Mafia Buzz Issue 3

Accountancy SA

Note: I do not summarise these articles because you should read them yourself.

Adri Kleinhans writes that the TOPP programme has been “re-launched”. With the potential demise of small company audits, this is going to be the only savoir for training meaningful numbers of CAs in SA. (Page 5)

Ignatius Shehoole has been appointed to chair the Developing Nations Committee at IFAC. Congratulations! (Page 6)

IFAC has created a resource centre for professional accountants in business called KnowledgeNet. No information is given on how to access this or what the cost is. (Page 6)

IFAC has released a new publication summarising key internal control frameworks, highlighting recent legislative and other initiatives and discussing the role of internal control in enhancing corporate governance. (Page 8)

Don’t fall for this scam: “I am terribly sorry but I deposited an amount in your account in error. Could you please return it to me?” I know of two people who fell for it and lost big time. (Page 9)

Contingent rentals are not straight-lined. (Page 10)

Articles such as the one called “Share-based executive incentive schemes” should be headed “Advertorial”! (Page 14)

Zwi Y Sacho discusses the impact of converting to IFRS in Europe. (Page 21)

Gerhardus Burger takes a look at the BEE Charter for CAs. (Page 24)

Martin Prozesky says that when looking at what is “generally accepted behaviour” (in relation to ethics) one should take into account the cultural diversity in SA. He believes that the eight shared core ethical values identified by the Global Ethics Institute in the US of love, truthfulness, fairness, freedom, unity, tolerance, responsibility and respect for life is a good place to start. [How would these differ in SA?] (Page 29)

Grant Thornton says that red tape is the greatest constraint to business growth in SA. Second is the lack of skills. (Page 31)

Estienne de Beer discusses the quest for career success. A point well made is: “One should realise that as long as your salary is being paid by an organisation, it is only fair to expect that you deliver results.” How many people believe that their employers owe them a living?

Günther Hoppe, all the way from the lovely country of Malawi, gives guidance on how to get through deadlines (plan in advance, don’t over-promise, warn early when things start to go wrong, get enough sleep, eat properly and get sufficient exercise). (Page 35)

Pieter Buys takes us through the advantages of Activity Based Costing. (Page 37)

Business Day

In 2005, 186 000 new CCs were registered, 60 000 more than in 2004. We are looking at something like 220 000 new CCs in 2006. This indicates a boom in small business. And the Government wanted to do away with CCs!! (10^th)

The Independent Regulatory Board for Auditors has opened the door to other bodies, thereby breaking the monopoly held by CAs in the past. Watch out for competition from ACCAs. (13^th)

The report on the Corpcap/Cytech investigation has at last been released. The report clears the company of wrong doing. However, the Minister of Trade and Industry, Mandisi Mpahlwa, has expressed reservations over the weaknesses in the report. From the little that I gathered from press reports, it appears as if the critical issue was not addressed. Corpcap revalued its investment in Cytech, treated the revaluation as a normal operating profit and paid bonuses out of the revaluation. Business Day says that Cytech was a subsidiary. If this is true, how in heaven’s name can one revalue a subsidiary and take the profit through the income statement? I think that BD got it wrong. Cytech was, in all likelihood, an associated company. GAAP does not permit one to revalue an investment in an associate, full stop. Where was the GAAP Monitoring Panel? I have been able to access the full report and will take off a few days to get to the bottom of this mess. (22^nd)

Sir David Tweedie says that accounting standards are getting so complex that they have to be interpreted by specialists such as the technical partners in an audit firm, which he says is “wrong”. He does not elaborate on why he thinks it is wrong. In my opinion it is wrong because it gives too much power to the auditors in determining what to present to users. No consultation takes place when technical partners take decisions. Auditors are terrified of disciplinary action so compromise fair presentation to the detriment of the preparers and the users. Something needs to be done to rectify this. No one seems to have the guts (if this is the right word) to take this on. I try but have no power base. (29^th)

A new financial watchdog will be set up next year to be known as the Financial Reporting Investigations Panel. The good thing about this body is that its reports will have to be made public thereby ensuring that any attack on a company is open to public scrutiny, not like the existing GAAP Monitoring Panel, which operates behind closed doors – easier to abuse power when there is no public scrutiny. (30th)

Citizen

Anne Cabot-Alletzhauser says that when building a portfolio one should focus on the financial goal, the timeframe and the targeted risk-tolerable variation. One should then structure a solution that will be robust for the timeframe chosen. Monitor progress in relation to the goal and the timeframe and rebalance to the optimal blend. She says everything else is irrelevant. [It is such a pleasure to see someone cut to the chase!] (15^th)

Financial Mail

Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want the knowledge to be properly utilised, you have to do it though the means of private property. (Milton Friedman, who died recently at the age of 94) [Or to put it simpler: Take control of your own investments.] (24^th, page 24)