since the formation of TUI in 2007 and before that with predecessor company First Choice Holidays. In its Section 519 letter of resignation, KPMG said: “We have had extensive discussions with the directors of the Company over the background to these restatements, the implications arising from them and their disclosure and accounting treatment in the financial statements. Over the course of these discussions our relationship with certain directors became increasingly strained… Accordingly we have decided not to seek reappointment.”
FAST FACTS
€120m – written-off by TUI when 2009 accounts restated
€45m – reduction in EBITA for 2009
€75m – restatement affecting prior years
Padoa-Schioppa dies
Tommaso Padoa-Schioppa, the chair of the Trustees of the IFRS Foundation, the oversight body of the IASB, has died suddenly. As well as helping to direct the work of the IASB, Padoa-Schioppa is credited as being the main architect of the euro currency. Sir David Tweedie, chairman of the IASB, said: “Tommaso possessed a rare combination of intellect and vision, delivered with a wry smile.” Tsuguoki Fujinuma and Robert Glauber, vice chairs of the Trustees, added: “Tommaso was one of the most influential and highly regarded figures in international finance of his generation and made an enormous contribution to the IFRS Foundation in his all-too-brief time as chair. All those who were fortunate enough to have benefitted from his immense wisdom, cheerful good humour and unflinching integrity will sorely miss him.” The trustees have now begun a process to recruit a new chair of the Foundation. A strategy review led by Padoa-Schioppa will continue to the previously agreed timetable.
FRC reforms reporting
Companies will be allowed to publish only electronic versions of their annual reports, under proposals from the Financial Reporting Council. The FRC also recommends a greater role for companies’ audit committees, which would report on a company’s risk exposure. Auditors would provide an opinion on the reliability of that assessment. The entire annual report would conform to the test of providing a ‘fair and balanced’ view. An expanded audit report would identify any items contained in the annual report that the auditors believe are incorrect or inconsistent with information found during the audit.
KPMG supports undergraduates
KPMG has announced an innovative project to support the costs of accountancy undergraduates through their university courses. The project involves a six year partnership with Durham University and promises those graduating from the programme a £20,000 starting salary. Students will receive a salary throughout their periods of study, during which they will partially be based at Durham Business School and part of the time working in KPMG’s offices. KPMG says the scheme is intended to broaden the range of those entering the accountancy profession.
Deloitte’s new CEO
David Sproul has been appointed Deloitte’s new chief executive and senior partner. He will succeed John Connolly in June. Sproul is currently head of tax at Deloitte, having previously been managing partner for talent and for consulting and advisory services. He joined Deloitte from Andersen, where he was managing partner for operations. Andrew Hodge becomes managing partner at Deloitte’s tax practice. Hodge is currently head of Deloitte’s UK and EMEA global employer services businesses and sits on the global management group for global employer services.
Two companies operating a tax umbrella scheme for self-employed consultants have been ordered into liquidation by the High Court on public interest grounds. Sunday Solutions Ltd and Bradbury & Co Ltd both recruited IT consultants into the Sunday Solutions Scheme. An investigation by The Insolvency Service concluded that the two firms promised clients they could put income aside into a bank account for subsequent use to pay tax liabilities, but the tax was not paid. An estimated £80m was paid into the scheme by 1500 consultants, who remain liable for their unpaid taxes.
E&Y charged over Lehman
Ernst & Young has been charged by New York Attorney General Andrew Cuomo with helping Lehman Brothers engage in accounting fraud. The Attorney General’s lawsuit claims that Lehman’s use of ‘Repo 105’ transactions, with E&Y’s approval, was to reduce Lehman’s financial statement leverage –removing tens of billions of fixed income securities from the balance sheet – thereby hiding from investors and analysts the true position of the bank. E&Y is vigorously contesting the lawsuit. In a statement the firm insisted: “There is no factual or legal basis for a claim to be brought in this context against an auditor where the accounting for the underlying transaction is in accordance with GAAP.”
FRC learns about risk
The Financial Reporting Council is to help companies and investors develop best practice in reporting and mitigating risk exposure. Meetings with company directors, investors and other stakeholders will discuss how boards are responding to the UK Corporate Governance Code provision on boards’ responsibilities for risk. The FRC will consider whether the Turnbull Guidance on risk and internal control should consequently be amended. Questions to be addressed include relationships between boards, committees and management; how boards determine their risk appetite; and how boards should report on risks to shareholders.
2011 ‘good year for accountants’
Employment prospects for accountants will improve this year, predict recruitment consultants Badenoch & Clark. Heidi Waddington, associate director for professional services, said: “While the latter half of 2010 was characterised by good levels of activity in permanent roles – as finance teams were rebuilt following cuts backs during the recession – we anticipate the return of a more buoyant interim and temporary market, particularly during periods of heavy workload for finance teams, such as fiscal year end….. There’s absolutely no doubt that the trend towards recruiting accountants with strong commercial acumen and good interpersonal and communication skills will continue apace in 2011.”
Better capital disclosures
Companies must do more to disclose information on capital management policies and practices, says the Accounting Standards Board. Investors told the ASB they want to know how much financial capital a business needs and whether there is a surplus or deficit. An ASB study of the quality of capital management disclosures found some good practice, but excessive use of ‘boilerplate text’ and too many failures to disclose essential facts. One objective, says the ASB, is to avoid surprising investors with announcements of share buy-backs, or the use of capital for acquisitions.
New CPD standard
Changes to the standards for accountants’ continuing professional development are proposed by the International Accounting Education Standards Board. The IAESB plans to emphasise prequalification education for accounting professionals and the competencies of an auditor through revisions of additional standards. “The IAESB would like to encourage a more innovative approach to meeting CPD needs,” said IAESB chairman Mark Allison. “We believe we can achieve this by confirming the existing requirements of the standard and the recommended measurements for appropriate CPD activity, and emphasizing the range of available approaches to CPD systems.”
The IASB has proposed reforms to accounting standards for hedging activities. A new exposure draft is intended to enable companies to reflect their risk management activities better in their financial statements and to help investors understand the effect of those activities on future cash flows. The model proposed is principles-based and aligns hedge accounting with risk management activities undertaken by companies when hedging their financial and non-financial risk exposures. The proposals also include enhanced presentation and new disclosure requirements, but are, claims the IASB, much simpler than the existing standards.
PCAOB co-operates with POB
The Professional Oversight Board and the US Public Company Accounting Oversight Board have signed an agreement to co-operate in the oversight of auditors and public accounting firms that practice in the two jurisdictions. The agreement enables PCAOB to resume inspections of registered accounting firms located in the UK that audit companies whose securities trade in the US. PCAOB conducted inspections in the UK with the POB from 2005 until 2008. The signing of the agreement was facilitated by the passage in the US of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which amended the Sarbanes-Oxley Act to permit the PCAOB to share confidential information with its non-US counterparts.
Grant Thornton makes redundancies
Grant Thornton may make up to 30 staff redundant, as a result of changes in operations in its tax practice. The firm said: “We are fully committed to maintaining and growing our personal tax practice. We are looking to build on our client offering by ensuring that our advisory staff have the time to focus on delivering value added services to our clients. We also want to continue to maximise how efficiently we deliver tax returns. Therefore we will be centralising some parts of the tax return offering. We are seeking to reassign people within affected offices or offer them roles in other offices.” But, it added, these offers may not be acceptable to all staff affected.
IFRS ‘to blame for crash’
The adoption of fair value accounting standards gave distorted valuations to banks and encouraged them to pay excessive bonuses, leading to the economic crisis, investors have told the House of Lords’ inquiry into the audit market. Iain Richards of Aviva said that the IFRS use of fair value had been a mistake which had “a material cost to the taxpayer and to shareholders” because “as a result dividend distributions have been made and bonuses have been paid that were imprudent”. He added: “IFRS is extremely pro-cyclical; it facilitated and exacerbated the credit bubble…There were some very clear risks inherent (in the banks)…the risks were extremely material.” Standard Life’s head of corporate governance, Guy Jubb, told the committee that the Big Four should be broken up into about eight firms.
Fewer company failures
The number of company failures declined by more than a third in 2010, according to analysis by Deloitte. The number of companies entering administration fell from 3,188 in 2009, to 2,086 in 2010. The worst rate of business failures occurred in the construction and property sector, with 453 companies entering administration in 2010 – but this was also a significant fall against 2009.
Thomson Reuters grows
Thomson Reuters’ accounting and tax business is to expand from its United States’ base into Europe and Asia. The tax and accounting operation provides technology and information services and related software to multinational corporations and to accounting firms used by multinationals. The company said it aims to achieve growth both organically and through acquisitions, focused on the provision of its ‘OneSource global tax workstation’ and the supply of specialist information. Revenues of the tax and accounting business have grown in five years from $450m to $1bn.
Tax avoidance group
The Treasury has appointed a team of experts to advise it on a General Anti-Avoidance Rule. The group will be chaired by Graham Aaronson QC, a senior tax lawyer and former chairman of the Tax Law Review Committee. Other members of the new group are John Bartlett (Group Head of Tax, BP); Judith Freedman (Professor of Taxation Law at Oxford University); Sir Launcelot Henderson (a High Court judge); Lord Hoffmann (former Lord of Appeal, Hong Kong); Howard Nowlan (formerly tax partner at Slaughter and May and a judge of the First Tier Tax Tribunal); and John Tiley (Emeritus Professor of the Law of Taxation, Cambridge University). The group will report in October.
RoW news
Khodorkovsky convicted again
Former Russian oligarch Mikhail Khodorkovsky has been sentenced to an additional six years in jail on charges of embezzlement and money laundering. He was convicted alongside his business partner, Platon Lebedev. Khodorkovsky was already serving eight years for a 2003 conviction for fraud and tax evasion. The charges relate to allegations that the two men stole $27bn of oil from their former company, Yukos. In finding the defendents guilty, the judge, Viktor Danilkin, suggested that Yukos’s practice of reporting its accounts in English was an indication that it was trying to avoid full disclosure of its trading arrangements. He accused the two men of keeping two sets of accounts. Prosecutors claimed that Khodorkovsky and Lebedev had used complex pricing schemes and inter-trading through a network of offshore companies as a means of removing funds from the company. PwC audited the Yukos accounts during this time, but withdrew their audits in 2007 during a criminal investigation.
FAST FACTS
350 tonnes: oil Khodorkovsky convicted of smuggling
$27bn: value of oil ‘stolen’
$98bn: claim by Yukos executives against Russian authorities alleging ‘expropriation’
Padoa-Schioppa dies
Tommaso Padoa-Schioppa, the chair of the Trustees of the IFRS Foundation, the oversight body of the IASB, has died suddenly. As well as helping to direct the work of the IASB, Padoa-Schioppa is credited as being the main architect of the euro currency. Sir David Tweedie, chairman of the IASB, said: “Tommaso possessed a rare combination of intellect and vision, delivered with a wry smile.” Tsuguoki Fujinuma and Robert Glauber, vice chairs of the Trustees, added: “Tommaso was one of the most influential and highly regarded figures in international finance of his generation and made an enormous contribution to the IFRS Foundation in his all-too-brief time as chair. All those who were fortunate enough to have benefitted from his immense wisdom, cheerful good humour and unflinching integrity will sorely miss him.” The trustees have now begun a process to recruit a new chair of the Foundation. A strategy review led by Padoa-Schioppa will continue to the previously agreed timetable.
Big 4 analysed
Global revenues in the Big Four firms returned to moderate growth in 2010, following severe revenue reductions in 2009, according to analysis by Big4.com, a social networking forum for the profession. In the period 2004 to 2008, the firms achieved continual double digit revenue growth. Combined revenues in 2010 rose by 1.4% across the four firms, with advisory revenues growing by 6%, audit revenue remaining static and tax revenues dropping by 6%, found the 2010 Big Four Firms Financial Performance Analysis.
Deloitte gains Managerial Design
Canadian consulting firm Managerial Design has become part of Deloitte, with 32 people transferring. Heather Stockton, a partner in Deloitte’s human capital practice, said: “Deloitte clients now have access to a new suite of offerings that will help them deploy their strategies more effectively, based on the proven tools and facilitative approach Managerial Design has used with market-leading organizations for more than 30 years.”
India’s corporates reject IFRS
A business group representing some of India’s largest companies has demanded the deferral of the implementation of IFRS, which is planned to be effective from this year in India. The Federation of Indian Chambers of Commerce and Industry argues that the April deadline is “highly unworkable and unfair”, especially given the number of IFRS revisions currently being developed. Government officials insisted that IFRS would be adopted as per schedule.
Azerbaijan moves to electronic reporting
Azerbaijan is moving to the electronic reporting of tax liabilities, with IT systems procured to automatically assess returns. “Accounting must be in electron[ic] form that which the tax agencies can take the information via defined electron[ic] facilities and analyze the information via this program,” said Vusal Shikhaliyev, chief officer at Azerbaijan’s Ministry of Taxes Tax Policy and Strategic Researches Department.
Russia rationalises regulators
Russia is regulating its financial regulatory structures so that a single regulator will be in charge of supervision of securities, investments, insurance and other financial services, though not banks or auditors. The newly merged authority will be called the Federal Financial Service (FFS). The existing Federal Financial Markets Service and the Federal Insurance Supervision Service are expected to be abolished. The reform addresses concerns expressed by Russia’s Ministry of Finance that there is insufficient co-ordination of financial regulation in Russia. The Bank of Russia – the country’s central bank – will continue to regulate the banks.
E&Y charged over Lehman
Ernst & Young has been charged by New York Attorney General Andrew Cuomo with helping Lehman Brothers engage in accounting fraud. The Attorney General’s lawsuit claims that Lehman’s use of ‘Repo 105’ transactions, with E&Y’s approval, was to reduce Lehman’s financial statement leverage –removing tens of billions of fixed income securities from the balance sheet – thereby hiding from investors and analysts the true position of the bank. E&Y is vigorously contesting the lawsuit. In a statement the firm insisted: “There is no factual or legal basis for a claim to be brought in this context against an auditor where the accounting for the underlying transaction is in accordance with GAAP.”
GAO challenges federal accounting
The US Government Accountability Office has not signed off the federal accounts for 2010. It said it could not render an opinion on the 2010 consolidated financial statements by reason of widespread material internal control weaknesses, significant uncertainties, and other limitations. “Even though significant progress has been made since the enactment of key financial management reforms in the 1990s, our report on the U.S. government`s consolidated financial statement illustrates that much work remains to be done to improve federal financial management”, said GAO acting comptroller general Gene Dodaro. Specific concerns related to the accounts of the Department of Defense, the process for preparing the federal government’s consolidated financial statements and the reconciliation of intra-government activities.
Madoff victims recover $7.2bn
The estate of an investor in the Madoff ‘Ponzi’ fund has agreed to pay $7.2bn in compensation to victims of the fraud. The settlement brings the total compensation available to victims to nearly $10bn – about half of investors’ total losses. The trustee for the victims hopes to obtain additional compensation from other investors, who benefited from the fund. The $7.2bn payment was authorised by Mrs Barbara Picower, from the estate of her late husband Jeffry M. Picower. Mrs Picower said that her husband had benefited from the Madoff investments without realising the returns had been achieved fraudulently. The payment represents the value of Picower’s profits from the Madoff investments.
E&Y investigated over Anglo Irish
Ernst & Young are being investigated over their audits of the Anglo Irish Bank, which had to be nationalised under a rescue operation. The investigation is the latest in a series conducted by the Complaints Committee of the Chartered Accountants Regulatory Board regarding Anglo Irish. A previous investigation concluded that there were prima facie cases against four accountants regarding their involvement in Anglo Irish. These included David Drumm, who was chief executive at Anglo Irish when it collapsed, and Sean FitzPatrick, the chairman at that time and its previous chief executive. A spokeswoman for E&Y said: “There are a number of investigations ongoing into the Irish banking sector so it would be inappropriate for us to comment at this time.”
Deutsche Bank makes $500m settlement
Deutsche Bank is to pay $553.6m to settle prosecutions in the United States for assisting tax evasion through the use of fraudulent tax shelters. The bank has admitted the charges, which federal agencies claim lost the US government $29bn in false ‘tax losses’. Deutsche’s settlement means that it will not be prosecuted. The arrangement involving Deutsche became known to federal tax authorities as a result of an investigation into KPMG’s sale of illegal tax shelters. KPMG had to make a settlement of $456m.
New CPD standard
Changes to the standards for accountants’ continuing professional development are proposed by the International Accounting Education Standards Board. The IAESB plans to emphasise prequalification education for accounting professionals and the competencies of an auditor through revisions of additional standards. “The IAESB would like to encourage a more innovative approach to meeting CPD needs,” said IAESB chairman Mark Allison. “We believe we can achieve this by confirming the existing requirements of the standard and the recommended measurements for appropriate CPD activity, and emphasizing the range of available approaches to CPD systems.”
Hedge accounting reforms
The IASB has proposed reforms to accounting standards for hedging activities. A new exposure draft is intended to enable companies to reflect their risk management activities better in their financial statements and to help investors understand the effect of those activities on future cash flows. The model proposed is principles-based and aligns hedge accounting with risk management activities undertaken by companies when hedging their financial and non-financial risk exposures. The proposals also include enhanced presentation and new disclosure requirements, but are, claims the IASB, much simpler than the existing standards.
Irish politicians face audits
A qualified accountant will be engaged by Ireland’s parliament (the Oireachtas) to audit the expenses claims of its members, both TDs (members of its parliament, the Dail) and senators (members of the upper house). The person previously charged with auditing expenses claims – Tom O’Higgins, chairman of the Oireachtas audit committee – resigned when proposals to reform the system were rejected.
Moscow banking ‘fraud’ investigated
A criminal investigation has opened into possible fraud conducted against the Bank of Moscow.
Russian investigators opened a criminal probe against unidentified employees of the Bank of Moscow for possible fraud, police said. News reports suggest that the allegations relate to loans of over $250m for land acquisitions carried out by a real estate company, which is also being investigated. Russia’s parliament, the Duma, has just approved an injection of additional capital to a value slightly higher than the money alleged to have been removed by the fraud.
Politics
Ethical standards tightened
The Auditing Practices Board has published a revised Ethical Standards for Auditors. The standard does not ban the provision of non-audit services by auditors, but recognises the risk of the perception of a loss of independence where auditors receive a large fees for non-audit work. The revised standard specifies that auditors should apply increased rigour to their assessment of any threats to their independence; they should disclose more about their provision of non-audit services; and audit committees should have an enhanced role in overseeing the use of a company’s auditors to undertake non-audit services.
Internal audit ‘needs strengthening’
The internal audit function should be strengthened, the Institute for Internal Auditors has told the House of Lords Economic Affairs Select Committee enquiry into the audit market. Institute chief executive Dr Ian Peters and past president Dr Sarah Blackburn told the committee that banks’ internal auditors had been focused on controls and processes and insufficiently on broader governance aspects and the overall risk management picture. They suggested strengthening the role of internal audit within the UK Corporate Governance Code, where internal audit is referenced but not sufficiently emphasised as a core principle of good corporate governance.
‘Regulators must co-operate’
There must be closer co-operation between the regulators of different countries and stronger engagement between audit committees and investors if audit quality is to improve, the Financial Reporting Council has said in its submission to the European Commission’s Green Paper, Audit Policy: Lessons from the Crisis. Stephen Haddrill, chief executive of the FRC, said: “The Commission now has the difficult task of building consensus across Europe, taking into account the distinctions that exist between national jurisdictions across the EU. I hope that a clear strategy will emerge around which agreement can be forged that will both enhance audit quality and promote more competition in the marketplace.”
IHT replacement call
Inheritance tax should be replaced by a new Capital Receipts Tax, proposes the left of centre think-tank, the Institute for Public Policy Research. “Inheritance Tax as presently formulated is highly unpopular, raises little money and can be avoided by the very wealthy. It is also not a tax on inheritances, but a tax on estates,” said IPPR. “There is a strong case on the grounds of equality of opportunity for taxing inheritances. Large inheritances give some people an unfair and unearned advantage in life. Compared to other taxes, a tax on inheritances has limited disincentive effects and it can be progressive….. A Capital Receipts Tax would be a fairer means of increasing equality of opportunity. The UK should introduce a progressive tax on lifetime gifts above a certain threshold.”
MPs expenses qualified
The National Audit Office has qualified the accounts of the body that processes MPs’ expenses claims. This was the first audit in which the NAO needed to consider the detail of MPs’ claims, following reforms to the previous, discredited, system. Amyas Morse, the Comptroller and Auditor General, has limited the scope of his audit opinion on the regularity of expenditure for 2009/10 because House of Commons’ authorities were unable to provide evidence to support payments to MPs of £2.6m. Another £11.3m of expenditure did not have sufficient evidence to confirm that it was for Parliamentary purposes.
Public sector
New conceptual framework
The International Public Sector Accounting Standards Board has published an exposure draft and two consultation papers as part of its project to develop a conceptual framework for financial reporting by public sector entities. Public sector financial reporting objectives should be to provide information for accountability and decision-making purposes, with the scope of financial reporting extending beyond the traditional financial statements to include more comprehensive financial and non-financial information, said the IPSASB. One consultation paper identifies alternative asset and liability-led and revenue and expense-led approaches to financial statements, considers the key characteristics of assets, liabilities, revenue and expenses and discusses whether further elements should be defined and examines approaches to the recognition of elements. The second paper considers the measurement bases that may be appropriate for the elements that are recognized in financial statements and discusses historical cost, market value, and replacement cost and examines deprival value as an approach to select the most relevant measurement basis.
Council reporting ‘improving’
Local authorities are improving their accounting practices and the vast majority are submitting accounts on time, or early, says the Audit Commission. Seven councils, one police authority and three other local government bodies submitted accounts early, though the Commission reports it was unable to give an opinion by the required date on the accounts of seven other councils and 11 other local government bodies. Only two local authorities were given non-standard audit opinions. The accounts of Brentwood Borough Council were qualified, while those of Northumberland Council were given an adverse opinion by reason of a legal dispute related to a private company controlled by a district council that was subsequently merged into Northumberland Council.
Financial services
Finance sector grows
The financial services sector grew strongly in the last two quarters of 2010, according to the latest quarterly survey by the CBI and PwC. However, revenues grew faster than profitability, while employee numbers fell at the fastest pace for 17 years. Companies expect growth rates to fall back again in the current quarter. Andrew Gray, UK banking leader at PwC, said: “Despite subdued business levels, the banks are more confident than they have been at any point since 2005 in anticipation of stronger commercial demand. On the retail side, while banks are in good shape and able to lend more, actual demand is still faltering. Faced with weak demand for new mortgages and growing customer desire to pay down debt, banks will continue to find it difficult to raise margins – though they should benefit from reduced bad debts. … Focus on balance sheet management as the sole priority seems to have come to an end, allowing more focus on market positioning and business retention. Falling activity with financial institutions suggests some banks are now able to be more self sufficient and have more stable longer-term funding and reduced reliance on the inter-bank market.”
Bonus practices to be disclosed
Banks will have to increase their disclosure of bonus payments, under proposals published by the Basel Committee. The regulators have agreed that banks should make clear how pay is linked to performance and total figures for various types of remuneration. The pay of top managers and other senior staff – particularly those who take decisions exposing their bank to risk – would be revealed on a personalised basis. The Basel Committee hopes that this level of disclosure would assist investors to demand banks change incentivisation packages to mitigate risk exposure.
Corporate
Accounting errors cost BAE £30m
BAE Systems will pay a total of £30m in compensation, fines and legal costs because it failed to keep proper accounts for payments to an advisor in Tanzania. BAE paid £7.7m to an agent to assist it winning a £28m contract to supply military radar equipment to the Tanzanian government. The company will pay a £500,000 fine imposed by Southwark Crown Court, plus £225,000 costs. But these will be deducted from a £30m settlement previously reached, under which BAE will compensate Tanzania. The judge, Mr Justice Bean, said the fine would have been higher but for the compensation arrangement with Tanzania. “The structure of this settlement agreement places moral pressure on the court to keep the fine to a minimum so that the reparation is kept at a maximum,” he said. But he criticized the arrangement reached through the Serious Fraud Office for giving the company and its employees a “blanket immunity for all offences committed in the past”. BAE accepted that it had paid the money via a “secretive” route, but denied it had committed any offence in doing so.
IG drops E&Y
The IG Group has appointed PwC as auditors in place of Ernst & Young. In a statement, the IG Group said: “In the course of the current financial year the Company’s Audit Committee decided it was desirable to put the Company’s audit work out to a competitive tender process. Upon careful consideration of proposals from three candidate firms, including the incumbent auditors, the Committee recommended to the board the appointment of PricewaterhouseCoopers LLP as the Company’s auditor.” Ernst & Young declined to comment.
Practice
Tax rebates going astray
Hundreds of thousands of taxpayers may not receive due tax rebates, because they failed to notify HMRC of changes of address, according to the personal finance website MoneySavingExpert.com. HMRC is in the process of contacting 4.3 million employees who have been overcharged tax under PAYE over the last two financial years because of problems with the HMRC IT system. A further 1.4 million taxpayers underpaid tax under PAYE and could face demands for penalties if they pay late because tax demands were sent to the wrong address. Taxpayers who owe less than £2,000 could have higher deductions for tax made by employers from April onward. Martin Lewis, MoneySavingExpert.com creator, said: “I’d urge everyone to urgently do two things: first, check your tax code to find out if you’re due money back or you owe money. Secondly, if you’ve moved recently, double check the Revenue has your new home address.” In a poll conducted on Facebook of a thousand taxpayers, MoneySavingExpert found that a third of respondents had moved in the last year, but two-thirds of these had not advised HMRC of the new address.
Lancashire firms merge
Three Lancashire-based accountancy firms have merged. Titus Thorp & Ainsworth, Rotherham Taylor and Mitchell Ramsden have come together under the name Titus Thorp & Ainsworth, which originated in the 1890s. The combined firm will have more than 30 staff and operate from offices in Preston, Chorley and Blackpool in Lancashire, plus the London offices that were operated by Rotherham Taylor. Chief executive will be Michael Barton, formerly of Rotherham Taylor.
RoW section nibs
Corporate
TUI turmoil continues
KPMG has stood down as auditors to German-based TUI Travel. The decision follows months of turmoil at TUI, relating to the restatement of its results for the year ending September 2009 because of a failure to properly reconcile transactions on different IT systems. TUI’s directors are recommending to its AGM on 3 February that PwC are appointed as replacement auditors. The company said that it “has had a good working relationship” with KPMG since the formation of TUI in 2007 and before that with predecessor company First Choice Holidays. In its Section 519 letter of resignation, KPMG said: “We have had extensive discussions with the directors of the Company over the background to these restatements, the implications arising from them and their disclosure and accounting treatment in the financial statements. Over the course of these discussions our relationship with certain directors became increasingly strained… Accordingly we have decided not to seek reappointment.”
Tanzania to receive £30m from BAE
Tanzania is to receive nearly £30m from BAE Systems as a result of the company’s failure to properly report commission payments of £7.7m to an agent to win a £28m contract for the supply of military radar equipment. A deduction of £725,000 will be made from the £30m for a fine and costs imposed by a London court, as a result of a successful prosecution against BAE. An arrangement reached by BAE with the UK’s Serious Fraud Office determined that any fines or costs would be deducted from the compensation to be paid to Tanzania. “The structure of this settlement agreement places moral pressure on the court to keep the fine to a minimum so that the reparation is kept at a maximum,” said the judge, Mr Justice Bean.
Practice
BDO expands in Japan
BDO has expanded its presence in Japan, through the amalgamation of BDO Sanyu & Co with Toyo & Co, which was a member of the Crowe Horwath network. The new firm will be called BDO Japan KK and have over 600 partners and staff operating from four offices across the country. It will have a combined fee income of about $84.4m (JPY7bn). Sanyu & Co was founded in 1986 and joined BDO in 1996, while Toyo & Co was established in 1971. “The substantial development of our presence in Japan is in line with the strategic growth plans of BDO both internationally and in this region,” said BDO International CEO Jeremy Newman. “I hope that this is the start of the transformation of our presence in Japan and we will now be looking for further opportunities to develop and grow our business, including our tax and advisory services.”
Thomson Reuters grows
Thomson Reuters’ accounting and tax business is to expand from its United States’ base into Europe and Asia. The tax and accounting operation provides technology and information services and related software to multinational corporations and to the accounting firms used by multinationals. The company said it aims to achieve growth both organically and through acquisitions, focused on the provision of its ‘OneSource global tax workstation’ and the supply of specialist information. Revenues of the tax and accounting business have grown in five years from $450m to $1bn.