Accounting & Business – news March 2010

UK News

NAO condemns HMRC bad call centres

Only just over half of phone calls to HMRC in 2008/9 were actually answered, a review of performance conducted by the National Audit Office has found. This is well below HMRC performance targets and previous years’ performance. Industry standards expect over 90% of calls to be answered. A mere one in three calls was answered during the peak period for tax credit renewals in July. Despite call volumes fluctuating massively during the year, HMRC does not adjust its staffing levels to reflect this. HMRC intends to achieve 90% of calls being answered at 30% less cost by March 2012. The NAO says that if HMRC halved avoidable calls it would answer 90% of calls and substantially cut costs. Amyas Morse, head of the National Audit Office, said: “HMRC needs to get telephone service standards up significantly if the transition to technology-enabled working is to have taxpayer support and deliver value for money.”

FAST FACTS

£233m – HMRC spend on contact centre staff in 2008/9

10,500 – number of HMRC contact centre staff in 2008/9

103 million – number of calls made to HMRC in 2008/9

59 million – number of those calls actually answered

Deloitte takes property route to expansion

Deloitte has acquired the Drivers Jonas property advice firm to create a new real estate group, Drivers Jonas Deloitte. The group will have annual revenues of over £110m – a 5% market share. Drivers Jonas is the longest established property advice firm in the UK. The acquired business brings 650 partners and specialist professionals, to add to the 50 in Deloitte’s existing property advice practice. Nick Shepherd, managing partner of Drivers Jonas, becomes managing partner of Deloitte’s Real Estate Group and joins the Deloitte Executive. John Connolly, senior partner and chief executive of Deloitte, said: “This is a very exciting transaction, which will truly differentiate us in this sector. We see a clear opportunity to combine the skills of our specialists in tax, corporate finance, business consulting and our real estate strategy team with the Drivers Jonas team, which has an outstanding reputation for providing the highest quality independent advice in this market. route to expansion.”

Mass email scam offers tax refunds

Up to 10,000 taxpayers a day received fraudulent emails in the run-up to the self-assessment filing deadline. The emails asked for bank or credit card details to ‘process tax refunds’. Anyone providing their details would have their accounts emptied and credit cards used to their limit,” said HMRC. “The victim also risks having their personal details sold on to other organised criminal gangs.” Nearly six and a half million people filed their self-assessment returns online this year – three quarters of all returns.

Fitch says accounting convergence ‘uncertain’

“The mother of all accounting debates” will take place this year as the IASB and FASB continue discussing standards convergence, predicts Fitch Ratings. It describes the prospect of convergence on financial instruments standards as “slim”, but suggests, the US has gone too far to “backpedal completely”. The big impact of IFRS this year will be through the consolidation of off-balance sheet structured entities, says Fitch. While the effect on banks is often now clear, “the ultimate impact on most nonfinancial companies largely remains a mystery”.

CEO confidence increases

Chief executive confidence has jumped in the last year, according to PwC’s 13th Annual Global CEO Survey. Some 81% of CEOs worldwide are now confident of their prospects for the next 12 months, compared to 64% a year before. Only 18% are pessimistic, against 35% in 2009. The figure for ‘very confident’ CEOs also increased strongly – up from 10% a year ago to 31% now. CEOs in India (97%), China (91%) and Latin America (91%) are all much more confident than their counterparts in Western Europe and North America (80%).

Slower timetable urged for IFRS for SMEs

The ASB’s timetable for the adoption of IFRS by SMEs should be extended, says Grant Thornton. The current deadline of January 2012 will not give most businesses sufficient time to prepare, says the firm. Brian Shearer, national director of financial reporting, says that while many SMEs are “unconcerned” about IFRS, they will need to consider the impact on tax bills, bank covenants and bonus arrangements, as well as the cost of conversion.

Property investors urged to take tax advice

Increased capital gains tax is almost inevitable – so property investors should take urgent tax advice, warns prime estate agency Savills. The current CGT rate of 18% looks increasingly out of line with the top marginal income tax rate of 50%, argues Savills. It says that investors who hold on to assets expecting rises in market prices may find that higher tax rates more than offset the added value.

M&A activity returns

M&A activity returned in the last two quarters of 2009, according to a study by PKF. In the second quarter of last year, deal value was a mere £8.3bn, but rose in the last quarter to £48.2bn. However, the financial cost of government bail-outs are included in the figures and distort them. The largest deal of the year was the Government’s rescue of RBS.

IASB rows back on accounting reform for property sector

The IASB has indicated it will not, after all, remove property values and rental income from landlords’ balance sheets. The move was welcomed by the European Public Real Estate Association and the British Property Federation. Gareth Lewis, director of finance at EPRA, said: “It shows that the IASB have listened to the views expressed by the industry and recognized that the European real estate sector already has an accounting standard – IAS 40 – that is well supported across the world.”

E&Y most gay-friendly firm

Ernst & Young has been named as the most gay-friendly accountancy employer in the 2010 Stonewall Workplace Equality Index. It received a special award for its gay, lesbian and bisexual network, EYGLES, which was named as Employee Network of the Year and now has 100 members. E&Y was ranked as the third best of all employers in the national benchmarking exercise. IBM was first and the Hampshire police force second.

ECJ rules out old tax claims

The European Court of Justice has confirmed an HMRC three year time bar on cliaming VAT refunds. The bar had been supported by an ECJ ruling last year relating to Equitable Life. But Latvia brought a related question to the ECJ, in a case regarding Alstom Power Hydro. The ECJ has now again confirmed the legality of tax refund time restrictions.

Deloitte to conduct Iris Robinson inquiry

Deloitte has been appointed to investigate events at Castlereagh Borough Council related to the scandal involving Iris Robinson, wife of the Northern Ireland first minister. The firm will consider whether the awarding of the lease to Lock-Keeper’s Inn to Iris Robinson’s lover involved any impropriety on the part of councillors or officers and whether it led to any financial loss for the council. The investigation has been put on hold pending the completion of a police inquiry also taking place.

BAE pays $400m fine

BAE Systems is to pay $400m in fines to US and UK authorities, after admitting it made criminal bribes to officials in a range of countries to obtain arms contracts. The Serious Fraud Office also charged a BAE agent with conspiracy regarding the obtaining of defence contracts in Eastern and Central Europe. Count Alfons Mensdorff-Pouilly is alleged to have make corrupt payments to “unknown officials” in the Czech Republic, Hungary and Austria in return for the awarding of contracts for the supply of SAAB/Gripen fighter planes. The corporate fines related to various contracts, including the sale of radar equipment to Tanzania.

Vantis – receivership risks receivership

Vantis – one of the largest accounting firms operating as a PLC – has had a ‘going concern’ doubt raised by its auditors, Ernst & Young. The doubt relates to its ability to recover its costs and fees incurred as receivers and liquidators of the European arm of the collapsed Stanford International Bank and the extent of the firm’s cost reduction programme. This “ may cast significant doubt on the company’s ability to continue as a going concern”, says E&Y. Legal action is continuing in the UK, the US and Switzerland regarding the control of Stanford group assets.

EU aid practice slammed

Audit firms to sign-up to NED role in corporate governance

Audit firms have been told to comply with a corporate governance code comparable to the UK Corporate Governance Code for PLCs. Leaders of firms should be accountable to the owners and firms should appoint independent non-executives to improve confidence in firm leadership and ensure public interest matters are properly addressed. Independent non-execs should be the majority on firms’ bodies that decide public interest matters and should address matters not effectively addressed by regulation. The Audit Firm Governance Code was drawn up by the FRC and ICAEW under an FRC project.

HMRC wind-up

HMRC is responsible for almost half of company winding-up orders, according to figures compiled by UHY Hacker Young. HMRC issued 43% of all petitions to wind-up companies to recover tax owed to it. The firm says it is essential that businesses put in place ‘time to pay’ agreements when they are in difficulty and before they fall into payment arrears. It argues that the pressure to recover unpaid taxes is taking priority over government policy to keep the economy going.

Liquidations down

The latest figures for liquidations in England and Wales, published by the Insolvency Service, shows a 1.7% fall in the last quarter of 2009 over the previous quarter and a 1.1% drop in the same quarter a year before. But the latest analysis from Begbies Traynor suggests continuing high levels of corporate distress with 140,000 companies in significant and critical difficulty. In the most recent quarter, distress levels were 14% lower than the same period a year before, but up 6% over the previous quarter.

HMRC wins judgment on IT contractor using offshore account

HMRC has won a High Court judgement that could lead to around £100m being recovered from UK residents who have moved funds offshore. Robert Huitson, a self-employed IT contractor, lost a case where he was considered by HMRC to have avoided £85,000 in income tax over seven years by moving proceeds to an Isle of Man account, advised by Montpelier Tax Consultants. The court found that such an arrangement was only lawful if it had a “genuine commercial purpose”. Huitson is expected to appeal.

RoW News

Swiss court blocks US access to UBS accounts information

A judgement by a Swiss court has prevented UBS from complying with an agreement made with US authorities to disclose details of private accounts. UBS was to have given the IRS personal financial information on around 4,450 US citizens holding Swiss bank accounts. The release of the information had been approved by UBS after it admitted aiding tax evasion and paid $780m in settlement to US government agencies. US authorities may now resume legal action within the US against UBS to resolve the conflict, unless a negotiated settlement can be reached between the Swiss and US governments. Meanwhile, German tax authorities have bought information from a former employee of Credit Suisse, revealing personal bank account information on 1,500 German account-holders. Tax authorities in other countries – including the UK, Austria, Belgium and the Netherlands – are thought to be interested in buying access to the data from Germany.

FAST FACTS

17,000 – the number of US citizens holding undisclosed UBS accounts

$20bn – value of assets alleged to be held by US citizens in UBS accounts

$780m – fine paid by UBS to prevent US prosecution

Court of Auditors slam EU aid practices

The European Commission has been strongly criticized by the European Court of Auditors for the way it spends foreign aid. The European Commission opted to process aid via the United Nations without objectivity and transparency, say the auditors, nor did the Commission assess the advantages and disadvantages of doing so. Other options were not systematically appraised. The Commission failed to obtain adequate information from the UN on the efficiency of aid spending or whether it achieved objectives. The UN Panel of External Auditors has challenged the Commission’s right to investigate expenditure, arguing that its own audit arrangements are sufficient. It also prevented the Court of Auditors from obtaining information sought by it. The Court of Auditors does not accept that this arrangement provides satisfactory evidence that financial control procedures work in practice. Over €1bn in aid was spent by the European Union in 2008.

SEC requires companies to report on climate change exposure

The US Securities and Exchange Commission has issued guidance to public companies on how to report on climate change exposure. Existing legal responsibilities are not affected, but the guidance should assist in interpreting legal requirements, particularly to assist with providing clearer disclosure to investors. Required disclosures include the impact of legislation, regulation, international accords, business trends related to climate change and the physical impact of climate change.

Ex-E&Y partners jailed

Former Ernst & Young US partners have been jailed for devising illegal tax shelter schemes. Robert Coplan, who led the firm’s tax shelter group and had previously been an IRS official, was sentenced to three years’ imprisonment, plus a $75,000 fine. Martin Nissenbaum, a member of E&Y’s tax shelter group and national director of its personal income tax and retirement planning practice, is imprisoned for 30 months and fined $100,000. Richard Shapiro, a lawyer, was jailed for 28 months and fined $100,000. Brian Vaughn, a former tax partner, was sentenced to 20 months. E&Y declined to comment.

CEO confidence increases

Brazil converges on IFRS

Brazil’s Federal Council of Accounting and its Accounting Pronouncements Committee have signed a memorandum of understanding with the IASB. The agreement commits Brazil to accelerate its movement towards the adoption IFRSs. All listed companies and regulated financial intermediaries had already been given deadlines to adopt IFRS. The memorandum of understanding also aims to improve the engagement of Brazilian companies in the standard-setting process.

Fitch says accounting convergence ‘uncertain’

Vantis – receivership risks receivership

PwC hires from IRS

PwC has recruited a former IRS acting commissioner, Linda Stiff, and other senior IRS staff. Stiff had been at the IRS for 30 years, with responsibility for 80,000 employees. PwC in the US also announced that it has been named as one of Fortune’s 100 best companies to work for and is number 25 in this year’s list. Personal development and corporate responsibility policies assisted the firm in winning the accolade for the sixth successive year.

Irish Stock Exchange urges corporate governance improvement

The Irish Stock Exchange has demanded that companies learn from recent corporate governance failures. “Companies must consider whether their historical practices, although accepted in the past, will meet market expectations in the future,” said Deirdre Somers, chief executive of the Irish Stock Exchange. Investors must also expect more and “demand better standards and require better disclosure and then differentiate and penalise those companies that do not provide them,” she added.

IASB and FASB work together to define fair value

A joint meeting of the IASB and the FASB agreed to continue using the term ‘fair value’, but to do more joint work to define it. The boards also agreed that fair value is an exit price in the principal market in which the assets can be traded and in which the enterprise can participate. The IASB tentatively decided not to address the recognition of day one gains or losses as part of the fair value measurement project, which will be discussed at a future meeting between the boards.

EU to take power to audit national statistics after Greek crisis revealed

The European Union is to take the power to audit member states’ national statistics, following the crisis in Greece. It was only after a new government was elected that the scale of the public finance deficit was revealed, leading to severe pressure on the whole eurozone. The EU is now taking infringement proceedings against Greece over its national financial data. Greece is to create a new statistics service independent from the finance ministry, to prevent any repercussion of the errors.

Tweedie says convergence ‘ only at right price ‘

Tweedie explained there remained serious differences between the two standards-setters on fair value definitions. The FASB is too flexible in its view of how fair value should be defined, he suggested.

EU official to conduct Irish banking inquiry

A former senior European Commission official has been appointed by Ireland’s finance minister Brian Lenihan to conduct an investigation into the crisis in the Irish banking system. Klaus Regling was Director General for Economic and Financial Affairs at Commission from 2001 to 2008 and also chaired a commission that reported last year to the German government on financial reform. He is currently chairman of the KR Economics consultancy. Lenihan said he wants “a real analysis of what went wrong”.

Bulgaria loses EU funds

Bulgaria risks losing up to €15bn in EU funding because of continuing problems of corruption and incompetence, its national parliament has been warned by one of its committees. Only 1.3% of the agreed EU funding for the period 2007/13 has so far been paid-out, because of poor budgeting and the involvement of vested interests in projects. Meanwhile, aspiring EU member states in the region Turkey, Serbia, Kosovo, the former Yugoslavian Republic of Macedonia, Bosnia and Herzogovina and Montenegro are all to receive assistance from the EU for the training of government auditors.

IRS proposes changes to corporate reporting of tax positions

US taxpayers’ self-reporting obligations have been substantially increased by the IRS, which intends to require some taxpayers to report their uncertain tax positions. These requirements will be fulfilled as part of their annual tax return filing. The new obligation would apply to business taxpayers with total assets over $10m. The obligations will include providing a description of uncertain positions for which a tax reserve is recorded in the taxpayer’s financial statements, or where it has not been recorded because of likely litigation, or where the taxpayer believes the IRS will not examine the position.

Politics

Tweedie says convergence ‘ only at right price ‘

Convergence between the IASB and the FASB will only happen if the cost is worth it, IASB chairman Sir David Tweedie has said. IASB standards will not be compromised, even if that is what it takes to converge with the FASB. “If we disagree with FASB, we have to do what we think is right,” said Tweedie. “We can’t converge at all costs.” He explained there remained serious differences between the two standards-setters on fair value definitions. The FASB is too flexible in its view of how fair value should be defined, he suggested, while the leaders of the European Union have to be resisted if their demands are inappropriate, he suggested.

Single country accounting moves closer

Calls for the adoption of country-by-country financial reporting by multinationals have been supported by the UK’s financial secretary, Stephen Timms. He said that the next stage of international co-operation for taxation reform should concentrate on the multilateral negotiation of tax information exchange; automatic exchange of tax information; country-by-country reporting and commonly agreed transfer pricing guidelines; and capacity building and technical support for tax administrations in developing countries, said Timms. He argued that developing countries lose at least $50bn annually, and possibly $280bn, through tax evasion and financial reporting manipulation. “There should be transparency about where companies earn their profits and where they pay their tax.” He is calling on the OECD to introduce guidelines on country-by-country reporting.

FSA calls for engagement between IASB and regulators

FSA chairman Lord Turner has called for closer engagement between accounting standard setters and banking regulators. Accounting standards must recognize “the unique systemic nature of banks”, said Turner. The FSA chairman said that bank accounting practice had caused problems regarding the treatment of loan losses within the banking book – which does not allow for reasonable judgements on future potential losses – and in the ‘fair value’ approach in the trading book, which recognises unrealised gains or losses, driving harmful volatility in both upswings and downswings. The FSA is seeking to allow the banking book to reflect a more forward looking approach to loan losses; and to limit the use of fair value accounting in the income statement to the areas of the trading book where it is most appropriate.

IASB and FASB work together to define fair value

A joint meeting of the IASB and the FASB agreed to continue using the term ‘fair value’, but to do more joint work to define it. The boards agreed that fair value is an exit price in the principal market in which the assets can be traded and in which the enterprise can participate. The IASB tentatively decided not to address the recognition of day one gains or losses as part of the fair value measurement project, which will be discussed by the boards at a future meeting.

Survey of regulators warns of new crisis

A new financial crisis can be expected within five years, warns a survey of senior bankers and compliance officers. Seventy seven per cent of those polled said that recent reforms were insufficient to avoid another crash. “The continuing lack of company transparency and accountability to the markets and the public makes the possibility of another crisis almost assured,” said one of those questioned by Complinet, which provides compliance solutions to banks. Only 40% of respondents thought their firm had changed its approach to compensating employees following the financial crisis.

Public sector

PwC says back office savings open fraud risk

The public sector is increasingly vulnerable to fraud as a result of moves to cut back office costs, warns PwC. Rationalisation of administrative functions means that more work is signed-off with less scrutiny, while internal audit activities have been pared back, says the firm. “Reduced investment in compliance and checking processes makes it easier for fraudsters, both inside and outside organisations, to exploit weaknesses and opportunities,” explains Tony Parton, a partner. Nearly half of UK public sector respondents to PwC’s recent Global Economic Crime Survey reported an increase of economic crime incidents in the last year. Cost cutting combined with stronger focus on performance improvement will lead to an increase in the instances of manipulation and falsification of performance data, as staff struggle to meet performance targets to protect their positions, reputations or funding levels for their areas of responsibility, says PwC.

APB issues new public sector audit guidance

The Auditing Practices Board has issued draft revised guidance for public sector auditors. Richard Fleck, chairman of the APB, said that most changes to Practice Note 10 have been made to conform with the new ISAs and that a small number of changes had been made in applicable legislation and regulations. The APB is inviting comments on the guidance. The IPSASB has published three new standards relating to financial instruments used in the public sector and a new standard on intangible assets that covers issues specific to the public sector, including intangible historic assets.

Practice

APB issues XBRL advice

The Auditing Practices Board has issued guidance for auditors where financial statements have been tagged for XBRL purposes. Richard Fleck, Chairman of the APB and a director of the FRC, said: “XBRL tagging of UK statutory financial statements is required for tax purposes in 2011. This guidance provides background information on that requirement and on the application of APB’s Ethical Standards for Auditors to non-audit services relating to XBRL tagging. Currently XBRL tagging is not within the same scope of an audit performed under ISAs (UK and Ireland).” The guidance is set out in Bulletin 2010/1 on the APB website, www.frcpublications.com. The International Auditing and Assurance Standards Board has published a new question and answer guide to XBRL, to raise awareness about how XBRL-tagged data is prepared and how it may affect financial reporting. XBRL: The Emerging Landscape is published at web.ifac.org/publications.

Accountants ‘taking corporate governance lead’

Accountants have established themselves as strong advocates for corporate governance reform, according to the third annual Global Leadership Survey from IFAC. Accountants are also taking a leading role in supporting SMEs. “Our members took action to assist their jurisdictions during the crisis, lending their expertise to governments and businesses,” explained IFAC chief executive Ian Ball. IFAC received 105 responses to its online survey from presidents and chief executives of accountancy institutes and regional accountancy organizations and groupings. “Survey respondents believe that continued emphasis on effective implementation of international accounting and auditing standards and good corporate governance principles are critical issues for the future,” said Ball.

Enterprise

EU eases small firms audit duty

Small firms may no longer have to draw-up annual accounts if proposed changes to EU accounting rules are enacted. The proposals have been approved by the European Parliament’s Legal Affairs Committee. If confirmed, some 5.4 million micro companies – firms with less than 10 employees – would be affected, cutting about €6.3bn from their overheads. The Commission has concluded that there is no real benefit for locally operating micro-entities in keeping full accounts. It was advised by the High Level Group of Independent Stakeholders on Administrative Burdens, acting in accordance with the EU’s Better Regulation Program and the European Economic Recovery Plan. A proposed revised directive would enable member states to exclude micro-enterprises from the scope of EU accounting directives. The proposal was previously rejected in the European Parliament’s Committee on Economic and Monetary affairs. Moves to remove the requirement for annual accounts were backed by The European Small Business Alliance (ESBA), which brought together eight independent national small business associations.

‘Accountants important for SMEs’

Accountants often play a crucial role in securing access to finance for SMEs as the frequent first port of call for SME owners – but they must provide SMEs with more than mere guidance on accounting matters, says the European Federation of Accountants and Auditors for SMEs (EFAA). The claim was made by EFAA Enterprise Policy Director Luc Hendrickx at a conference on ‘the growing importance of accountants for SMEs’. Hendrickx said accountants must also provide information on funding opportunities and advice on commercial and strategic decisions. Meanwhile, a report by business insurer QBE predicts a big increase in SMEs seeking advice from accountants this year. A survey from the company found that 68% of SMEs intend to ask accountants for business advice in 2010. Only 23% intend to go to banks for advice, 14% to financial advisors and 14% to lawyers.

Corporate

Global corporates cautious about 2010 prospects, finds E&Y

Global corporates are much more optimistic regarding trading prospects than they were a year ago, but they remain nervous about the recovery, concludes a survey by Ernst & Young. A year ago only 19% of survey respondents said they intended to use the recession to pursue new market opportunities: the figure has now jumped to 34%. But over half (53%) believe that surviving 2010 remains a challenge. The survey indicates that corporates have mostly completed their efforts at improving their capacity to improve performance: the number focused on improving returns from current assets has fallen from 39% to 27%, while those engaged in restructuring their businesses dropped from 37% to 27%. Scott Halliday, managing partner, UK & Ireland, Ernst & Young says: “The spirit of optimism has increased, but it is essentially fragile in nature. A pick-up in confidence is not surprising, given the massive global government stimulus working its way through the economy and the larger developing and emerging economies beginning to rebound. Companies may be less worried about survival over the next 12 months, but the return to a healthy operating environment is still some way off.”

Wolseley hires new FD

Steve Webster is stepping down as chief financial officer and an executive director of Wolseley PLC. He leaves Wolseley following the completion of its £1bn capital raising in April 2009 and the disposal of Stock Building Supply, which strengthened the group’s financial position. Webster has been with Wolseley for 15 years. John Martin takes over as CFO and executive director, joining from Alchemy Partners. He was CFO at Travelex Group between 2006 and 2008 and has also held senior financial management positions at Hays PLC. Wolseley made other changes in its senior positions, with Rob Marchbank ceasing to be Europe CEO and managing director of Wolseley UK. The role of Europe CEO is being discontinued.

Financial services

Firms to disclose complaints

Financial services firms are to be required to publish detailed information on the complaints they receive and how they are handled, the FSA has announced. The move is intended to increase transparency in the industry, assisting consumers with informed decision-making and to help improve industry complaints-handling standards. Firms that receive 500 or more complaints in a six month period will have to publish information twice a year on how many complaints they have opened and closed; the percentage closed within eight weeks; and the percentage of complaints upheld. Firms will need to present this information by five product areas: banking, home finance, general insurance and pure protection, life and pensions, and investments. The FSA will use this information to publish twice yearly a consolidated list of complaints data covering all affected firms.

Sheila Nicoll, the FSA’s director of conduct policy, said: “We believe that this will help improve how firms treat their customers and provide incentives for firms to deal more effectively with complaints when they are received. Our more intensive approach to supervision places a greater focus on assessing how firms deal with their customers – and how firms handle complaints is a key part of this.”

FSA reports on corporate governance interviews

The Financial Services Authority has interviewed 332 candidates for positions of significant influence functions in financial services firms since it began its supervisory enhancement programme in 2008, it has announced. Some 25 candidates withdrew following the interviews. The FSA has further strengthened this process, with ‘Dear CEO’ letters where candidates are not regarded as sufficiently strong to take senior roles in firms. An FSA consultation proposes further extending this supervisory role, involving the FSA taking a more intrusive approach to check the role that senior staff are playing within regulated firms and checking the activities of individuals in parent companies who exert significant influence upon a UK regulated firm.

Plus RoW

Enterprise

EU eases small firms audit duty

EFAA says accountants provide important support for SMEs

Corporate

Global corporates cautious about 2010 prospects, finds E&Y

Global corporates are much more optimistic regarding trading prospects than they were a year ago, but they remain nervous about the recovery, concludes a survey by Ernst & Young. A year ago only 19% of survey respondents said they intended to use the recession to pursue new market opportunities: the figure has now jumped to 34%. But over half (53%) believe that surviving 2010 remains a challenge. The survey indicates that corporates have mostly completed their efforts at improving their capacity to improve performance: the number focused on improving returns from current assets has fallen from 39% to 27%, while those engaged in restructuring their businesses dropped from 37% to 27%. Scott Halliday, managing partner, UK & Ireland, Ernst & Young says, “The spirit of optimism has increased, but it is essentially fragile in nature. A pick-up in confidence is not surprising, given the massive global government stimulus working its way through the economy and the larger developing and emerging economies beginning to rebound. Companies may be less worried about survival over the next 12 months, but the return to a healthy operating environment is still some way off.”

Bank of America pay $150m to SEC

The Bank of America is to pay $150m to the Securities and Exchange Commission. It has also promised to strengthen its corporate governance and disclosure practices. This settles SEC charges that the company failed to properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.

Practice

IAASB raises awareness of XBRL

The International Auditing and Assurance Standards Board has published a new guide to the use of XBRL in business reporting, aimed at raising awareness of how XBRL will affect financial reporting. The publication, XBRL: The Emerging Landscape, explains that the IAASB’s current International Standards on Auditing (ISAs) were not developed with XBRL in mind and accordingly do not require auditors to perform procedures on XBRL-tagged data as part of a financial statement audit. It clarifies how XBRL may lead to a demand for various types of assurance and related services engagements, and describes the scope of the IAASB’s planned consultations to determine whether to develop a new international pronouncement addressing XBRL. “As more and more financial authorities begin to require or permit entities to provide financial information in XBRL, now is the time to help educate users about some XBRL fundamentals, and for the IAASB to explore whether and how a related international standard might help address assurance needs,” says James Gunn, IAASB Technical Director.

Accountants ‘taking corporate governance lead’

Accountants have established themselves as strong advocates for corporate governance reform, according to third annual Global Leadership Survey from IFAC. Accountants are also taking a leading role in support SMEs. “Our members took action to assist their jurisdictions during the crisis, lending their expertise to governments and businesses,” explained IFAC chief executive Ian Ball. IFAC received 105 responses to its online survey from presidents and chief executives of accountancy institutes and regional accountancy organizations and groupings. “Survey respondents believe that continued emphasis on effective implementation of international accounting and auditing standards and good corporate governance principles are critical issues for the future,” said Ball.

Bank of America pay $150m to SEC

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