Gone fishing
Posted by Christie Malry on July 23, 2010 at 10:19 am
Back in mid-August or so.
Oncomouse gag
Posted by Christie Malry on July 22, 2010 at 11:45 am
The discussion of why dying Libyan terrorist, al Megrahi, hasn't died yet and the rather gruesome way that the toxic harpy Hillary Clinton has tried to link in every American's favourite boogieman, BP, into the debate reminds me of a gag I heard some time ago.
I was at a pharmaceutical conference about 10-15 years ago and one of the participants was very angry about a sketch they'd seen on the TV (or maybe heard on the radio). The comedian had, so he claimed, bought an oncomouse, one of those patented mice that's genetically predisposed to catch cancer. Only his oncomouse hadn't died yet and now he was ringing up the laboratory to ask for a refund.
This is the sort of appallingly black humour that makes me laugh like a drain. But does anyone know who was responsible for this gag? It sounds like something Chris Morris might do, or someone cerebral like Armando Iannucci. But does anyone know for sure? Please let me know.
Ritchie and Frankie get their comeuppances
Posted by Christie Malry on July 22, 2010 at 10:56 am
One of the things that got me started blogging was the shamefaced dishonesty of the most famous accountancy bloggers. There are plenty who are good at hawking their views to anyone who will listen, but very very few who actually pay any attention to facts or who can analyse accountancy trends in an objective and balanced way.
So it is with a particular lightness in my step and with the cruellest of intentions that I remind you of what a certain friend of ours, Richard Murphy, said last year about KPMG's proposals to offer certain internal audit services to an audit client of theirs, Rentokil:
Let’s be blunt: there is no defence for this. It is flagrantly wrong. Internal audit is a management function. Holding that post and being external auditor has to mean you are in flagrant breach of all independence rules.
But what do KPMG care? They have only one ethical yardstick - as has been proved time and again, which is the profit they make from a deal.
This one makes them profit. So they’ll do it.
The answer is very obvious: strip their audit licence. It is clear they ae not fit and proper persons to act as auditors as they have proven they cannot identify a confluct of interest.
And another favourite accounting gob of ours, Francine McKenna was similarly underwhelmed:
In fact, I reported in February that the audit firms were rolling their internal audit practices back into the external audit/assurance practices. No more pretending to be true “strategic” consulting/advisory teams. This is certainly more efficient and cost effective for the firms, especially if they can use the same staff for both external and internal audit engagements.
If you thought the discussion was pure rhetoric, you were mistaken. KPMG (and PwC who also proposed on Rentokil but lost) has now rationalized, rhetoricized, and revisited the best practice based restrictions for their new client Rentokil. Rentokil is not listed on a US exchange and, therefore, not subject to the Sarbanes-Oxley restrictions. The UK, where Rentokil is listed, has a gentleman’s agreement with regard to auditor independence for non-audit services.
Given the pressures on costs and the longstanding ties some finance, audit, and accounting executives have with the accounting firms, it is not surprising that the weakening of the independence commitment may come from the companies themselves. What’s the downside for them? The potential for scrutiny by corporate governance experts and journalists? You can’t argue with a recession. And in the event of an accounting scandal or restatement, plaintiff’s lawyers will have an uphill battle to penetrate the impenetrable auditor liability shields and caps.
I would hate to think, as Dennis Howlett has suggested, that this could become another lame excuse for repealing SOx/general deregulation of audit firms under the threat of companies decamping to more hospitable climates?
So, the latest report from the Audit Inspection Unit on its activities and findings for last year will probably make some uncomfortable reading for them both. On page 11, it notes (emphasis added):
Following the announcement by Rentokil plc that its external auditor would be undertaking some work previously undertaken by internal audit, the AIU met the firm concerned and representatives from the company to understand better the nature of the services to be provided. Based on these discussions and the evidence provided, it appeared to the AIU that these services were more in the nature of an extended audit rather than traditional internal audit. The AIU identified potential threats to independence from these services and asked the firm to explain the safeguards that would be established to maintain auditor independence.
That's a pretty strong endorsement of the KPMG/Rentokil arrangement, from the Inspection Unit which you would presume to be highly sceptical. Which makes it the most almighty refutation of Ritchie's ill-informed rhetoric. It also firmly puts down Francine's wittering about this being an erosion of independence. Under the more sensible UK independence framework, the Inspection Unit is comfortable that there are effective safeguards to address the threats to independence.
I shall enjoy the moment. And I suppose it would be too much to ask for these rabid commentators to rush to admit their errors on Rentokil as quickly as they raced to shoot their mouths off about it in the first place.
Dormant bank accounts
Posted by Christie Malry on July 21, 2010 at 11:27 am
There's a simple ethics test. You walk into a pub and there's a twenty pound note on the table. You know it's not yours. Do you pocket it or do you leave it? Discuss.
Government proposals to fund the Big Society by raiding 'dormant' bank accounts suggest that they would soundly fail the test. How can the government believe it is acceptable to use money in dormant bank accounts for any purpose?
A bank account necessarily belongs to the person who deposited it there. In today's modern climate, with all the checks and balances to protect against money-laundering and terrorist funding, it's inconceivable that any account could ever become truly lost.
How pathetic and supine are our banks for letting them do this. And how pathetic are we for allowing our politicians to fleece us once through the taxation system and now again by stealing money straight from our bank accounts.
It was bad enough from Labour. But the Conservatives have proven themselves to be equally immoral. They should call a halt to this disgusting plan, immediately.
Why you shouldn't spam, and how to cut the deficit
Posted by Christie Malry on July 21, 2010 at 11:11 am
I got spammed the other day. Ordinarily my spam filters kill spam before it gets to me, but the occasional one gets through. And, trust me, I don't take kindly to my time being wasted by people sending me unsolicited e-mail. If I want your service, I will come find you. Never presume that it's okay to do it the other way around.
Spam is a really bad idea. Don't do it. It doesn't give a good impression of your business and a real internet guru, such as Mark Lee, will eat your spam for breakfast.
What the spam was trying to sell me was a training course. And the training course was going to be completely free for me. But, TANSTAAFL. So, where's the catch?
The catch is that the training course actually costs £500. But it's paid for by a government grant given through Business Link. From another internet marketeer offering a similar service:
Would you like a business grant that you can use towards a private training/coaching session with me to develop your Internet marketing skills?
Small business owners/managers are eligible for a grant of up to £1000 towards the cost of business training and development designed to develop their strategic skills to drive their company forward.
One grant is available per organisation of up to a maximum of £1,000. The first £500 is 100% grant funded, with an additional £500 available for you to match at 50%, for a total grant value of £1000.
Both business, public sector and charitable organisations with between 5 to 249 employees are eligible to apply. Organisations who accessed previous Leadership and Management funding initiatives from the LSC are not eligible. Funding is made available for the development of a senior manager or key decision maker.
Our training and consultancy services are a approved [sic] by Business Link in both the East Midlands and West Midland, and our training courses rated amongst the top three in the country.
So, broadly speaking Business Link gets the money from taxpayers and then hoses it around to any Tom Dick and Harry with a training course. Haven't we seen the problem with this before?
The basic idea is a fair one - it's right that directors of small businesses should get the training they need. But I'm distinctly uneasy about seeing all these wannabe internet entrepreneurs spamming clients in order to charge them £500 for a course of unproven value until "the money is gone". This sort of thing would be an excellent and pain-free area to cut, in the interests of reducing our deficit.
Michael Izza on what makes chartered accountants great
Posted by Christie Malry on July 20, 2010 at 11:59 am
Part of a pretty good article on privilege and the case the ICAEW has been intervening in to try and convince the judge to extend legal professional privilege to accountants. But this is a howler:
Chartered accountants pass rigorous exams and gain valuable experience through their employment during a three year training contract. Once qualified, they have to complete a number of hours of continuous professional development each year to ensure their technical knowledge is up-to-date.
You would expect the Chief Executive of the Institute of Chartered Accountants to know his own body's rules on continuous professional development. The ICAEW ditched the 'hours' system years ago. Now, members must certify that the actions they have taken during the year address any risks to their professionalism.
The new system is altogether more difficult, in that you can't just turn up to a bunch of useless courses, sign the register and then bugger off down the pub for the rest of the day. Indeed, that's such a problem with US accountants, who still have the hours system, that course providers now have to take the register at the start and end of the course (and some even do it at lunchtime too to prevent an obvious cheat). Chartered accountants must think about the risks to their professionalism, plan a course of action to deal with it, and then follow it through. And be prepared to explain what they've done if asked to.
They don't have to "complete a number of hours" at all.
Let's not bother with personal carbon trading
Posted by Christie Malry on July 20, 2010 at 11:43 am
Tim Worstall is unhappy with Tim Yeo:
Facepalm. He’s just reintroduced ID cards through the back door, hasn’t he? Can you prove who you are before you buy petrol sir?
The reason is because Yeo thinks personal carbon cards are a good idea. And of course they're not.
The broad idea is that everyone is given a personal carbon allowance and then they use it up whenever they do anything - buy food, petrol, gas & leccy, train tickets, etc. People can sell excess allowance to other people and must buy allowance if they want to exceed it for any reason.
The point is, we already have a method for rationing carbon use. It's called our currency. No money? Can't use up carbon. Got money? Well, I guess you can use up carbon, except you're probably limited by your own ability to burn through the stuff. We can't all be deep frying diamonds in bitumen.
Only then politicians come along and mess things up. They say that it's a terrible shame that poor people can't eat or heat their houses, or buy a winter coat for their children. And they take money forcibly from those that have it and give it to those who don't. (Who promptly spend it on food, heating, winter coats, cigarettes, satellite tv, White Lightning, bingo or drugs).
The personal carbon market is also prone to political meddling. Can we imagine politicians looking the other way while tens of thousands of people who had blown their annual carbon allowance on flights were now shivering in November because the winter was a little bit colder than they had anticipated? No, they will announce a special carbon redistribution levy and nick carbon credits from people who have them and give them to those that haven't. It will be yet another appalling transfer from the responsible to the feckless.
So let's just not bother. Let's accept that they're a stupid idea that won't work because politicians can't keep their hands out of other people's pockets.
(Oh, and does anyone think politicians themselves will be covered by a personal carbon allowance?)
Our approach to regulation - cars vs. banks
Posted by Christie Malry on July 19, 2010 at 11:12 am
From a little something I posted to CiF:
Cars are instructive to our unconscious approach to regulation.
We're angry that Gordon and Tony introduced light touch regulation on the banks, but we want the speed limits on the roads taken away, because we can be trusted to drive safely. We think it's okay to speed up to a camera and then slam on the brakes, but then complain furiously about how Lehmans was window-dressing its accounts at each period-end. We want borrowers' recklessness to be stopped,and tight controls put on how much banks can lend to people as a multiple of salary. But we resist any attempts to limit our own car usage.
And remember, the banks didn't actually kill anyone. Cars kill some 3,000 people a year in the UK. Are we sure we really like our ultra light touch regulation?
Don't get me wrong, I'm not arguing for heavy regulation everywhere forever; merely using our extreme tolerance for cars as an example of how we don't need to react to every single bad outcome with more regulation.
Auditor liability - a case from the US
Posted by Christie Malry on July 19, 2010 at 10:49 am
From the US, we learn of a case on auditor liability which - for once - resists the urge to extend auditor liability to non-shareholders. Grant Thornton LLP v. Prospect High Income Fund and others found that:
Certified accountants audit companies for many purposes, not least of which is to provide corporate directors with an objective assessment of their companies’ performance. Audits are also prepared to give information to a specific investor who the auditor knows will rely on its contents. We must decide whether the law imposes an obligation on the auditor to provide an accurate accounting not to the corporation or known investor, but to anyone who reads and relies on it. We conclude that it does not. Likewise, we hold that the particular investors involved in this case could not have justifiably relied on the audit reports as to purchases made after they knew the corporation was at risk of financial ruin, and they may not substitute their escrow agent’s reliance for their own without also being bound by its knowledge. Finally, we reject the investors’ “holder” claims—claims not that they bought or sold securities based on the auditor’s reports, but that they held them when they otherwise would not have—in the absence of a direct communication with the auditors.
Needless to say, this is helpful to auditors. It makes it much more difficult for a non-shareholder to claim that they were misled on the basis of the audit opinion alone. Where there is other evidence of a company's precarious position, potential investors must take account of it.
I'm sure the audit profession will heave a sigh of relief at this fairly commonsense ruling.
SuperRitchienomics - how bungs contribute to the tax gap, without insulting HMRC
Posted by Christie Malry on July 16, 2010 at 12:33 pm
Ritchie desperately tries to explain what he meant when he apparently dissed HMRC inspectors for taking bribes. Are you sitting comfortably? Then we'll begin:
I was explicitly saying that such illicit payments, usually for the procurement of contracts, are themselves a contribution to the tax gap as they are untaxed, unsurprisingly
So, a transaction that shouldn't exist at all, and as far as HMRC is concerned doesn't exist at all, contributes to the tax gap because it isn't taxed.
Even by Ritchie's pisspoor standards of argument, that is pathetic.
The definition of the tax gap is, in layman's language, "the difference between what we think we should be getting in tax compared to what we actually end up getting in tax". The taxman doesn't expect to get tax on bungs or bribes, and therefore it cannot contribute to the tax gap. It's most definitely fraud, but there has never been a suggestion that they should be declared to the taxman. Where would you include such payments - Schedule D?
[Out of interest, some US tax authorities do have an ingenious method for taxing bits of the illicit economy, e.g. see here]
