Because I'm much too lazy to review the EC audit reform proposals myself, other than to express shock and surprise that Barnier could even conceive of a six-year maximum audit tenure, here are some thoughts from other people.

ICAEW doesn't agree with all of what the EC proposes. But it does find some areas of common ground, which it highlights. ICAS finds even more grounds for disagreement, in particular the burdens it will place on business. ACCA use their release to give an outing for their new-technical-director-on-the-block, Sue Almond. She, like ICAEW, is careful not to bash Barnier too heavily, and looks to find some points of agreement, such as the emphasis on the importance of audit committees, while fretting about the potential costs of mandatory rotation. Chartered Accountants Ireland have the smoothest response; while welcoming the proposals, they reserve the right to put the boot in once they've examined them in more detail and consulted with stakeholders ¹.

The firms have also been active. KPMG argue in terms of audit quality to put up a stern defence of multi-disciplinary firms, which would be prohibited by the proposals. pwc is even harsher; while also arguing for greater audit quality, they complain that the EC has missed an opportunity to really learn the lessons of the crisis. Deloitte avoids the audit quality argument altogether, instead preferring to highlight how the EC's proposals won't deliver its stated objectives ².

There are comments in some of the newspapers too: The Guardian says that Barnier is "taking on" the Big 4. The Telegraph echoes this, saying that he wants to break them up. It also notes that the proposals will seriously weaken the powers of national regulators, which presumably includes institutes as well as the FRC.

Accountancy Age snorts at the "watered down" proposals, which have dropped the notion of mandatory joint audits that was included in the earlier leaked drafts.

Filed under: Auditing, Current issues, Institutes with tags acca, accountancy age, big 4, cai, deloitte, ec green paper, european commission, guardian, icaew, icas, kpmg, meta, pricewaterhousecoopers, telegraph
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The Telegraph has a strange headline for its story today on UBS's latest results:

UBS profits beat forecasts despite rogue trading scandal

UBS has reported a pre-tax profit of close to Sfr1bn (£709m) for the third quarter despite being hit by a Sfr1.8bn loss from an alleged rogue trading incident.

I don't think this is what they mean. Presumably when they broke it to the markets that they'd had a serious fraud, the forecast was restated to take account of it.

So it might certainly be the case that the bank did better than analysts expected. But it's wrong that the scandal had no impact whatsoever on the bank's ability to meet its original forecasts.

Filed under: Accounting, Other blogs with tags banks, fraud, telegraph, ubs
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Hotlaim?

Filed under: Entertainment with tags hotlaim, idiots, telegraph
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Andrew Simms, a nef fellow and their former Policy Director, tweets the following glib observation:

Generally speaking, employees like to be paid in cash. So unless those 840 employees are prepared to receive their pay entirely in shares which they can't touch for three years, the two figures simply aren't comparable.

nef really are as dumb as a bag of hammers, aren't they?

Filed under: Current issues, Other blogs with tags andrew simms, banks, bonuses, hsbc, idiots, nef, telegraph, twitter
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Remember the non-doms, who were living it large in this country?  They got to shelter all their overseas earnings from the UK taxman by paying tax only on income earned in or remitted to the UK. So rich folk like Lord Ashcroft could live in the UK but avoid paying tax on their worldwide earnings, something that ordinary Brits would be unable to do.

Sensing trouble, and egged on by overzealous tax campaigners, the government decided to change the regime for non-doms. Instead of getting the remittance basis for nothing, they would need to opt in to it. Broadly speaking, it would cost £30,000 a year to opt in. If you didn't opt in, then you would pay tax on your worldwide earnings just like any domiciled UK resident.  These proposals built on earlier Tory plans for a £25,000 annual charge.

Critics of the proposals said that non-doms don't have to live in the UK, they merely choose to.  They would probably respond to the increased cost by moving to another country, taking precious tax payments with them.  But this was pooh-poohed by the experts.  Richard Murphy (for it is he) rubbished the claims.  The £25,000 plan would, in his view, raise an extra £2bn annually for the Treasury.  Surveys suggested that maybe people wouldn't leave, at least no more than they do so already anyway. Later, Ritchie got even more strident, stating emphatically that they just won't go.

So, what actually has happened since the law was introduced?

According to the Treasury figures, in response to a Freedom of Information request, around 16,000, or 11.5% of non-doms have left the UK since the introduction of the non-dom tax, the Telegraph reported.

Non-doms pay £4bn in income tax, according to Treasury estimates, and another £3bn in other taxes such as capital gains, VAT and stamp duty, Damian Reece wrote in a column.

Reece, citing Inland Revenue figures that 11.5% of non-doms left the UK in 2008/09, estimates that this has cost the government about £800m in lost taxes.

The latest Freedom of Information figures show that the non-dom levy was "a dubious idea at best, as far as our public finances were concerned", Reece adds.

Filed under: Taxation with tags accountancy age, domicile, hm treasury, idiots, richard murphy, telegraph
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On the one hand, you've got the banks, whom many have criticised for telling lies in their financial reports and elsewhere in order to sustain the economic boom for as long as possible, just so they can trouser their millions of pounds of bonuses. Politicians, none moreso than St Vincent of Cable, have lined up to put the boot into the bankers for telling lies just so they can hold on to their highly paid jobs.

On the other hand, you've got Vince Cable himself.  Up till yesterday he seemed a fairly happy member of the Cabinet, give or take a couple of gripes.  But then he spilled his guts when gently prodded by two pretty constituents who just happened to be undercover Telegraph reporters in disguise.  And we find out that Cable is a man who really thinks that what the Coalition is doing is wrong. Yet, he seems prepared to lie about it in public, presumably merely so he can hold on to his highly paid job.

What, honestly, is the difference between them? Is it too much to ask that people tell the truth to keep their jobs? Why are bankers excoriated while Cable is celebrated?

When we've finished with the bankers, can we reuse the piano wire?

Filed under: Politics with tags banks, idiots, lies, politicians, telegraph, vince cable
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Andrew Brown, a nice enough chap (I know him from way back), asks:

But is there any point in whining babies and toddlers attending Mass, if they can’t stay calm and not disturb other people? They gain nothing from the experience, and in any case don’t need to be there.

Of course there is.  We should tolerate whining babies and toddlers because, well, we were whining babies and toddlers ourselves once upon a time.  And the church hopes that some day these babies will grow up to be the next generation of churchgoers.  Without them, the church is finished.

And it's worse than that.  Brown admits that he stayed at home watching the baby while his wife went to church with his other children.  For many couples, stopping going to church because of a baby means that they never go again.  So as well as losing the next generation, the church risks losing some of the current generation too.  It's a price that simply isn't worth paying.  Let the babies cry.

Cultivating the next generation is a major focus for all membership organisations, including the professional accountancy institutes.  Facing a shrinking membership base as a result of the lack of any protection from competition for the services most accountants do or, indeed, any protection even of the term accountant, the accountancy bodies have started diversifying into new service offerings.  They've also looked to other countries as a source of growth.

Let's hope they succeed; if they don't, life for accountants will get decidedly uncomfortable - and expensive - in the years to come.

Filed under: Institutes, Other blogs with tags acca, andrew brown, icaew, protection of term accountant, telegraph
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Fresh from getting David Laws fired, The Telegraph reports that "the Bank of England made £8bn profit from quantitative easing fund."

Er, come again?

Quantitative easing is one of those infuriating concepts that, while it seems easy to understand, economists will merrily tell you that it's not that simple.  In your first ever lesson in economics, you will learn that printing money causes inflation. End of.  Ah, but this is the economists' very own version of the naked short sell.  You sell money you don't have in the hope that you can buy it back in the future before it's had a chance to cause inflation.  In the meantime, it can be used to provide much-needed liquidity to the markets.

It reminds me of a joke about a smoker trying to quit - because he was one day going to stop, there would be thousands of packs of cigarettes he would save in the future, so he was bloody well going to have one of them now!

Anyhow, given that QE is fundamentally just a balance sheet entry - debit assets today, credit assets in the future - I don't really see how we can make a profit on the deal.  Are these the first signs of inflation?  I think our learned economists really should explain to us.

Filed under: Economics with tags bank of england, inflation, quantitative easing, telegraph
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The corpse of David Laws's political career is still warm in its grave, yet The Telegraph is already gunning for Danny Alexander over the alleged flipping of his second home.  But that's not the bit of the story that interests me.  I choked on this section:

The new Treasury minister also claimed more than £1,800 from his office allowances to pay a firm of chartered accountants for financial advice. One invoice specified that the firm advised him on tax and prepared his personal self assessment form.

Now, I accept that accountancy and tax advice are legitimate business expenses.  It's totally acceptable that an entrepreneur should be able to pay for them out of the business and claim them as allowable expenses for tax purposes.  What sticks in my craw is the idea that the taxpayer should somehow pay the full whack for them.

The entrepreneur still bears the cost of accountancy and tax advice.  If the tax code gets particularly complicated and the accountant's fees go up, the entrepreneur must find extra money to pay the higher bill.  It's the entrepreneur who must forego other expenses if money gets tight, or must work harder to find new sources of business to fund these and other business expenses.  As members of society, our participation is merely the tax foregone by tolerating them as legitimate business expenses.

Compare that to our MPs.  They are responsible for overseeing legislation, including the annual Finance Act process.  It's their fault that the tax code is so complicated in the first place - they worked on the committees that scrutinised the Finance Bill and they voted on it in Parliament.  So if they find the tax laws hard to deal with they have only themselves to blame.

As a result, if they do feel they need advice, they need to find the money to pay for it themselves out of their salaries.  Like other salaried mortals, accountancy and tax services are ordinarily paid for out of post-tax income. We don't get to deduct tax advice pre-tax.

And neither should they.  Let's hope Danny Alexander, should he have to refund any house-flipping profits, also refunds the taxpayer for his personal tax advice.

Filed under: Current issues, Politics, Taxation with tags danny alexander, david laws, mps' expenses, sleaze, tax agents, telegraph
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Who said accountants were boring. The Telegraph has huge amounts of fun with a delightful story about two neighbours who just can't seem to get along:

Back in 2007 when PricewaterhouseCoopers decided to build a new office next to Ernst & Young's More London HQ it was described as an "exciting move" for the firm.

Three years later with the building nearing completion the two companies are starting to realise quite how exciting things could get. At their closest point the two offices are roughly 10m apart – leading to concerns rival employees could spy on each other.

First blood in the battle has gone to PwC with the installation of blinds that close automatically whenever audio-visual presentation equipment is switched on and an office layout that ensures no computer screens face windows.

E&Y is unlikely to be far behind. On Tuesday it said it was "evaluating a number of options".

Er, didn't they see this coming? I don't suppose it would ever have crossed my mind to have spied on a competitor like that, even though I share - with the late John Peel - a love of staring out of the window.

E&Y's offending building, shown to the right, is part of the rather swish More London complex near London Bridge. There's a funny sort of stream that runs down the middle of the street - you can see it in the picture - which serves no purpose as far as I can tell other than to trip up the unwary.

There's a picture of PricewaterhouseCoopers's building here.

And no doubt we can look forward to more tales of accounting espionage involving these firms in the future!

Filed under: Entertainment, Ethics with tags big 4, ernst and young, espionage, pricewaterhousecoopers, telegraph
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