A man was fined R1 000 for not having a TV licence and another was released on R500 bail on a charge of murder. So the moral of the story is to kill the licence inspector. It will save you R500. (FM, 20th January 2006, page 74)
An advertisement for a Unisa course in economic and management science says that the answer to the following problem is 13: One third of the rest of a group of girl guides is in front of Judy and three fourths are behind her. How many are in the group?
0,33 x (G – 1) + 0,75 x (G – 1) + 1 = G
0,33G – 0,33 + 0,75G – 0,75 + 1 = G
1,08G – 0,08 = G
0,08G = 0,08
G = 1
So the answer is that Judy thinks she is Snow White. Some of her imaginary dwarfs are in front and some behind her. (And the FM could not work this one out! Shame. I hope that they issue an apology to Unisa.) (FM, 20January 2006, page 74)
February 2006 (30 Minutes)
Robert Bruce is of the opinion that companies are coping with the increased regulation quite well but the auditors have spent so much time and resources trying to sell companies more lucrative non-audit services that they simply had their eye off the ball when the tide of regulation arrived. [One wonders what evidence Rob has for this statement.] He goes on to say that audit firms have become so terrified of taking decisions on IFRS that they push the decision making responsibility up the audit partner ladder to the extent that the senior technical partners have seen their workload grow at a terrifying rate. He says that the biggest failure of firms is their inability to give timely advice. He says that what clients want is technical support and they are not getting this from their auditors. [My experience is that because of the massive information overload and lack of education in handling the new information coming out, auditors are being pressurised into giving the wrong advice resulting in financial presentation disasters. And I have ample evidence of this!] (Page 25)
And we think we have problems in Africa? Last year the Court of Auditors in the EU estimated that 50% of cows claimed to be grazing in Portugal don’t exist. 90% of Luxembourg farmers claim payments based on acreages that would double the size of the EU’s tiniest country. And a Greek farmer claimed for a loss of 500 sheep to wolves when he had only 470 to begin with and a year later claimed support for 470 sheep without doing any restocking. When these frauds were uncovered, the two employees who exposed them were sacked. (Page 26)
Emile Woolf supports a forthcoming EU legal requirement for audit engagement partners to sign audit reports in their own name. This will really make the signing partner think twice if he or she has to take personal responsibility for the opinion. (Page 26)
Mike Brooks is of the opinion that downsizing could increase the risk of potential loss and increase the loss of potential opportunities. (Page 28)
Since 1998 UK quoted companies with a combined value of more that £37bn have been taken private, mostly funded by private equity firms. [This is an option more companies in RSA should look at. In this morning’s Citizen, there is speculation that Shoprite may be considering this move. It really does make sense. Who needs the JSE if you are a long term investor in a company? And there is a major reduction in the regulatory burden and public exposure. There is a large pool of private equity funds out there looking for such investments.] (Page 34)
A financial director of a small listed IT company specialising in call-centres issued a statement to the stock market saying that the company had a satisfactory year and that it had won three new contracts worth £4,8m. The first half of the statement was not true and the new contracts had not been signed and fell away after the year end. Result? The FD is now sitting in jail. The judge, who sentenced him, said that investors must be able to trust information given to the market as the whole financial services industry relies on reliable information. Directors must be held personally responsible for misinformation distributed. It is essential that directors check their facts before making statements. (Page 42)
Mike Brooks sets out the objectives to be achieved and the procedures one should take when fraud happens. The critical principle is that you do not wait for it to happen before planning the procedure. He defines the objectives as:
Get the assets back (first priority)!
Implement damage control.
Deal with the perpetrators.
Clear the innocent.
Learn from the event to improve defences.
He then goes on to list the procedures. [If you have defined the objectives correctly, the procedures fall into place. (Page 45)
Sir David Tweedie is staying on as chairman of the IASB for another five years. This is excellent news – he is a clear headed thinker who will, if he gets the right support, get IFRS sorted out. However, I have a serious problem with his statement that his biggest challenge is to make the standards more easily understood for the average accountant. I would have thought that his goal should be to make them more relevant to businesses and investors! (Page 69)
Most people wander through their lives without a plan. Emotionally intelligent individuals map out their lives and achieve much more with them. Successful people don’t believe in luck – they create their own success by having a vision and setting out to achieve it. Your goals should create a challenge but as there are only 24 hours in a day, you have to limit those ambitions. Ensure that your activities are goal related. Research was conducted at Harvard back in the 1950s. Students were asked what their goals were. They all had goals but only 3% had crystallised them in writing. A follow-up survey 30 years later found that those who had written out their goals had amassed as much wealth as the other 97% together. (Page 120)