International
ACCA finds investors want real time reporting
Investors support the adoption of ‘real-time’ reporting, which they believe would raise confidence in corporate governance and improve investor returns. An ACCA survey of 300 investors found 85% predict real time reporting would improve their ability to react quickly, 78% expect it would enhance returns and 73% said it would provide evidence that companies had robust corporate governance. “Investors clearly believe it would help their decision-making and give them greater understanding of companies,” said Ewan Willars, ACCA’s director of policy. ”On the other hand, they also accept that it could lead to increased instability and short-termism in markets,” The survey results are published in an ACCA report, ‘Understanding investors: the road to real time reporting’.
Deloitte and PwC grow global revenues
Deloitte’s global revenues rose to US$32.4bn in the year ending May, re-establishing its position as the largest global accounting firm. The revenue growth followed nearly 30 acquisitions in strategically important markets and sectors. Big increases were reported in the Americas, with an 18.1% rise in revenues in Chile and 14.3% in Latin America. There was a 5.6% rise in revenues in the Europe, Middle East and Africa (EMEA) region. Asia Pacific grew by 3.1% – though this represented a contraction if measured in the US dollar. PwC’s global revenues for the year ending June were up by 4% to US$32.1bn. Revenues in South America rose by 9% and those in North America by 7%, as were those In the EMEA region, but in Asia they rose by only 2%.
EY acquires Greenwich Consulting
EY France has acquired Greenwich Consulting, which has a global presence. EY said the acquisition will strengthen the firm’s capacity to advise on growth strategy, marketing strategy, product marketing, marketing effectiveness, advanced pricing and customer analytics. Greenwich Consulting was established 12 years and has an annual 35% growth rate, with a 2012 turnover of €25m. It has seven offices in Europe, North America, Africa and the Middle East.
Deloitte expands cyber security
Deloitte is strengthening its capacity to advise clients on cyber security with the appointment of a former senior FBI special agent as a director of the firm’s security and privacy practice in New York. Mary E. Galligan worked on some of the FBI’s most high profile and complex investigations, including the September 11th attacks. EY has also announced that it is increasing its focus on cyber security.
IFRS Foundation and IOSCO agree protocols
The IFRS Foundation and the International Organization of Securities Commissions (IOSCO) have agreed to strengthen co-operation to raise the standard of financial reporting globally. Michel Prada, chairman of the IFRS Foundation Trustees, said the signing of a set of protocols marked a big step forward in improving financial reporting. He added that decisions taken by IOSCO in 2000 had led to the creation of the IASB. IOSCO represents securities regulators and its more than 120 members oversee 95% of the world’s securities markets.
UK
IFRS complies with UK law
The Financial Reporting Council and the Department for Business, Innovation and Skills have both received legal advice confirming that IFRS complies with UK law. Legal advice was taken after suggestions that directors presenting accounts under IFRS might be breaching their responsibilities to provide a true and fair view of the company. But the latest advice concludes that if there is a conflict between accounts presenting a true and fair view and complying with accounting standards, the standards should be overridden. The FRC has asked the IASB to review those standards that create conflicts with the provision of a true and fair view. The legal advice is published on the FRC’s website.
‘Cursory’ due diligence in financial services
Financial services companies frequently fail to understand the risks they enter into through third party relationships. The KPMG Astrus Insights report found the financial services sector is the most exposed of any industry to fraud, corruption, insider trading, negligence and bankruptcy. Nearly half of reports conducted for the sector generated ‘red flags. Nine of the ten highest risk reports relating to banks. Flagged concerns included directors who were on sanctions lists, or had associations with fraud or corruption charges. Alex Plavsic, head of forensic at KPMG, said that many banks only conduct “a cursory review” of who they do business with, which fail to reveal 84% of actual risks.
ACCA and FRC hold joint meetings on audit reports
ACCA and the FRC have held the first of two joint public events to provide more information on proposals from the International Auditing and Assurance Standards Board (IAASB) to make auditor reports more informative. The IAASB believes that making the auditor report more transparent and more relevant will have a positive impact on audit quality and increase users’ confidence in audits. The first event was held in London and was addressed by ACCA’s technical director Sue Almond, FRC director Nick Land and IAASB deputy chair Dan Montgomery. A second event will be held in Brussels on 26 November.
EY revenues up
EY has reported a 6% rise in UK revenues, to £1.7bn, in the year ending June. Global revenues were US$25.8bn. In the UK, revenues rose by 17% in advisory, 6% in assurance and 6% in tax, but fell by 11% in transaction advisory services. The firm is planning significant growth in revenues and staff in the next year, seeking an extra 2,400 people in the UK next year. It is recruiting in all service lines and at all levels from student intake to partners.
GT turnover up
Grant Thornton UK’s revenues rose by 13% to £471m in the year ending June. The advisory practice grew by 21% and audit by 9%, while turnover in the tax service remained flat. Profit per partner rose by 4.2%. After four years of significant growth, the firm has brought forward its target of hitting £500m turnover in the UK from 2015 to 2014.
WH Smith to restate accounts
Books and newspaper retailer WH Smith is to restate its accounts after a review by the FRC’s Financial Reporting Review Panel. The FRRP found that WH Smith’s accounts for the year ended August last year failed to recognise pension obligations arising between a subsidiary and the company’s pension trustee. The company did not regard these as representing a liability under IFRIC 14, which provides interpretation of IAS19. After correspondence with the FRRP, the company accepted that the funding requirement did fall within the IFRIC 14 explanation of liabilities.
Insolvency reform proposed
Substantial reform of the insolvency regime has been proposed by the Insolvency Service. The proposals include consolidation and simplification of existing rules and the greater use of electronic submissions. They are in line with suggestions made by the Red Tape Challenge, published in July. Consultation on the proposals runs until 24 January.
Charities investigated for reporting failures
Twelve charities are being investigated by the Charity Commission for serious reporting failures that have involved failing to file annual reports, accounts and returns for two or more years. Seven of the charities are religious, three run parks and gardens, one provides short term accommodation and one, Russell-Cotes in Bournemouth, is an art gallery. Another 74 charities breached their legal obligations to provide annual financial reports, but many of these had been dissolved, were in administration, or had otherwise ceased operation.
CCAB studies financial reporting by not-for-profits
The CCAB has commissioned research into current accounting practices in the not-for-profit sector around the world. The project will seek to establish whether the sector should have a dedicated reporting framework, guidance, or standards. CCAB Chairman, Anthony Harbinson said: “This innovative project will seek to establish definitions and current approaches to financial reporting by the sector in different jurisdictions around the world. Ultimately, the aim is to promote discussion on possible ways forward.” The research will be led by Sheffield Hallam University.
Financial services vulnerable to workers’ lies
More than half of workers in the finance sector have witnessed colleagues lying at work for personal benefit. Nearly a third of all workers lie every day at their workplace, according to the survey conducted by the Chartered Management Institute. Three quarters of those surveyed felt their managers did not set a good moral example. Managers are more likely than their staff to commit a ‘white lie’ to make their lives easier, saying that career progression was more important than morality.
Accountants in demand
There are signs of a big surge in demand for accountants. Recruitment consultant Marks Sattin expects 11,500 new accountancy jobs will have been created in the UK during the course of this year, spurred by a resurgence in M&A activity. Despite the recession, demand for accountants has grown in recent years, with a net increase of 19,000 employed accountants between 2008 and 2012 – a rise of 8.64%, at a time when total UK employment fell by 0.15%.
Deloitte’s latest CFO survey
CFOs are now focused on expansion, according to the latest Deloitte CFO survey. This is the first time in two years that CFOs have not regarded cost cutting and cash hoarding as their main priorities. Corporate risk appetite is at its highest point since the onset of the global crisis. More than half of CFOs say this is now a good time to take balance sheet risks, while 40% report that they are moving into new products, services, or markets. However, 62% say their businesses face a high level of financial and economic uncertainty – compared to 97% in the last quarter of 2011.
PwC’s Berkeley audit investigated
PwC’s audit of Berkeley Group Holdings is being investigated by the FRC. The investigation is in relation to a former PwC partner joining the board of the company and whether there is any breach of auditor independence. Former UK PwC vice chairman Glyn Barker joined the board of the house-building company Berkeley in January 2012, having been with PwC for 35 years. He held various positions at PwC, including managing partner and head of assurance. PwC said that it will co-operate with the investigation and that it takes its independence responsibilities “very seriously”. Berkeley Group declined to comment.
Deloitte appeals against MG Rover decision
Deloitte are appealing against the findings of the FRC disciplinary hearing which gave the firm a severe reprimand for what the tribunal found to be breaches of professional standards. The FRC concluded that Deloitte and its former partner Maghsoud Einollahi had been subject to a conflict of interest. In a statement, Deloitte said: “After careful consideration, we have decided to seek leave to appeal the findings of the MG Rover Tribunal.” It added that while the firm wanted to move on, it did not agree with the Tribunal’s main conclusions, which it felt “could create significant uncertainty” for individual accountants and for the profession as a whole.
Smith & Williamson management reshuffle
Gareth Pearce has retired as chairman and group managing partner of Smith & Williamson. David Cobb and Kevin Stopps become co-chief executives. Cobb is head of investment management and banking and Stopps leads the tax and business services practice: both retain their positions in addition to the joint CEO roles. Andrew Skykes steps up from the role of deputy chairman to become non-executive chairman. Smith & Williamson is one of the ten largest UK accountancy firms.
Tant takes Imperial FD role
Oliver Tant has been appointed as financial director of Imperial Tobacco. He was head of UK audit for KPMG and has been global managing director of the firm’s private equity division. He had been lined up as CFO for Legal & General Insurance, but the appointment was not confirmed after the Prudential Regulation Authority demanded that the position be filled by someone with specific insurance sector experience. Mark Gregory was appointed Legal & General CFO in the summer, joining from Asda – he had previously spent several years with Legal & General in senior positions.
Johnston Carmichael joins PKF network
Johnston Carmichael has become a member of the PKF International network. It now represents the network in Scotland and jointly represents it in the rest of the UK, alongside PFK Littlejohn. There is an existing close relationship between Johnston Carmichael and PKF Texas in Houston, based around commonality of energy sector clients. PKF International is the 11th largest global accounting network.
‘Systemic’ weaknesses in small Welsh councils
There are systemic weaknesses in small Welsh councils’ financial management and governance arrangements, says the Auditor General for Wales. In a large number of community and town councils – the lowest tier of local government – accounts are not submitted on time and many are of poor quality. The Auditor General has now modified the way local councils’ accounts will be audited from the 2014/15 year on, to provide a stronger focus on the need for improved governance and financial management.
Politics
Alexander announces clampdown on partner incomes
Firm partners face higher tax bills as a result of a clampdown on tax ‘loopholes’ announced by Chief Secretary to the Treasury, Danny Alexander. Partners are to be prevented from using artificial structures to reduce income tax liabilities, Alexander told the Liberal Democrats’ annual conference. Related measures are designed to stop private equity shareholders “dodging the intended income tax”, said Alexander. There is to be a short consultation before the measures are introduced.
Heaton humiliation forces HMRC exit
Baker Tilly partner David Heaton was forced to quit his role as a panel member advising HMRC on tackling tax avoidance after BBC television recorded him advising a conference on steps to keep “money out of the Chancellor’s grubby mitts”. The conference was titled ‘101 Ideas for Personal Tax Planning’. Tax minister David Gauke said: “Mr Heaton’s statements are directly at odds with the government’s approach to tackling tax avoidance.” A spokeswoman for Baker Tilly said that Heaton was not commenting on the matter.
Call for clearer CSR reporting
CSR reporting should be made more objective, with reports subject to a Statement of Recommended Practice, suggests the Directory of Social Change. The use of a SORP would reduce corporate ‘spin’ and improve the quality, transparency and consistency of CSR reporting, says the charity. A single standard core set of metrics should be required of companies, to avoid distortions in CSR reports. This would provide a level playing field between companies, make reporting easier for companies and assist investors to assess companies’ CSR activities.
Women on boards
There has been a further increase in female representation on UK company boards and the target of 25% representation by 2015 is achievable, according to the Department for Business, Innovation and Skills (BIS). The latest figures from BIS show that 19% of directors are female – a significant rise on the 12.5% in 2011, when Lord Davies published his report on corporate diversity. Some 23.8% of NEDS are women, up from 15.6% in 2011, while 6.1% of executive directors are female, up from 5.5% at the time of the Davies report.
RoW
Madoff accountant charged
A former senior tax partner at New York accounting firm Konigsberg Wolf & Co has been charged with helping Bernard Madoff conduct his multi-billion dollar Ponzi fraud. Paul Konigsberg is charged with two counts of conspiracy and three counts of falsifying records. The US Securities and Exchange Commission has filed related civil charges. Konisberg, who is 77, was released on a $2m bond, conditional on travel restrictions. He claims that he is a victim not a perpetrator, citing his family’s loss of $10m in the fraud. Total investor losses were around $17bn.
Malaysia and Sri Lanka establish IR forums
Demand for Integrated Reporting is increasing in South East Asia, says the International Integrated Reporting Council. IR forums are being established in Malaysia and Sri Lanka to spread awareness of the concept across the profession. In a visit to the region, IIRC chairman Professor Mervyn King received support for IR from senior officials from Indonesia’s Ministry of Finance, the Singapore Stock Exchange, the Malaysian Stock Exchange and the Malaysian Securities Exchange Commission. Langgeng Subur of Indonesia’s Ministry of Finance described IR as “an important step towards achieving a sustainable economic model”.
JP Morgan hit with $920m penalties
JP Morgan is to pay a total of $920m in penalties in a global settlement of accusations that the bank filed wrong financial results and lacked financial controls to detect and prevent traders from fraudulently overvaluing investments. Two traders have previously been charged by the US Securities and Exchange Commission in relation to the so-called ‘London Whale’ fraud, which concealed massive trading losses. JP Morgan has settled with several regulatory bodies, paying fines of $200m to the SEC and also paying penalties to the US Federal Reserve, US Office of the Comptroller of the Currency and to the UK’s Financial Conduct Authority.
EY’s revenues rise
EY has revealed a 5.8% growth in global revenues in the year ending June – its fastest growth rate for five years. Revenues in emerging markets rose by 12%. The largest revenue increase was in the Americas at 9.5%, but revenues fell by 9.5% in Japan. They rose by 4.6% in EMEIA and by 4.3% in Asia. The strongest performing sector was advisory, where revenues grew by 16%.
‘Action against tax avoidance essential’, says UN
“There has to be better regional and international co-operation to stop leakages of funds through transfer pricing and the use of tax havens” if the world’s sustainable development goals are to be achieved, says the UN. The claim was made in its report ‘Asia Pacific Aspirations’. The three key priorities for the region are good quality education, zero poverty and effective, accountable and responsive government, says the UN. It added that the demand for accountable, transparent and corruption-free public institutions had emerged clearly from consultations.
Anti corruption ‘must become core to CSR’
Tackling fraud and corruption must be seen by companies as core to their corporate social responsibility approach, argues a report by Deloitte in India in collaboration with the Federation of Indian Chambers of Commerce and Industry. It is time, they say, to move beyond corruption risk mitigation, to “proactively solving social problems [that are] critical to the business”. The paper specifies the actions it believes companies should take and the roles of different stakeholders.
SASB launches pilot scheme
Ten companies in the financial and healthcare sectors will be chosen for a pilot scheme for sustainable accounting reporting. The scheme has been launched by the Sustainability Accounting Standards Board to help companies use SASB standards to disclose material environmental, social and governance issues in their annual filings to the US Securities and Exchange Commission.
Nigeria adopts IPSAS
Greater consistency, transparency and accountability are to be introduced to public sector financial reports, Nigeria’s government has announced. From next year, the national budget will comply with a new National Chart of Accounts strategy. The NCA is based on IPSAS, the public sector version of IFRS. It is intended that IPSAS cash accounting will be adopted next year, with full accrual IPSAS used by 2016. All government ministries, departments and agencies will use IPSAS.
EY supports Clinton Global Initiative
EY is committing its support to the Clinton Global Initiative to support women owned businesses. A partnership scheme between EY and two not for profit organisations – WEConnect and Vital Voices – will help women improve their capacity to enter corporate supply chains and increase their commercial revenues. EY says that one third of businesses globally are owned by women, yet these attract less than 1% of corporate spending. The program is based in the US, but is directed at 15,000 women entrepreneurs in other countries. The Clinton Global Initiative was established in 2005 by President Bill Clinton.
Deloitte publishes Russia reporting survey
Russian energy companies should consider speeding-up their financial reporting and pay more attention to their resource allocation, according to Deloitte’s second financial reporting survey in the country. Deloitte found large variations between companies in terms of their reporting speeds. Kelly Allin, Deloitte CIS audit energy and resources sector leader, said that Russian companies are interested in learning from elsewhere.
Political instability ‘biggest concern about Africa’
Political instability and tax are the biggest concerns for companies wanting to do business in Africa, according to a survey conducted by PwC. The Democratic Republic of the Congo, Nigeria and Angola are regarded as the most difficult African countries in which to do business. Paul de Chalain, head of tax for PwC Africa, said that while international companies want to be involved with Africa, there remain big challenges, “In particular, areas such as obtaining certainty around the application of legislation and discussing or negotiating with the tax authorities remain challenging,” he said.
Islamic and other banks’ profits ‘to converge’
Profitability rates for Islamic banks are likely to converge with those in conventional banks in the future, predicts Standard & Poor’s. Islamic banks in the Gulf region grew by a compound rate of 17.4% between 2009 and 2012, compared to an 8.1% growth rate amongst conventional banks. Government support and banks’ role in funding infrastructure for the 2022 World Cup are cited as factors supporting Islamic banking growth. But Islamic banks are disproportionately affected by the low interest rate environment and by weak revenues in non-core banking operations.
Deloitte acquires TMA
Deloitte’s Infrastructure and Capital Projects group in Canada has acquired TMA Construction Consultants, strengthening its dispute resolution and project management business in the infrastructure sector. “Given the current acceleration in infrastructure and capital spending right across the country, this move creates an opportunity to add significant value to our clients in all industries and from a national perspective,” said Iseo Pasquali, managing partner of Deloitte’s financial advisory practice in Canada. TMA’s two principals, Lorna Tardif and Maged Abdelsayed, join Deloitte as partners.
France considers digital sales tax
France could adopt a digital sales tax as part of moves by its government to protect traditional retailers. In a first step, France has banned free home deliveries of books. The French government regards this as a hidden subsidy offered by Amazon that undermines book shops and the retail price control of books. France is also considering a report that proposes a new definition of ‘permanent establishment’ that could extend sales taxes to online transactions. The French government is keen for these principles to be adopted across the EU, accompanied by a consolidated corporate tax base for digital companies.
Ireland
Banking inquiry to consider role of auditors
Auditors are to be scrutinised by the banking inquiry, the go-ahead for which has been given by the Government. Regulators, the role of the banks and the bank guarantee will also be considered by the inquiry. “The Government believes the inquiry should be modular in nature and that the three main modules should be the bank guarantee and events leading up to it, the role of banks and auditors and the role of State institutions,” Taoiseach Enda Kenny told the Dail.
Irish lending ‘too tight’
Irish lenders are using box ticking exercises that leave too many bankable propositions from SMEs rejected, according to the latest report from the Credit Review Office. Low and medium risk borrowers are obtaining finance, however. The Credit Review Office says that it hears too many complaints from SMEs of poor quality customer service from banks and has asked the Central Bank to review its Code of Practice on SME lending, with a focus on banks’ supporting economic recovery through SME growth.
CCAB studies financial reporting by not-for-profits
The CCAB has commissioned research into current accounting practices in the not-for-profit sector around the world. The research will be conducted by Sheffield Hallam University, with input from University College Dublin, the University of Dundee and New Zealand’s Victoria University of Wellington. The project will seek to establish whether the sector should have a dedicated reporting framework, guidance or standards. CCAB Chairman, Anthony Harbinson said: “This innovative project will seek to establish definitions and current approaches to financial reporting by the sector in different jurisdictions around the world. Ultimately, the aim is to promote discussion on possible ways forward.”
20% fall in Irish business insolvencies
There has been a big fall in insolvencies amongst Irish businesses so far this year. Business insolvencies in July fell to 106, compared to 157 in July 2012 – a fall of a third. In August, there were 108 insolvencies, down from 126 last year. Over the first three quarters, there has been a 20% reduction in insolvency numbers, according to figures collated by the Insolvency Journal.
Auditor General challenges revenue forecasting
Tax collection forecasts have improved, but more work needs to be done to strengthen their accuracy, says the Auditor General in his annual report. While income tax forecasts are more accurate, receipts for PRSI – Pay Related Social Insurance – have diverged significantly from expectations and failed to move, as had been expected, in correlation with income tax. The Department of Social Protection has agreed to review its forecasting methodology.
Ryanair reaches out to business customers
Ryanair is now accepting payment by American Express and has promised to be nicer to customers, as it reaches out for more business clients. It has also said it will improve its widely criticised website. Ryanair said it recognised that EasyJet had moved ahead in the market for Euroepan business travel. It believes that taking American Express cards could increase its passenger numbers by 5%.
Northern Ireland seeks HS2 compensation
Northern Ireland’s Department for Finance and Personnel has confirmed that it will seek compensation from the UK Government for spending on the High Speed 2 rail project that will not benefit Northern Ireland. The line is intended to link London, Birmingham, Manchester, Leeds and Scotland. Under the Barnett Formula for spending on the devolved UK nations, Northern Ireland could receive around £1.3bn.
Top Irish companies pay 15.5% tax
Ireland’s largest companies are paying an effective tax rate of 15.5%, according to analysis undertaken by the Irish Times. It found the largest corporate taxpayers in Ireland are Dragon Oil, Microsoft and CRH. But the newspaper reported that non resident pharma company Abbott paid no tax on revenues of €1.1bn in 2011. Several other large companies paid tax at less than 5% of profits. Separately, it has emerged that Google paid €17m tax on €15.5bn revenue in 2012, while SAP saved €100m in tax through using Ireland for some of its operations.