If you ever did my Q.E. or Unisa course you will remember the approach called: “IF think POKI, Passing Completely Assured”. It is virtually the same as the above. (If you need further information on this system, go to the examination technique section of our website.)
The Auditing Profession Act, 2005 was signed into legislation on 16 January. I have been getting calls from concerned practitioners complaining that they can now be jailed if their clients do not comply with GAAP or IFRS!
On April Fools Day SAICA sent out a circular calling for “urgent interim accounting relief for small companies”. Subsequent enquires resulted in assurance that this was not a cruel April Fools Joke. In case you have not been following this story:
About seven years ago I was lecturing in East London on some or other GAAP topic when a member got up and said something like: “All this is totally irrelevant to a small private company!” I said: “Are you calling for differential accounting?” He said: “Yes.” So I thought, let’s see if the accountants in East London are prepared to challenge the system. During coffee break we formed a small committee and drafted a petition to SAICA calling for differential accounting. To my utter astonishment, every one of 51 attendees except for the lecturer at Rhodes University gave their support to this call by signing their names on the petition. Unfortunately I was half-way through that year’s lecture tour but I tried the members in Durban, Johannesburg and Pretoria and got similar responses. That year I collected over 900 signatures. I reported back to SAICA and nothing was done.
The next year I drafted a proper petition and collected thousands of names calling for differential reporting. I analysed the results and delivered three lever arch files containing the petitions together with a covering letter addressed to the CEO of SAICA to their offices. The resulting silence was deafening.
I then started writing articles on the subject. Dan the Stationery Man became the talking point in 2001. Still nothing from SAICA.
And now we are told that SAICA is “urgently” calling for relief just when the Companies Act is in the process of being finalised. There are only two possible conclusions one can draw from all this: (1) SAICA has no idea how to plan ahead and does not know the most potent of Covey’s seven habits of highly effective people, i.e. being proactive. OR (2) There is method in their madness – hey let’s postpone this call for relief till the last moment and that way we will not get it. Or am I missing another possible reason for their procrastination? Please help me here.
There is one simple adage that many investment advisers live by and that is “when rates are high, stocks will die”. (17th, page 32)
Other Tit Bits
Did you know that the Close Corporations Act now permits trusts to be members provided:
No juristic person may directly or indirectly be a beneficiary of that trust.
The same rights and obligations will apply to such members as for other members of the cc.
The cc is not obliged to observe any agreements between the trust and its beneficiaries.
The total number of beneficiaries plus members of the cc may not in total exceed ten.
Fun Corner (Not for Children Under 18)
An old man was sitting at a restaurant watching a teenager sitting next to him. The teenager had spiked hair in colours green, red, orange, purple and blue. The old man could not take his eyes off the teenager. Eventually the teenager turned to the old man and asked: “What’s the matter old man, never done anything wild in your life?” The old man’s response was: “Got drunk once and had sex with a peacock. I was just wondering if you were my son.”
Have you ever heard of someone who says: I deliver 103%? Try this exercise: If A, B, … Z were allocated numbers 1, 2, … 26 then:
HARDWORK = 8+1+18+4+23+15+18+11= 98%
KNOWLEDGE = 11+14+15+23+12+5+4+7+5= 96%
ATTITUDE = 1+20+20+9+20+21+4+5= 100%
BULLSHIT = 2+21+12+12+19+8+9+20= 103%
ASSKISSING = 1+19+19+11+9+19+19+9+14+7 = 118%
So mathematically, hard work and knowledge will get you close, attitude will get you there but bullshit and ass-kissing will put you over the top.
May 2006 (30 Minutes)
The accounting profession in the UK is in turmoil over the government’s proposal to move the deadline for self assessments forward from 31 January to 30 September. The main complaints are that no consultation took place with members of the profession, work load will increase and information may not be ready at such an early time to complete the assessments. But the real gripe is that the summer holidays of accountants will be affected.
Jon Symonds, one of the top financial directors in the UK is concerned with the move towards fair values in financial statements as he believes that they are not useful and would be a burden to prepare. [The also reduce the reliability of financial statements.] (Page 44)
The banks in the UK are, like in RSA, coming under scrutiny because of the excessive profits they are making out of SMEs. (Page 53)
A report on the competition in the auditing profession finds (which we all knew) that the big four auditing firms dominate completely. Only one of the companies listed in the FTSE top 100 is audited by a firm outside this “quadropoly” and only eight in the top 250 companies. The fear is what will happen if the big four become the big three! (Page 60)
The complexity of various insurance products is holding up the next phase of the insurance standard. (Page 80)
Some proposals in the new IAS 1 are:
The name “balance sheet” will be replaced by “statement of financial position”.
Preparers will have a choice of preparing the income statement in a single format or in two separate statements. The second statement would include items that do not go through profit or loss, e.g. gains or losses on available for sale financial assets.
The statement of changes in equity (the columnar format as we know it) will disappear. [As an analyst, I object as this statement is an excellent way of articulating the income statement with the balance sheet.]
The way information is presented in the financial statements will be altered to make it more user friendly for the analysts. (Page 82)
Under the old audit methodology auditors had to obtain and document an understanding of the internal control system sufficient to determine the audit approach. Under the new system they have to understand and document controls regardless of the intended audit approach. The work load on small company audits will therefore increase with an associated increase in audit fees. [I am so pleased that I am a close corporation!] (Page 88)
The US is proposing that the deferral of actuarial gains and losses iro post retirement benefit costs be scrapped and that the plan assets and plan liabilities be measured at the balance sheet date. So no more corridor method for them! [A matter of time before this becomes an IASB proposal.] (Page 90)
In the US SMEs merely have to file tax returns, not financial statements, so there are no US accounting standards for SMEs. [Africa is the only continent which is being forced to use big GAAP for SMEs – a conspiracy to keep us uncompetitive?] (Page 121)
Robert Hodgkinson, the executive director of the ICAEW, says that one solution does not fit all. He says that not recognising this is the root cause of many regulatory problems. He says that we should focus on making sure that those differences are clearly understood by international policymakers before making decisions. [It is so nice to see someone with some common sense. I wonder what he would think about straight lining leases in Zim or comments like “an audit is an audit is an audit”?] (Page 121)