constantinos mavromichalis

Transcription

September 2011 - No. 104
ISSN 1450-2380
Editor
Ninos Hadjirousos, FCA
Deputy Editor
T. Anastasiades, B.Sc., M.A. (Econ.)
Editorial & Institute Offices
11 Byron Avenue, CY-1096 Nicosia
P.O.Box 24935
1355 Nicosia - Cyprus
Tel. 22870030, Telefax 22766360
E-mail: [email protected]
URL:http/www.icpac.org.cy
The Institute Council
Accountancy Cyprus is published quarterly by
the Institute of Certified Public Accountants of
Cyprus and is sent free to all members of the
Institute as well as to a large number of other
persons, companies, and organizations.
The Institute can accept no responsibility for
the accuracy of contributed statements or articles appearing in this publication, and any
views or opinions expressed are not necessarity endorsed by the Institute, its Council or by
the Editors
President:
* Theodoros Parperis, BSc (Econ), ACA
Vice President: * Marios Skandalis, FCCA, FIFC, CFC, CFE
Secretary:
* Demetris Halios, BSc (Acc), CPA
* Denotes member not in practice
* Μembers
* Michalis Antoniades, BA (Hons), ACA
* Panicos Charalambous, FCCA
* Ioannis Charilaou, FCCA, FAIA, MBA
* Christis Christoforou, BA (Econ.), FCA, MBIM
* Demetris Demetriou, FCCA
* George Kourris, BSc, FCA
* Nicos Syrimis, FCA
* Demetris Taxitaris, ACA
* Panikos Tsiailis, FCCA
Contents
Institute News..................................................................................................................................................................................................................................................
2
Professional Briefing................................................................................................................................................................................................................................... 11
The 10% corporation tax should be protected as a treasure proposals by ICPAC for the Cyprus Economy.......................... 20
Cyprus economy: The opportunity for major reforms should not be lost........................................................................................................... 23
Ιnterview with H.E. the Ambassador of Poland Mr. Pawel.............................................................................................................................................. 25
Consensus on a strong expenditure - based fiscal package needed.................................................................................................................... 28
A social dialogue for the minority........................................................................................................................................................................................................... 29
Οne for two or two for one......................................................................................................................................................................................................................... 33
The prerequisites for a successful set of economic measures...................................................................................................................................... 34
Time to put our banking sector in order........................................................................................................................................................................................... 35
Cyprus and the next Greek crisis.............................................................................................................................................................................................................. 36
Ιn the Lobby of the operating theatre................................................................................................................................................................................................. 38
The future of the Eurozone and the Euro................................................................................................................................................................................... 41
Distress signals from the services sector................................................................................................................................................................................... 43
The graduated wage indexation and the competitiveness of the economy....................................................................................................... 44
Clear Political will needed in members states to effectively fight corruption - MEPs.................................................................................... 46
Detection and Combating of Fraud..................................................................................................................................................................................................... 49
The Excel Wizard............................................................................................................................................................................................................................................. 50
Fraud: The Auditorʼs responsibilities under ISA240................................................................................................................................................................. 52
The UK Bribery act 2010............................................................................................................................................................................................................................ 54
Turmoil in the international monetary system................................................................................................................................................................................ 58
Natural Gas Discovery: Will Make Us or Break Us?............................................................................................................................................................... 60
Integrated energy policy for Cyprus.................................................................................................................................................................................................... 62
The society of knowledge.......................................................................................................................................................................................................................... 65
Dissemination policy of the statistical service of Cyprus.................................................................................................................................................... 66
EU Audit Policy: The next chapter in the debate...................................................................................................................................................................... 70
The Illusion of prosperity............................................................................................................................................................................................................................ 74
Responding to a black swan - principles for responding to unexpected catastrophic events.................................................................... 75
Αn epidemic of badly maintained buildings.................................................................................................................................................................................. 77
Thieves and thieves....................................................................................................................................................................................................................................... 78
Do you have the time for “time management skills”? - Tips for better time management for the busy professional............. 81
Contemporary Auditing in Cloud Computing Environments............................................................................................................................................. 84
Crisis = (Danger + Opportunity) / Self Knowledge: an homage to steve jobs.................................................................................................... 89
Cloud computing defined........................................................................................................................................................................................................................... 94
Shaping-up of an improved EU VAT system............................................................................................................................................................................... 99
Τhe EU framework on investment funds and the challenges arising for Cyprus.............................................................................................. 101
IASB issues new standard on joint arrangements............................................................................................................................................................... 103
Employeesʼ complaints............................................................................................................................................................................................................................. 108
Cyprus Financing companies - A step in the right direction............................................................................................................................................. 110
IAS 17 Leases - changes in the making......................................................................................................................................................................................... 114
Τhe rights of the citizens are violated in the cases of expropriation of property.............................................................................................. 116
Economic Bulletin............................................................................................................................................................................................................................................ 119
How to Make Your Small Practice a Big Success Practice Management Tips for SMPs ............................................................................. 123
Institute News
Institute News
ñ Internal Audit
ñ Organisation and Methods
Institute News
The white document will be circulated to all members of
ICPAC and will help clarify the boundaries and the
interaction of these three functions within and
organisation.
COUNCILʼS ACTIVITIES
ñ The committee, in collaboration with the European
During the third quarter of 2011 the Council of the Institute
Union Affairs committee, has designed a seminar on
met four times and considered matters of interest to ICPAC
“Auditing EU Funded Projects”. The seminar, in
andcoordination
to the profession
Other Committee,
issues dealt with
were,
with at
thelarge.
Education
is planned
among
others,
the
following:
for September 2011.
ñ The committee studied the European Council Green
on Corporate
Governance
andInstitute
submitted
its
On Paper
5 September
2011 a delegation
of the
headed
response
to
the
questions
posed
by
the
paper.
by the President, Mr. Theodoros Parperis, met with the
ñ
committee
has embarked
on a Kazamias
study of and
the
newThe
Minister
of Finance,
Mr. Kikis
Institute’s
Governance
procedures.
The
objective
of
discussed measures to be taken for facing the problemsthe
of
study is to assist the Institute develop governance
the Cyprus economy.
processes which will incorporate best practices, at the
same time recognising the local practicalities and sizes.
On 7 September 2011 Mr. Christos Kyriakides, Senior
ñ The committee has continued to monitor closely all
Officer
of the and
Institute,
attendedinitiatives
the Council
meeting
of the
European
International
within
its scope
Mediterranean
Rome. to the
domain andFederation
continuedoftoAccountants
contribute inarticles
Institute’s magazine.
On 13 September 2011 a press conference was held at the
Panicos
G. the
Papamichael
Offices of
Institute concering proposals by ICPAC for
Chairman
the Cyprus economy. The press conference was given by
the President of the Institute Mr. Theodoros Parperis.
ECONOMIC CRIME AND FORENSIC
ACCOUNTING
(ECFA)2011
COMMITTEE
On 22 and 23 September
the President of the Institute
Mr. Theodoros Parperis and the General Manager Mr.
During the third quarter of 2011, the ECFA subcommittee
Theodoros Philippou attended a meeting of the Presidents
on organizing seminars had been collaborating with the
and CEOs of the European Federation of Accountants
education committee and the IT committee on co(FEE) Member Bodies in Vienna and a Special Meeting of
organising two seminars. One on fraud detection utilizing
theand
General
Assembly.
IT
the other
on fraud detection and prevention. Both
will be offered before the end of the year.
COMMITTEESʼ ACTIVITIES
The ECFA-ebulletin Volume 1 Issue 1 was emailed to all
ECFA-SIG (special interest group) and members had
ACCOUNTING STANDARDS COMMITTEE
provided positive feedback on this initiative.
During the last meeting the committee studied the
Finally, there are two articles in this issue of “Accountancy
amendments in IAS1 relating to changes in the
Cyprus” in the ECFA column. The first one is authored by
presentation of financial statements and IAS19 relating
a member of our committee Leonidas Ieronymides with
mainly to the abolition of the ‘corridor method’.
the title “Fraud: The auditor’s responsibilities under
ISA240” and the second by a well-known UK lawyer
It also initiated a study of FEE’s discussion paper
O’Shea Eoin on the Bribery Act. The UK Bribery Act will
‘Combined Financial Statements’. The discussion paper
have serious implications on those doing business in the
2
UK or even those who are doing business with a UK
company outside the UK.
ACCOUNTANCY CYPRUS ñ VOLUME 104 ñ SEPTEMBER 2011
Maria Krambia-Kapardis
Chairperson
FINANCIAL SERVICES COMMITTEE
which was published in April 2011 is open for comments
The
Services
Committee monitors developments
up toFinancial
30 September
2011.
in the bank industry, investment and other financial
operations,
on a domestic level as well as on a European
Marios Agathangelou
level.
It
also
keeps contacts with the regulatory bodies,
Chairman
such as the Central Bank of Cyprus (CBC), the Cyprus and
Securities
Commission
(CySEC) and the
LARNACAExchange
– FAMAGUSTA
CO-ORDINATING
Commissioner
COMMITTEE of Insurance companies in order to
exchange views regarding the industry, as well as other
organized
groups
and
associations
(for carried
example
During the third
quarter
of 2011
the Committee
out
Association
of
Cyprus
Commercial
Banks,
Insurance
the following activities:
Association of Cyprus etc).
1. On 13 April 2011 the committee organised a lunch at
During
secondinquarter
the year
the Committee
ZephyrostheTavern
Larnacaof with
the new
director of
monitored
the
economic
crisis
and
its
consequences
Inland Revenue of Larnaca Mr Marios Kourouniades. in
regards to all areas of economic activities in Cyprus and
abroad.
2. On 4 May 2011 a seminar was co-ordinated at Sun Hall
Hotel in Larnaca with a subject Field Audits from the
Below
are the main topics that the Committee has
Inland Revenue.
concentrated on over the past three months:
Panayiota Vayianou
ñ
Law relating to Covered Bonds
Chairwoman
The
Committee studied
the draft legislation
and directive
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
AND RISK MANAGEMENT COMMITTEE
which were discussed with the Central Bank of Cyprus.
During the third quarter of 2011 the Corporate
Following
the Internal
passing ofAudit
the legislation
Parliament,
Governance,
and RiskbyManagement
representatives
of
the
Committee
had
numerous
meetings
committee has, within the scope of its terms of reference,
with
representatives
of the CentralofBank
of Cyprus,
during
commenced
the implementation
its action
plan and
has
which
various
concerns
of
ICPAC
were
discussed
dealt with the following:
regarding the provisions of the Directive issued by the
Central
Bankonofthe
Cyprus
which affect
or Corporate
indirectly
ñ Worked
development
of a directly
survey on
members
of our Institute.
Governance.
The survey will be sent to the listed
companies in Cyprus. Its results will be sent to all
In addition,
to be
prepared that
by the
of
members.theItreport
is also
envisaged
theregulator
results be
Covered
Bondsduring
was discussed,
well as the issue
of the
presented
a press asconference,
within
activities planned
for the celebration
of ICPAC’s
50th
independence
of the regulator.
The Committee
has decided
that the report of the regulator is to be in the form of an
ñ WorkedUpon
on a white
paper describing
the As
role,such,
duties and
‘Agreed
Procedures’
(‘AUP’).
the
responsibilities
of the
departments
within
an
Committee
will inform
thefollowing
Central Bank
of Cyprus
of the
organisation:
decision to circulate an illustrative example of the report to
the Institutes members.
ñ Risk Management
1
Institute News
Institute News
ñ Internal Audit
Institute News
organisation.
Chairperson
up toFinancial
30 September
2011.
The
Services
ñ
The the
committee,
in collaboration
with the
European
During
third quarter
of 2011 the Council
of the
Institute
and to the profession at large. Other issues dealt with were,
coordination with the Education Committee, is planned
among others, the following:
for September 2011.
OnPaper
5 September
2011 a delegation
of the
headed
on Corporate
Governance
andInstitute
submitted
its
by response
the President,
Mr.
Theodoros
Parperis,
met
with
the
to the questions posed by the paper.
newTheMinister
of Finance,
Mr. Kikis
ñ
committee
has embarked
on a Kazamias
study of and
the
Institute’s
Governance
procedures.
The
objective
of
discussed measures to be taken for facing the problemsthe
of
to assist the Institute develop governance
thestudy
Cyprusis economy.
time recognising
the local
practicalities
andSenior
sizes.
Onsame
7 September
2011 Mr.
Christos
Kyriakides,
Officer of the Institute, attended the Council meeting of the
European and International initiatives within its scope
Mediterranean Federation of Accountants in Rome.
domain and continued to contribute articles to the
Offices G.
of the
Institute concering proposals by ICPAC for
Panicos
Papamichael
the
Cyprus
economy.
The press conference was given by
Chairman
Marios Agathangelou
operations,
Chairman
level. It also keeps contacts with the regulatory bodies,
LARNACAExchange
– FAMAGUSTA
CO-ORDINATING
Securities
Commission
(CySEC) and the
COMMITTEE of Insurance companies in order to
Commissioner
During the third
quarter
the Committee
out
organized
groups
andof 2011
associations
(for carried
example
the
following
activities:
Association of Cyprus Commercial Banks, Insurance
ACCOUNTING
(ECFA)2011
COMMITTEE
the President of the Institute
During
the third
quarter
of 2011,
the ECFA
Theodoros
Philippou
attended
a meeting
of subcommittee
the Presidents
on
organizing
seminars
had
been
collaborating
with the
education
committee
and
the
IT
committee
on co(FEE) Member Bodies in Vienna and a Special Meeting
of
the General Assembly.
IT and the other on fraud detection and prevention. Both
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
The
Committee studied
and directive
AND
RISK
MANAGEMENT
COMMITTEE
issued by the Central Bank of Cyprus and cited its opinions
Governance,
and RiskbyManagement
Following
the Internal
passing ofAudit
the legislation
Parliament,
committee
has,
within
the
scope
of
its
terms
of
representatives of the Committee had numerous reference,
meetings
commenced
the implementation
its action
plan and
has
with
representatives
of the CentralofBank
of Cyprus,
during
dealt
with
the
following:
which various concerns of ICPAC were discussed
ECFA-SIG
(special
interest group)
and members had
ACCOUNTING
STANDARDS
COMMITTEE
Finally,
there areintwo
articles
in this issue
of “Accountancy
amendments
IAS1
relating
to changes
in the
Cyprus”
in
the
ECFA
column.
The
first
one
is
authored
by
amainly
member
of our
committee
Ieronymides with
to the
abolition
of the Leonidas
‘corridor method’.
ISA240”
and the second
well-known
UK lawyer
It also initiated
a studybyofa FEE’s
discussion
paper
O’Shea
Eoin
on
the
Bribery
Act.
The
UK
Bribery
Act
will
2
Zephyros
Larnaca
the new
director of
During
theTavern
secondinquarter
of with
the year
the Committee
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
monitored the economic crisis and its consequences in
abroad.
Inland Revenue.
Below
are the main topics that the Committee has
Panayiota Vayianou
Chairwoman
ñ
ñ Worked
development
of a directly
survey on
Corporate
Central
Bankonofthe
Cyprus
which affect
or indirectly
Governance.
members
of our Institute.
members.theItreport
is also
envisaged
theregulator
results of
be
In addition,
to be
prepared that
by the
presented
a pressasconference,
within
the
Covered
Bondsduring
was discussed,
well as the issue
of the
activities
planned
for
the
celebration
of
ICPAC’s
50th
independence of the regulator. The Committee has decided
ñ Worked
on a white
paper describing
role,such,
duties the
and
‘Agreed
Upon
Procedures’
(‘AUP’).theAs
responsibilities
of the
departments
within
an
Committee
will inform
thefollowing
Central Bank
of Cyprus
of the
organisation:
ñ Risk Management
31
Institute News
Solvency
II
ñ Internal
Audit
ñ
Organisation
and Methods
A seminar
organized
by the Committee with subject
‘Governance in the Insurance Sector’ will be held on 29
The
white document
to all
of
September
2011. Thewill
aimbeofcirculated
the seminar
is members
to highlight
ICPAC
and will
clarify
the byboundaries
andMore
the
certain issues
that help
are not
covered
Solvency II.
interaction
of following
these three
functions
within and
specifically the
topics are
to be covered:
organisation.
� Introduction to corporate governance
� CEBS / Walkers principles / recommendations on
ñ The
committee,
in collaboration with the European
corporate
governance
Affairswithin
committee,
has designed
a seminar on
� Union
Governance
the Solvency
II Framework
EU Funded
Projects”. The seminar, in
� “Auditing
Proportionality
on governance
the Education
Committee, is planned
� coordination
Introductionwith
to Audit
Committees
for September 2011.
ñ
The committee
the will
European
CouncilbyGreen
Greetings
at the studied
seminar
be given
the
Paper on Corporate
Governance
and submitted
its
Superintendent
of Insurance
Companies,
Ms. Victoria
response
to
the
questions
posed
by
the
paper.
Natar and by the Vice President of the Council Members of
ñ
committee
has embarked
on a study
of the
the The
Institute
of Certified
Public Accountants
of Cyprus.
Institute’s
Governance
procedures.
The
objective
of the
The seminar will be conducted under the auspice of
the
study is to assist
the Institute
developMs.
governance
Superintendent
of Insurance
Companies,
Victoria
Natar.
ñ
The Cosma
committee has continued to monitor closely all
Marios
Chairman
STOCK EXCHANGE AND CAPITAL MARKETS
COMMITTEE
Panicos G. Papamichael
Chairman
During the 3rd quarter of 2011, the Committee met twice.
In addition to these meetings, other meetings were held
between various sub-committees members.
ACCOUNTING (ECFA) COMMITTEE
The main activities of the Committee during the above
period were as follows:
education committee and the IT committee on co1. Carried out maintenance and updated activities on the
Committee’s material on the Institute’s Website.
2. Reviewed the publication of directives for the
implementation of the Undertakings for Collective
Investments in Transferable Securities (UCITS) Law of
2011 – Consultation Paper CP (2011-07).
Marios Demetriades
Chairman
LIMASSOL – PAPHOS COORDINATION
COMMITTEE
During the period from 1 July 2011 to 30 September 2011
24
Institute News
the Limassol
- Paphos
Committee
hasa been
UK
or even those
whoCoordination
are doing business
with
UK
carried outoutside
the following
company
the UK. activity:
On theKrambia-Kapardis
8th of September 2011 the Committee coordinated
Maria
the seminar “The Explanation Circulars that was published
Chairperson
by the Department of Inland Revenue (IRD) and examples
of imposition SERVICES
of administrative
fines”. The seminar was
FINANCIAL
COMMITTEE
held at St. Raphael Resort in Limassol.
The Financial Services Committee monitors developments
Kyriakos
N. Panayiotou
in
the bank
industry, investment and other financial
Chairman on a domestic level as well as on a European
operations,
INTERNATIONAL
BUSINESS,
SHIPPING
such
as the Central Bank
of Cyprus (CBC),
the CyprusAND
and
FOREIGN Exchange
INVESTMENTS
COMMITTEE
Securities
Commission
(CySEC) and the
Commissioner of Insurance companies in order to
Cyprus Prospects
as a business
Center as well as other
exchange
views regarding
the industry,
organized groups and associations (for example
A market research
surveyCommercial
has been made
by a member
of
Association
of Cyprus
Banks,
Insurance
the committee
and presented
Association
of Cyprus
etc). to the committee regarding
the prospects of Cyprus as a business center. The survey
has confirmed
Cyprus
mainofadvantages
as well
as the
During
the second
quarter
the year the
Committee
disadvantages
the sectors
has to improve
monitored
the and
economic
crisisthat
andCyprus
its consequences
in
in order to
to all
be areas
more competitive.
regards
of economic activities in Cyprus and
abroad.
LEGISLATION FOR TRUSTS
Below are the main topics that the Committee has
The members
have met Ms Maria
concentrated
on of
overthethecommittee
past three months:
Kyriacou to update them on the proposed changes of the
ñ
legislation.
The
Committee
the draft
legislation and directive
SEMINAR
FORstudied
THE U.K.
MARKET
which
were discussed
with the Central
Bankinofthe
Cyprus.
The committee
is organising
a seminar
U.K to
promote Cyprus as a financial center in the U.K. market.
Following
the will
passing
of thetogether
legislation
Parliament,
The seminar
be done
withbyICAEW
and
representatives
of be
theasked
Committee
had numerous meetings
sponsorships will
from banks.
with representatives of the Central Bank of Cyprus, during
which
various concerns
of THE
ICPAC
were discussed
COLLECTION
OF F.S. BY
CENTRAL
BANK
regarding
the provisions
of the
Directive issued
by NO
the
OF CYPRUS
FOR THE
COMPANIES
WITH
Central
Bank PRESENCE
of Cyprus which
affect directly or indirectly
PHYSICAL
IN CYPRUS.
members of our Institute.
The committee had a meeting with the Central Bank of
In
addition,
the report
be prepared
byaccounting
the regulator
of
Cyprus
regarding
their to
request
from the
firms
Covered
discussed,
as well aswith
the issue
of the
to provideBonds
them was
the F.S
of the companies
no physical
independence
of the regulator.
The Committee
has decided
presence in Cyprus.
The committee
explained
to the
that
the Bank
reportofofCyprus
the regulator
is to be for
in the
of an
Central
the difficulties
the form
accounting
‘Agreed
Upon such
Procedures’
As such, were
the
firms to provide
details and(‘AUP’).
various alternatives
Committee
willCentral
inform the
Central
Bank
Cyprusonofhold
the
proposed. The
Bank
has put
the of
request
decision
to circulate
an illustrative
example
of the
report
to
until a meeting
is organised
for final
decisions
to be
made.
3
Institute News
Institute News
CONSOLIDATION OF CYPRIOT COMPANIES
WITH NON-EUROPEAN COMPANIES
2. New tax circulars effective 1.7.2011.
After having several meetings and discussions with the
Tax Commissioner, the following tax circulars were
released:
Institute News
The committee will seek the cooperation of the Cyprus Bar
Association in an effort to amend the existing law so that
non-European countries can merge with Cypriot
companies.
Costas Mavrokordatos
Chairman
EU AFFAIRS COMMITTEE
The EU Affairs Committee of ICPAC has carried out the
following actions in accordance with its terms of
On 5 September 2011 a delegation of the Institute headed
reference:
by Execution
the President,
Theodoros
met with the
ñ
of theMr.
Action
Plan of Parperis,
the Committee
newMeeting
Minister
KikisandKazamias
and
ñ
withoftheFinance,
PlanningMr.
Bureau
the Treasury
discussed
measures
toorganization
be taken for of
facing
the problems
of
department
for the
training
seminar for
theICPAC
Cyprusmembers
economy.
ñ Communication with the Corporate Governance
Audit and
Committee
for
OnInternal
7 September
2011Risk
Mr. Management
Christos Kyriakides,
Senior
the joint
organization
of a training
seminar
for ICOAC
Officer
of the
Institute, attended
the Council
meeting
of the
members
ñ Continuous follow up on the developments in the EU
affecting the accounting profession through research
from various sources such as the EU website, the
Offices of the Institute concering proposals by ICPAC for
European business and accounting press etc and update
theof
Cyprus
economy.
The
conference
was given
by
the members
if the
EUpress
Committee
and update
of the
the
President of and
the Institute
Mr. Theodoros
Parperis.
ñ Preparation
publication
of 2 articles
for the
magazine of ICPAC
ñ
update of 2011
the website
of ICPAC
OnContinuous
22 and 23 September
the President
of the Institute
Maria
KaffaPhilippou attended a meeting of the Presidents
Theodoros
Chairwoman
(FEE) Member Bodies in Vienna and a Special Meeting of
TAXATION COMMITTEE
The Taxation Committee continued during the third
quarter
of 2011 its pursue
of resolving the various tax
COMMITTEESʼ
ACTIVITIES
issues on its agenda. To this intent, there were a number of
meetings
with the STANDARDS
Commissioner of
the Tax Authorities.
ACCOUNTING
COMMITTEE
Issues
have
finalized
Duringthatthe
lastbeen
meeting
theinclude:
committee studied the
1.
Loan arrangements
between
related
presentation
of financial
statements
andparties.
IAS19 relating
An
agreement
has
been
reached
with the Tax
Commissioner concerning the application of article 33 of
the
Income
Tax Law
margins
of loansdiscussion
between related
It also
initiated
a on
study
of FEE’s
paper
parties.
The
details
of
the
agreement
have
been
notified
to
all our members.
4
ñ Circular 2011 07 dated 8.7.2011 regarding defence
withheld from rents paid by companies.
which
was published
April 2011
is openregarding
for comments
ñ
Circular
2011 03in dated
11.7.2011
the
up Assessment
to 30 September
and2011.
Collections Law, 136(I)/2010 as
published on 31.12.2010 in the Official Gazette of the
Republic,
issue 4267.
Marios
Agathangelou
ñ
Circular 2011 04 dated 11.7.2011 regarding Laws
Chairman
132(I)/2010 to 135(I)/2010 as published on 31.12.2010
in the Official
Gazette of theCO-ORDINATING
Republic, issue 4267.
LARNACA
– FAMAGUSTA
COMMITTEE
Issues pending on our agenda include:
During the third quarter of 2011 the Committee carried out
The
finalization
of a tax circular regarding foreign tax
the following
activities:
credits for income generated abroad and taxable in Cyprus
(double
taxation
relief).the committee organised a lunch at
1. On 13
April 2011
Zephyros Tavern in Larnaca with the new director of
2.Taxisnet-problems.
Inland Revenue of Larnaca Mr Marios Kourouniades.
3. Tax treatment of non reciprocal capital contributions.
4.
current procedures.
2. Reorganizations-simplification
On 4 May 2011 a seminar was of
co-ordinated
at Sun Hall
5.
The taxation
of Directors'
fees received
by non residents
Hotel
in Larnaca
with a subject
Field Audits
from the
from
Cyprus
resident companies.
Inland
Revenue.
6. Simplification of tax return filing for dormant
companies.
Panayiota Vayianou
7.
Simplification of tax strike off procedures for dormant
Chairwoman
companies and companies that have already been stricken
off
the Registrar of
Companies register.
CORPORATE
GOVERNANCE,
INTERNAL AUDIT
OTHER ACTIVITIES
1.
We have studied
the latest
billsRisk
and have
attended
Governance,
Internal
Audittaxand
Management
meetings
thewithin
Parliamentary
Committee
ofreference,
Finance
committeeofhas,
the scope of
its terms of
during
which the
we implementation
presented our comments
and suggestions.
commenced
of its action
plan and has
A
fewwith
daysthe
after
the passing of the laws we prepared and
dealt
following:
distributed to all our members a summary of the main
provisions
thethe
Laws.
ñ Workedofon
development of a survey on Corporate
Governance. The survey will be sent to the listed
2. Members
of our
committee
beenwill
involved
with
companies
in Cyprus.
Itshave
results
be sent
to the
all
members.
It
is
also
envisaged
that
the
results
be
negotiations of various DTTs.
presented during a press conference, within the
activities
planned for the celebration of ICPAC’s 50th
Angelos
M. Gregoriades
Chairman
ñ Worked on a white paper describing the role, duties and
VATresponsibilities
COMMITTEEof the following departments within an
organisation:
- On its June 2011meeting the committee has studied in
ñ RisktheManagement
detail
circular no 151 which described the vat
51
Institute News
ñ
Internal Audit
applications
on services provided by the
director of a company. The committee
ñ
and Methods
hasOrganisation
drafted is comments
and suggestions
and agreed to discuss these with the VAT
The
white document will be circulated to all members of
department.
interaction
of these
threediscussed
functions within and
- The committee
has further
organisation.
the issue whether the circulars and the
Institute News
Chairperson
rulings issued by the VAT department
ñ
The
committee,
in
collaboration
with
the
European
are subject to objection by the taxpayer.
Affairs
a seminar on
operations, on a domestic level as well as on a European
TheUnion
committee
hascommittee,
decided to has
seekdesigned
legal
“Auditing
EU
Funded
Projects”.
The
seminar,
in
advice on this issue and then discuss it
with the Education
is planned
withcoordination
the Commissioner
of VAT. Committee,
The
for
September
2011.
Securities Exchange Commission (CySEC) and the
committee will release its findings in
ñ
The
committee
studied
the
European
Council
Green
due time.
Paper on Corporate Governance and submitted its
response
to
the
questions
posed
by
the
paper.
- During July, the committee welcomed
ñ
The
committee
has
embarked
on
a
study
of
the
the first draft circular issued by the VAT
Institute’s
Governance
procedures.
The
objective
of
the
department concerning the Credit Notes.
study
is
to
assist
the
Institute
develop
governance
The VAT Department has submitted to
During the second quarter of the year the Committee
the VAT committee, its draft circular for
comments, based on our recent
achievement for a “consultation”
European and International initiatives within
its scope from the
A photograph
seminar on the Basic Principles of VAT held in Nicosia
abroad.
relationship between the Authorities and
and Limassol.
our committee. The Committee has
submitted its comments, following a
The followingonseminars
concentrated
over thehave
pastbeen
threeorganised
months: and presented
meeting for clarifications. The outcome of this
during this period.
communication was the circular no 152.
Chairman
ñ Law relating to Covered Bonds
1. Basic Principles of Vat
- On its July meeting the committee has discussed in detail
The Committee studied the draft legislation and directive
the first draft of the so called “Yacht scheme” prepared by
The seminar
was co-organised
with the
Committee.
It
issued
by the Central
Bank of Cyprus
andVat
cited
its opinions
the VAT Department, in association with the VAT
was held
ondiscussed
14 June 2011
17 of
June
2011 in
which
were
with in
theNicosia
Centraland
Bank
Cyprus.
Committee. On the 1st of August 2011, the committee has
Limassol. The purpose of the seminar was to inform
submitted its final comments on the draft scheme. It is
members on
basic principles
of Vat. The
was
Following
thethepassing
of the legislation
by seminar
Parliament,
expected that the scheme will be favourable compared
education committee and the IT committee on coaddressed
specifically
to
new
members
without
experience
representatives of the Committee had numerous meetings
with other competitive schemes in the region. The scheme
in therepresentatives
Vat regulations.
TheCentral
speakers
of of
theCyprus,
seminarduring
were
with
of the
Bank
is expected to be released soon in the form of a circular.
Mr.
Christos
Papamarkides,
member
of
the
Vat
Committee
and partnerthe
in Deloitte
Ltd,ofand
Alexis Tsielepis,
regarding
provisions
theMr.
Directive
issued byVicethe
- During the meetings of June and July 2011, the
President
of
the
Vat
Committee
and
partner
in
Costas
Central
Bank
of
Cyprus
which
affect
directly
or
indirectly
committee dealt with major issues arising our of VAT court
Tsielepis of
& Co
The seminar in Nicosia was attended
members
our Ltd.
Institute.
cases.
by 118 participants and in Limassol by 103.
In addition, the report to be prepared by the regulator of
- No meeting was held during August 2011.
2. Changes
in was
Taxation
Lawasinwell
effect
from
1stofJuly
Covered
Bonds
discussed,
as the
issue
the
2011.
Christos S. Christodoulou
Chairman
The purpose
of the
seminar was
to inform
in
‘Agreed
Upon
Procedures’
(‘AUP’).
As members
such, the
public
practice
on
the
new
taxation
rules
in
effect
from
1st
Committee will inform the Central Bank of Cyprus of the
EDUCATION COMMITTEE
July 2011.
The seminar
was presented
by Mr.
Neophytos
decision
to circulate
an illustrative
example
of the
report to
Neophytou,
member
of
the
Taxation
Committee
and Tax
the
Institutes
members.
During the third quarter of 2011, the Committee held two
Partner of Ernst & Young. The seminar was held on 20
meetings.
26
5
Institute News
Institute News
Institute News
June 2011 in Nicosia, 22 June 2011 in
Limassol and 23 June 2011 in Larnaca.
The seminar in Nicosia was attended by
130 participants, in Limassol by 109
participants and in Larnaca by 110
participants.
up to 30 September
2011.
3. Explanation
of Technical Circulars
issued by the Inland Revenue and
Marios Agathangelou
examples
regarding
imposed
Chairman
penalties.
new Minister of Finance, Mr. Kikis Kazamias and
discussed measures to be taken for facing the problems of
the Cyprus economy.
LARNACA – FAMAGUSTA
CO-ORDINATING
The seminar was
co-organised with the
COMMITTEE Taxation Committee. It was held on 7
September 2011 in Nicosia, and 8
During the third quarter
of 20112011
the Committee
carriedand
out
September
in Larnaca
Limassol. The purpose of the seminar
was to inform members in Public
1. On 13 April 2011
the committee
lunch at
practice
of the neworganised
technicala circulars
Zephyros Tavernand
in explain
Larnaca the
with
the new
directorThe
of
imposed
penalties.
Inland Revenue ofseminar
Larnacawas
Mr Marios
Kourouniades.
presented by Mr. Pieris
Marcou, member of the Taxation
Τhe seminar on changes in Taxation Law in effect from 1st July 2011
held
in 2011 a seminar was co-ordinated at Sun Hall
2.
On
4
May
Committee and Tax Partner of Deloitte
Mediterranean FederationNicosia,
of Accountants
Rome.
Limassol in
and
Larnaca
Hotel in LarnacaLtd.
with The
a subject
FieldinAudits
fromwas
the
seminar
Nicosia
Inland Revenue. attended by 259 participants, in Larnaca
by 134 participants and in Larnaca by
Panayiota Vayianou
235 participants.
Chairwoman
On 22 and 23 September 2011 the President of the Institute
CORPORATE GOVERNANCE,
INTERNAL
AUDIT
Several seminars are
planned for
the
AND RISK MANAGEMENT
COMMITTEE
fourth quarter of 2011 in Nicosia,
Larnaca and Limassol, in accordance
During the third
of Plan
2011of the
Corporate
withquarter
the Action
the Education
Governance, Internal
Auditwith
andthe Risk
Management
Committee,
view of
continuing
committee has, within
the
scope
of
its
terms
of
reference,
to provide the members of ICPAC
with
commenced the implementation
of itsforaction
plan and has
relevant seminars
the purposes
of
Continuous Professional Education
(CPE) and to keep them abreast with
ñ Worked on therecent
development
of a survey
on Corporate
changes
in national
and
Governance. The
survey will
sentregulations
to the listed
international
lawsbeand
as
companies in well
Cyprus.
Its
results
will
be
sent
to
all
as changes in the profession.
members. It is also envisaged that the results be
presented during
press conference, within the
MariaaPastellopoulou
activities planned
for
the
celebration of ICPAC’s 50th
Chairwoman
responsibilities of the following departments within an
organisation:
A
photographFinancial
from the seminar
on theThe
Explanation
of Technical
‘Combined
Statements’.
discussion
paper Circulars issued by
ñ Risk Management
the Inland Revenue held on Nicosia, Limassol and Larnaca.
6
71
Institute News
ñ
Internal
Audit
NEW
MEMBERS
ñ
Organisation
andJuly
Methods
During
the period
– September 2011 the following
persons have been accepted as new members of the
Institute:
3307 Constantina Ketoni
ACCA
organisation.
3308 Stavroula Athanasiadou
ACCA
3309
Antonios Christodoulou
ACCA
ñ
The committee,
3310
Antoniades
ACCAon
UnionConstantinos
Affairs committee,
has designed a seminar
3311
Constantinos
Constantinides
ACCAin
“Auditing
EU Funded
Projects”. The seminar,
3312
Katerina
Constantinou
coordination with the Education Committee, is ACCA
planned
for September
2011.
3313
Olymbia Solomonidou
ACCA
ñ
The committee
Green
3314
Andreas C. studied
Andreouthe European CouncilACCA
PaperDora
on Kyriakidou
Corporate Governance and submitted
3315
ACCAits
response
to
the
questions
posed
by
the
paper.
3316 Tasos Zachariou
ACCA
ñ The committee has embarked on a study of the
3317 Costas Taliadoros
ACA
Institute’s Governance procedures. The objective of the
3318 Marinos Mavromichalis
ACA
3319 Anastasia Papanastasiou
ACA
3320
Joanna
Kyriakou
same time recognising the local practicalities andACA
sizes.
3321
George
Tsaggarides
ACA
3322
Polymnia
Efthymiou initiatives within its
ACCA
European
and International
scope
3323
Louiza
domain
and Loizou
continued to contribute articlesACCA
to the
Institute’s
magazine.
3324
Ioanna
Roussi
ACCA
3325 Evgenia Gruny
ACCA
Panicos
G.
Papamichael
3326 Paschalis Paschalides
ACCA
Chairman
3327 Alexis Dritsas
ACA
3328 Myria Dorati
ACA
3329 Loukas Anastasiou
ACA
3330 Aristos Pentaliotis
ACA
3331 Maria Loizou
ACCA
3332
George
Liasi
ACCA
on organizing seminars had been collaborating with
the
3333 Ioanna
Ioannouand the IT committee on
ACA
education
committee
co3334 Georgoula
Arsiotou
ACCA
organising
two seminars.
One on fraud detection utilizing
3335
Anastasios
ACCA
IT
and the
other on Yiangou
fraud detection and prevention.
Both
3336
Niki
Nicolaou
FCCA
3337 Michael Iacovides
ACCA
The
Volume 1 Issue 1 was emailedACA
to all
3338ECFA-ebulletin
Elena Eracleous
ECFA-SIG
(special
interest
group)
and
members
had
3339 Kyriakos Gabriel
155(1)(b)
provided
positive feedback
on this initiative.
3340 Androulla
Hadjiyiannakou
ACA
3341 Eleni Afami
ACA
3342 Constantinos Mitsigkas
ACCA
3343 Antria Christodoulou
ACCA
3344 Andreas Lambrou
ACCA
3345 Christos Tsaousis
ACCA
3346 Eoin
Pambina
Kountouridou
O’Shea
on the
Bribery Act. The UK Bribery ACCA
Act will
28
Institute News
UK
those who
are doing business withACCA
a UK
3347or even
Constantinos
Mitellas
company
outside
the
UK.
3348 Michaelis Vasiliou
ACA
3349 Maria Tofia
ACA
Maria
3350 Krambia-Kapardis
Katerina Spanou
ACA
Chairperson
3351 Stavros Michael
ACA
3352 Iosif Yiannoukas
ACA
3353 Maria Kouroufexi
ACA
3354 Irene Hadjipavlou
ACA
3355
Despoindustry,
Vasiliou investment and other financial
ACA
in
the bank
3356 Emilia
ACA
operations,
on aMakridou
domestic level as well as on a European
3357 It Ioannis
Christofides
ACA
level.
also keeps
contacts with the regulatory bodies,
3358
Iacovos
Kounnamas
ACA
such as the Central Bank of Cyprus (CBC), the Cyprus
and
3359 Georgia
Effe Commission (CySEC) and
ACCA
Securities
Exchange
the
Commissioner
Insurance companies in order
3360 Natassa of
Pilides
ACAto
exchange
views
regarding
the
industry,
as
well
as
other
3361 Kleanthis Pissarides
ACA
organized
groups
3362 Elena
Leventiand associations (for example
ACA
Association
of
Cyprus
Commercial
Banks,
Insurance
3363 George Demosthenous
ACA
Association
of
Cyprus
etc).
3364 Charalambos Charalambous
ACCA
3365 Egli Matheou
ACCA
3366 Hasmig Melian
ACCA
3367 Stavros Petrakides
ACCA
3368 Charalambos Kartoudes
ACA
abroad.
3369 Aggela Philippou
ACA
3370
Mary
Poufou
ACA
3371 Kyriakos
Charalambides
ACA
concentrated
on over
the past three months:
3372 Erma Michael
ACA
3373
ACA
ñ
Law Spyros
relatingIoannou
to Covered Bonds
3374 Kyriakos Assiotis
ACA
The
studied
the draft legislation and directive
3375Committee
Constantinos
Markou
ACCA
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
3376 Jacob Damien Roche
IIPA
which
were
discussed
with
the
Central
Bank
of
Cyprus.
3377 Andreas Kalopetrides
Regulation
1.103 par. 4(1)(d)
Following the passing of the legislation by Parliament,
REMOVALS
87
Nicos Hadjinicolaou
ACCA
1430 Bank
Liza Hamani
ACCA
Central
of Cyprus which affect directly or indirectly
1954 Alexia
ACA
members
of our Panayidou
Institute.
2194 Lazaros Lazarou
ACCA
2808
Chryso
Nathanael
ACAof
In addition, the report to be prepared by the regulator
3098 Andreas
Kimishies
Covered
Bonds was
discussed, as well as the issue ACA
of the
‘Agreed
PASSED Upon
AWAYProcedures’ (‘AUP’). As such, the
decision
to circulate
an illustrative example of theACCA
report■to
356
Aggelos
Christodoulides
7
Institute News
Professional Briefing
Institute News
Professional
Briefing
ICAEW APPOINTS FIRST REPRESENTATIVE IN
CYPRUS
and to theaprofession
at large.
Other
issues dealt
with
were,
ICAEW,
world leader
in the
accountancy
and
finance
among others,
following:
profession,
has the
appointed
Christiana Diola Skordis as its
first staff representative in Cyprus, effective 1 July.
by the
President,
Mr. Theodoros
with the
With
a growing
number
of ICAEW Parperis,
Charteredmet
Accountants
new
of Diola
Finance,
Mr.appointment
Kikis Kazamias
and
in
the Minister
country, Ms
Skordis’
will ensure
discussed
measures
to and
be taken
for support.
facing the
of
they
receive
dedicated
tailored
Anproblems
additional
the
Cyprus
economy.
part of her brief will be strengthening the partnership with
the Institute of Certified Public Accountants of Cyprus
(ICPAC).
Mediterranean
Federation
Accountants
in Rome.
ICAEW
has over
1,300 of
members
in Cyprus
and 500
students, and is committed to providing premium services
On 13
September
a press
conference
wasfirst
heldmarket
at the
and
support
to all 2011
of them.
Cyprus
was the
Offices the
of the
proposals by and
ICPAC
for
outside
UKInstitute
to offer concering
the ACA qualification
is also
the
Cyprus
economy.
The
press
conference
was
given
by
the market with the largest student population outside the
the President
of the
Institute
Theodoros
Parperis. with
UK.
At the heart
of its
work isMr.
working
in partnership
ICPAC as well as in the wider region and internationally to
On 22 and
September
2011 the President
of the Institute
develop
the23
finance
and accountancy
profession.
Theodoros
Philippou
attended
a meeting
the Presidents
As
an ICAEW
Chartered
Accountant,
Msof Diola
Skordis
and
CEOs
of
the
European
Federation
of
Accountants
has worked with both Ernst & Young and PwC in the UK
(FEE)
Member
Bodies
in Vienna
andinaAccountancy
Special Meeting
of
and
Cyprus
and also
works
as a tutor
at the
the
General
Assembly.
University of Cyprus. She is therefore well placed to
understand and support the needs of members in the
region.
Christiana Diola Skordis said: ”It is fantastic to be able to
work with ICAEW to provide the support and services that
Cypriot
I am
looking studied
forward the
to
During members
the last need.
meeting
thereally
committee
helping
ICAEW
members
and
to
helping
ICAEW
achieve
its
aims in theofregion.”
presentation
financial statements and IAS19 relating
Theodoros Philippou, ICPAC Chief Executive, said:
It also initiated
of aFEE’s
discussion
paper
“ICAEW’s
decisiona tostudy
appoint
staff member
is warmly
‘CombinedbyFinancial
Statements’.
discussion
paper
welcomed
the ICPAC
Council. The
We look
forward
to
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
up to 30 September 2011.
working more closely with ICAEW to support and develop
the profession in Cyprus and the region”.
Marios Agathangelou
Chairman
Martin Manuzi, ICAEW Regional Director for Europe,
said:
“ICAEW– Chartered
Accountants
work to the highest
LARNACA
FAMAGUSTA
CO-ORDINATING
professional,
technical and ethical standards and in order
COMMITTEE
to do that they require the best support their institute can
provide.
why of
we2011
arethe
providing
a carried
dedicated
During theThis
thirdisquarter
Committee
out
representative
for our Cyprus members. At the same time,
ICAEW is working with ICPAC to strengthen the finance
1. Onaccountancy
13 April 2011profession,
the committee
organised
a lunch
at
and
which
demands
wellZephyrosand
Tavern
in Larnaca
with the Christiana
new director
of
qualified
committed
representatives.
brings
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
with her a wealth of expertise and experience and we are
very pleased that she will be working with us to deliver
results in the region.”
Inland Revenue.
Media enquiries:
Contact
Kirstina
Reitan, email:
Panayiota
Vayianou
[email protected],
tel: +44 (0)207 920 8607
Chairwoman
Notes
to editors: GOVERNANCE, INTERNAL AUDIT
CORPORATE
During ICAEW
the third quarter of 2011 the Corporate
ABOUT
Governance, Internal Audit and Risk Management
committee
has, within
scope of itsaccountancy
terms of reference,
1.
As a world
leadingtheprofessional
body,
commenced
the
implementation
of
its
action
plan
and
has
ICAEW provides leadership and practical support to over
136,000 members in more than 160 countries, working
with Government, regulators and industry in order to
ñ Worked on the development of a survey on Corporate
ensure the highest standards are maintained.
Our members.
members provide
financial
knowledge
andresults
guidance
It is also
envisaged
that the
be
based
on
the
highest
technical
and
ethical
standards.
They
are trained
to planned
challenge
and organisations
to think
activities
forpeople
the celebration
of ICPAC’s
50th
and act differently, to provide clarity and rigour, and so
ñ Worked
on asustain
white paper
describing
the role,
duties
and
help
create and
prosperity.
ICAEW
ensures
these
responsibilities
the following
departments
within an
skills
are constantlyof
developed,
recognised
and valued.
organisation:
Because of us, people can do business with confidence.
ñ Risk Management
911
Institute News
ñ
Internal isAudit
2. ICAEW
a founding member of the Global Accounting
Alliance with over 775,000 members worldwide.
3. ICAEW has 1340 members, 500 students and 60
authorised training employers in Cyprus. Christiana Diola
joins ICAEW on July 1 as Services Executive to support
ICAEW’s work in Cyprus.
organisation.
ABOUT
CHRISTIANA
DIOLA SKORDIS
ñ
The committee,
in collaboration
with the European
Christiana Diola
Skordis was
“Auditing EU Funded Projects”.
The seminar,
in
born
and
educated
in
the
UK
for September 2011.
to Cypriot parents and read
ñ The committee studied the
EuropeanPhilosophy
Council Green
Politics
&
Paper on Corporate Governance
and
submitted
its
Economics at St Hilda’s
response to the questions posed
by the Oxford.
paper.
College,
She
qualified with Ernst &
Young in London where she
worked best
in practices,
the Auditat and
processes which will incorporate
the
Lead
Advisory
departments.
same time recognising the local practicalities
and sizes.
In 2001
she joined
ñ The committee has continued
to monitor
closely the
all
Corporate
Finance
European and International
initiatives within its
scope
Christiana Diola
domain and continued todepartment
contribute articles
to the
in PwC
in
Cyprus and subsequently
moved to the University of Cyprus in 2002 where she
Panicos
G.toPapamichael
continues
work as a tutor in the Accounting specialism
Chairman
of the Public and Business Administration department.
13TH ANNUAL GENERAL MEETING
OF THE CYPRUS INSTITUTE OF INTERNAL
AUDITORS
Below is ancommittee
extract focusing
economy,
education
and on
thetheITCyprus
committee
on from
cothe
speech
of
Mr.
Onisiforos
A.
Onisiforou,
President
of
theand
Cyprus
Institute
Internal
Auditors
which took place
IT
the other
on of
fraud
detection
and prevention.
Both
during
the
13th
Annual
General
Meeting
of
the
Institute,
on 29/6/2011.
ECFA-SIG
(specialeconomic
interest group)
andhitmembers
“The international
crisis that
Cyprus had
provided
on this initiative.
belatedly,positive
coupledfeedback
with the uncertainty
in the external
environment, has brought to the fore, amongst other
things, the necessity to push for radical changes and
at the same time for considerable improvement in
institutions, practices and attitudes.
The financial
provides
for will
O’Shea
Eoin oncrisis
the Bribery
Act.the
The opportunity
UK Bribery Act
immediate,
decisive and
convincing
in ain the
have
seriousbold,
implications
on those
doingmoves,
business
2
10
UK
or evenconsensual
those who climate,
are doingtobusiness
a UK
preferably
promotewith
structural
company
outside
the
UK.
changes and resolve mainly long-standing problems the
Cyprus economy has been facing and which have worsMaria
Krambia-Kapardis
ened due
to the prevailing situation.
Chairperson
It is generally accepted that there is a dire need for the fisFINANCIAL SERVICES COMMITTEE
cal deficit and public debt to be reduced in a medium-term
perspective. At the same time, the creation of employment
opportunities,
particularly
of high added
value,financial
through
in
the bank industry,
investment
and other
macroeconomic
stability and
be a
operations,
on a domestic
leveldevelopment
as well as onshould
a European
major It
objective.
level.
also keeps contacts with the regulatory bodies,
Allow me just
to mention
indicatively that
a more and
rigorous
Securities
Exchange
Commission
(CySEC)
the
Commissioner
of spending
Insuranceis companies
in order
control of public
called for, along
with toa
exchange
views
regarding
the
industry,
as
well
as
other
restraint on the government payroll, the restructuring
of
organized
groups
(for reform
example
the health sector
and,and
aboveassociations
all, the immediate
of
Association
of
Cyprus
Commercial
Banks,
Insurance
the pension system.
Moreover, productivity has to be increased while the huge
administrative cost is reduced, procedures must be simplimonitored the economic crisis and its consequences in
fied and e-governance implemented. We should invest
much more in research, reinforce innovation, encourage
abroad.
professional training, improve our competitiveness and
enhanceare
the the
attractiveness
of Cyprus
an International
Below
main topics
that theas Committee
has
Financial
Centre.
At Law
the same
time,
institutions
ñ
relating
to the
Covered
Bondsmust be strengthened
along with coordinated and preventive supervision, includThe
Committee
studied the
draft legislation
and directive
ing that
of the financial
organizations
and legislative
and
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
other regulatory frameworks. There is a need for entrenchwhich
were
discussed with
theprinciples,
Central Bank
ing and
implementing
basic
suchofasCyprus.
those of
meritocracy, transparency, accountability and being propFollowing the passing of the legislation by Parliament,
erly informed. A culture must prevail based on an
enhanced feeling of responsibility on the part of decision
makers, as well as a culture of zero tolerance to outbreaks
of corruption and sleaze.
Central Bank of Cyprus which affect directly or indirectly
Covered Bonds was discussed, as well as the issue of the
‘Agreed Upon Procedures’ (‘AUP’). As such, the
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
It is also very important to
improve the effectiveness of
risk management procedures, internal control systems and corporate governance in general. These are
the basic pillars and field of
action for the professional
Internal
Auditor.
The
Internal Auditor, as the
trusted and valuable advisor
of the Administration and the
standard bearer of the code of ethics and the code of professional conduct, can contribute substantially to the comOn 5 September 2011 a delegation of the Institute headed
pliance of leaders, managers and other employees with the
legal, ethical and social responsibilities of organizations.
In parallel, the Internal Auditor can contribute substandiscussed measures to be taken for facing the problems of
tially to the effective practices of corporate governance
the Cyprus economy.
and risk management, and in particular the new, variable
and interdependent risks of the financial crisis, thus helpOn 7 September 2011 Mr. Christos Kyriakides, Senior
ing the organizations to become less vulnerable.
For these reasons, as the Cyprus Institute of Internal
Auditors, we believe that investing in internal auditing,
both in the public and private sectors, can add real value
and provide manifold benefits to organizations, firms and
to the economy as a whole.”
tional applicant base. IFAC is initiating the recruitment
process in the fourth quarter of 2011 to allow time for a
comprehensive search, Board approval, and relocation,
and to provide the new CEO with a positive and seamless
transition before Ian Ball’s departure.
Institute News
IFAC BEGINS SEARCH FOR NEXT CHIEF EXECUOn 22 and 23 September 2011 the President of the Institute
TIVE OFFICER
Korn/Ferry Has Been Retained
The International Federation of Accountants (IFAC), the
global organization for the accountancy profession with
members and associates in 125 countries is seeking an outstanding individual to become its next chief executive offiCOMMITTEESʼ ACTIVITIES
cer (CEO), based in New York City. The candidate will
succeed
current CEO
Ian Ball, whose
contract is set to
ACCOUNTING
STANDARDS
COMMITTEE
expire in February 2013 and who is not seeking a further
term.
presentation
financial
relating
The
executiveofsearch
firmstatements
Korn/Ferryand
hasIAS19
been retained
mainly
to the abolition
of the ‘corridor
for
the search.
IFAC’s management
teammethod’.
will partner with
Korn/Ferry to actively engage IFAC member bodies, the
It also initiated
a studyandof other
FEE’sstakeholders
discussion inpaper
accountancy
community,
the
‘Combined
Financial
Statements’.
The
discussion
paper
recruitment process to encourage a diverse and interna-
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
IFAC’s mission is to serve the public interest by contributwhich was published in April 2011 is open for comments
ing to the development, adoption and implementation of
high-quality international standards and guidance; contributing
to the development of strong professional
Marios Agathangelou
accountancy
Chairman organizations and accounting firms, and to
high-quality practices by professional accountants; promoting
the value
of professional
accountants worldwide;
LARNACA
– FAMAGUSTA
CO-ORDINATING
COMMITTEE
and
speaking out on public interest issues where the
accountancy profession’s expertise is most relevant.
the following
activities:
The
IFAC CEO
is responsible for developing and articulating policy positions on issues affecting the profession,
implementing all projects approved by IFAC’s Board and
Council, facilitating collaboration and cooperation with
IFAC member bodies, and overseeing the administrative
and operational management of IFAC’s activities. The
CEO
in close
cooperation
Hotelworks
in Larnaca
with
a subject with
FieldIFAC’s
Audits volunteer
from the
leadership
to
support
the
organization’s
mission, and is
Inland Revenue.
responsible to the elected president and the IFAC Board.
Panayiota Vayianou
Current
CEO Ian Ball joined IFAC as its chief executive
Chairwoman
officer in March 2002, having previously served IFAC as
CORPORATE
INTERNAL
AUDIT
chair
of its PublicGOVERNANCE,
Sector Committee (now
the independent
AND
RISK
MANAGEMENT
COMMITTEE
International Public Sector Accounting Standards Board)
and as a member of its Nominating Committee. Prior to
During
quarter of
of Accounting
2011 the and
Corporate
that,
Mr. the
Ball third
was Professor
Public
Policy at Victoria University of Wellington, an internacommittee has, within the scope of its terms of reference,
tional consultant in public management, an accounting
commenced the implementation of its action plan and has
standard setter, and a senior official in the New Zealand
Treasury. “I am privileged to have led IFAC and the
accountancy
profession
for nearlyofa adecade
am very
ñ Worked on
the development
surveyand
on ICorporate
proud
of what weThe
havesurvey
achieved.
looksent
forward
to servGovernance.
willI be
to the
listed
ing IFAC
for theinremainder
of my
term.will
However,
companies
Cyprus. Its
results
be sentfor
to me
all
personally,
it will
be time
to look that
to new
members.
It then
is also
envisaged
theprofessional
results be
presented
a presssome
conference,
the
challenges
and during
also to devote
more timewithin
to family
activities
planned
for
the
celebration
of
ICPAC’s
50th
and to activities outside the profession,” said Mr. Ball.
“We are grateful for Ian Ball’s contributions to IFAC.
During his tenure as CEO, Ian’s dedication and expertise
organisation:
steered a steady course, even in particularly challenging
times
such
as the Enron crisis and the current global finanñ Risk
Management
31
11
Institute News
ñ
Audit
cialInternal
crisis. We
are pleased to have a leader who worked
side by side with our member bodies, standard setters, regñ
Organisation
and Methods
ulators,
and governments
worldwide to deliver IFAC’s
message, support the global accountancy profession, and
champion global convergence to international standards,”
noted IFAC President Göran Tidström.
organisation.
Interested candidates should contact Korn/Ferry Senior
Client
ChuckinEldridge
at
ñ
ThePartner
committee,
collaboration
with the European
[email protected].
Forcoordination
reference, the
profile
for the IFAC
CEO canisbeplanned
found
with
the Education
Committee,
for September 2011.
at http://web.ifac.org/download/IFAC-CEO-Profile.pdf.
Paper REDUCES
on Corporate
Governance and
submitted its
ICAEW
REGULATORY
REQUIREMENT
response
to
the
questions
posed
by
the
paper.
FOR CYPRUS MEMBERS
ICAEW has amended its practising certificate regulations,
reducing
the which
regulatory
cost wherebest
appropriate
its
processes
will incorporate
practices,for
at the
members
resident
in
Cyprus.
From
1
January
2012,
in
the
circumstances
outlined
below, to
ICAEW
accept
ñ The committee
has continued
monitorwill
closely
all
ICPAC’s
written
entitlementinitiatives
to practise
instead
of
European
and International
within
its scope
domainown
andpractising
continuedcertificate.
to contribute articles to the
ICAEW’s
This amendment will apply to members who:
Chairman
ñ practise within Cyprus and the EEA but outside the
United Kingdom, Republic of Ireland or Crown
Dependencies*; and
ñ are members of ICPAC; and
ñ are authorised
by ICPAC
to practise
in Cyprusonand/or
education
committee
and the
IT committee
coa
third
country.
If members
meet
thesethe
three
will
be offered
before
end conditions,
of the year.ICAEW will not
require them to hold and pay for a practising certificate
The
Volume 1 Issue 1 was emailed to all
fromECFA-ebulletin
ICAEW.
provided
feedback
on this
Practisingpositive
members
in Cyprus
whoinitiative.
undertake professional
business in respect of clients in the United Kingdom,
Republic of Ireland or Crown Dependencies* should
continue to hold the ICAEW practising certificate and if
they are carrying out an audit of a UK company, they will
need to retain their ICAEW practising certificate and have
audit registration
from
ICAEW.
O’Shea
Eoin on the
Bribery
Act. The UK Bribery Act will
Members
can
continue
to
hold
their
ICAEW
practising
have serious implications on those
doing
business
in the
24
12
UK
or even
thosewish,
whoand
arealldoing
business
withare
a UK
certificate
if they
ICAEW
members
still
company
outside
the
UK.
entitled to all of the support available from the ICAEW,
including advice published at icaew.com/practice.
Chairperson
For more information, please email
[email protected].
(*Isle of Man, Jersey and Guernsey)
IASB ANDonFASB
ANNOUNCE
INTENTION
TO REoperations,
a domestic
level as well
as on a European
EXPOSE
LEASING
PROPOSALS
level.
It also
keeps contacts
with the regulatory bodies,
The International
Accounting
Standards(CySEC)
Board (IASB)
Securities
Exchange
Commission
and and
the
Commissioner
of Insurance
companies
in order
to
the US-based Financial
Accounting
Standards
Board
exchange
views
regarding
the
industry,
as
well
as
other
(FASB) announced today their intention to re-expose their
organized
groupsforand
associations
example
revised proposals
a common
leasing(for
standard.
ReAssociation
of
Cyprus
Commercial
Banks,
Insurance
exposing the revised proposals will provide interested
Association
etc). to comment on revisions the
parties with of
anCyprus
opportunity
boards have undertaken since the publication of an
exposure draft on leasing in August 2010.
Even through the boards have not completed all of their
abroad.
deliberations, the decisions taken to date were sufficiently
differentare
from
in the
drafthas
to
Below
thethose
mainpublished
topics that
the exposure
Committee
warrant reexposure
revised
proposals. The boards
concentrated
on overofthethe
past
three months:
intend to complete their deliberations, including
consideration
of the
period, during Q3 2011 with
ñ
Law relating
to comment
Covered Bonds
a view to publishing a revised exposure draft shortly
The
Committee studied the draft legislation and directive
afterwards.
which
discussedAwith
the Central
Bank of Cyprus.ON
IASB were
LAUNCHES
PUBLIC
CONSULTATION
ITS FUTURE WORK PROGRAMME
The International Accounting Standards Board (IASB)
launched today a public consultation to seek broad public
input on the strategic direction and overall balance of its
future work
Central
Bankprogramme.
of Cyprus which affect directly or indirectly
Since the creation of the IASB in 2001, International
Financial
Reporting
(IFRSs)byhave
increasingly
In
addition,
the reportStandards
to be prepared
the regulator
of
become Bonds
the internationally
accepted
reporting
Covered
was discussed,
as well financial
as the issue
of the
independence
of the
has decided
language around
theregulator.
world. AsThe
the Committee
number of jurisdictions
that
the
report
of
the
regulator
is
to
be
in
the
of an
applying IFRSs increases, stakeholders haveform
identified
‘Agreed
Upon issues
Procedures’
(‘AUP’).byAs
new accounting
for consideration
the such,
IASB. the
decision
to circulate an
illustrativepublished
example of today
the report
to
The consultation
document
asks
deliberately open questions to gather views on the IASB’s
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
future work programme from all those involved in or
affected by financial reporting. In particular, the IASB is
seeking feedback on how it should balance the
development of financial reporting with the maintenance
of IFRSs and—with consideration of our time and resource
constraints—those areas of financial reporting that should
be given the highest priority for further improvement.
These entities would be exempt from the consolidation
requirements and instead would be required to account for
all their investments at fair value through profit or loss.
The exposure draft also includes disclosure requirements
about the nature and type of these investments.
Institute News
IASB PROPOSES ADJUSTMENT TO EFFECTIVE
DATE OF IFRS 9
published today for public comment an exposure draft of
proposals to adjust the mandatory effective date of IFRS 9
Financial Instruments. The exposure draft proposes an
effective date of 1 January 2015 (currently 1 January 2013)
for IFRS 9.
the Cyprus economy.
In publishing the exposure draft, the Board noted the
importance of aligning all phases of the project (both
completed and ongoing) to have the same effective date.
The comment period of the exposure draft closes on 21
October 2011.
IASB PROPOSES TO EXEMPT INVESTMENT
ENTITIES FROM CONSOLIDATION
REQUIREMENTS
published today proposals to define investment entities as
a separate type of entity that would be exempt from the
accounting requirements in IFRS 10 Consolidated
Financial Statements.
Investment entities are commonly understood to be entities
that pool investments from a wide range of investors for
investment purposes only. Currently, IFRS 10
Consolidated
Statements
would require
ACCOUNTINGFinancial
STANDARDS
COMMITTEE
consolidation if an investment entity controls an entity it is
investing
in. last
However,
developing studied
IFRS 10,
During the
meetingwhen
the committee
the
investors
commented
that relating
this would
provideinthem
amendments
in IAS1
to not
changes
the
presentation
of financial
statements
andtheIAS19
relating
with
the information
they need
to assess
value of
their
mainly to the To
abolition
of the
method’.
investments.
address
this ‘corridor
issue, the
exposure draft
published today proposes criteria that would have to be
It also
a study
of FEE’s
discussion entity.
paper
met
by aninitiated
entity in order
to qualify
as an investment
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
This project is being undertaken jointly by the IASB and
the US national standard-setter, the Financial Accounting
Standards Board (FASB). Both boards’ proposals are
broadly
aligned. However, the FASB is considering
Marios Agathangelou
proposing
Chairman that the exemption would extend to cases in
which the investment entity is owned by a larger group that
isLARNACA
not itself an–investment
entity.CO-ORDINATING
The FASB will publish its
FAMAGUSTA
COMMITTEE
exposure
draft in due course.
During
the third
quarter
of 2011Entities
the Committee
out
The
exposure
draft
Investment
is open carried
for public
the
following
activities:
comment until 05 January 2012 and can be accessed via
http://go.iasb.org/open+to+comment. The FASB will align
its comment period with that of the IASB to ensure joint
redeliberations. A podcast on these proposals and a highInland Revenue of Larnaca Mr Marios Kourouniades.
level summary of the proposals (IASB Snapshot) is
available on the project page. If adopted, the proposals
would
into IFRS
10. Field Audits from the
Hotel be
in integrated
Larnaca with
a subject
Inland Revenue.
IAESB
CLARIFIED STANDARD ON
PanayiotaPROPOSES
Vayianou
PRACTICAL
Chairwoman EXPERIENCE REQUIREMENTS FOR
ASPIRING PROFESSIONAL ACCOUNTANTS
CORPORATE GOVERNANCE, INTERNAL AUDIT
ANDInternational
RISK MANAGEMENT
COMMITTEE
The
Accounting Education
Standards Board
(IAESB) today released for public exposure a proposed
During of
the International
third quarter
of 2011
the Corporate
revision
Education
Standard
(IES) 5,
Practical Experience Requirements. IES 5 currently
prescribes the practical experience International
Federation of Accountants (IFAC) member bodies should
require before qualification as a professional accountant.
In
can be of
helpful
to on
educational
ñ addition,
Worked onthis
the IES
development
a survey
Corporate
organizations,
employers,
regulators,
government
authorities,
andinany
other stakeholders
whobesupport
companies
Cyprus.
Its results will
sent to the
all
practical
experience
professional
members.
It is of
also
envisagedaccountants.
that the results be
the celebration
of ICPAC’s
50th
The activities
revision planned
of IES for
5 continues
to support
the use
of
practical experience in developing the competence of an
aspiring professional accountant, but also proposes:
organisation:
ñ greater flexibility in measuring practical experience;
ñ Risk Management
51
13
Institute News
ñ Internal
Audit
permitting
supervisors or mentors to direct an aspiring
professional accountant’s experience; and
ñ requiring practical experience to be recorded in a
verifiable and consistent form.
“The IAESB believes that relevant practical experience is
organisation.
at the heart of the development of competence of a
professional
accountant.
This revision of
IESthe
5 reflects
the
ñ
The committee,
in collaboration
with
European
different
that
experience
be gained,
and isona
Union ways
Affairs
committee,
hascan
designed
a seminar
“Auditing
Funded
Projects”.
The seminar,
in
significant
stepEU
from
a rules-based
approach
to a system
coordination
with the
Education
Committee,
is planned
based
on principles,”
explained
Mark
Allison, chairman
of
for
September
2011.
the IAESB. “IFAC member bodies will be required to
demonstrate that the method of gaining experience follows
one of three approaches: input-based, output-based, or a
response to the questions posed by the paper.
combination of input- and output-based approaches. We
have
ensured that
this approach
to experience
requirements
Institute’s
Governance
procedures.
The objective
of the
for study
Initial Professional
Development
is
consistent
with
that
is to assist the Institute develop governance
recently
issued
the Continuing
Professional
processes
which for
will incorporate
best practices,
at the
Development
(IES 7) the
of local
experienced
professional
same time recognising
practicalities
and sizes.
ñ
The committee has continued to monitor closely all
accountants.”
continued atoproject
contribute
articles
to the
Thedomain
IAESB and
has undertaken
to redraft
all eight
of
its IESs in accordance with its new clarity drafting
conventions, as outlined in its 2010-2012 Strategy and
Work Plan. This project began in December 2010 with the
Chairman
proposed revision of IES 7, Continuing Professional
Development:CRIME
A Program
of Lifelong Learning and
ECONOMIC
AND FORENSIC
Continuing
Development
of
Professional Competence.
Proposed revisions of IES 4, Professional Values, Ethics,
and Attitudes,
IESof6,2011,
Assessment
Professional
During
the thirdand
quarter
the ECFAofsubcommittee
on
organizing were
seminars
had for
beenexposure
collaborating
with2011.
the
Competence,
released
in April
education
committee
and
the
IT
committee
on
coIES 1, Entry Requirements to a Program of Professional
organising
seminars. was
One released
on fraud detection
Accountingtwo
Education,
on June utilizing
21. The
IT
and
the
other
on
fraud
detection
and
prevention.
comment period for these three IESs is still open.Both
The
current timetable envisages that all IESs will have been
revised and redrafted, or redrafted only, by the first quarter
of 2013.
CHANGING
ROLES
ANDinEMPLOYER
Finally,
there are
two articles
this issue of “Accountancy
EXPECTATIONS
DEFINE
Cyprus”
in the ECFA
column.AREAS
The firstOF
one is authored by
COMPETENCY
FOR
PROFESSIONAL
the
title “Fraud: The
auditor’s responsibilities under
ACCOUNTANTS
IN BUSINESS
O’Shea
Eoin on the Bribery
Act. TheinUK
Bribery Act
will
The Professional
Accountants
Business
(PAIB)
have
seriousofimplications
on those
doing business
in the
Committee
the International
Federation
of Accountants
26
14
UK
or even
those who
are doingand
business
with a How
UK
(IFAC)
published
Competent
Versatile:
company
outside
the
UK.
Professional Accountants in Business Drive Sustainable
Organizational Success, which supports the global
accountancy profession in responding to changing
Chairperson
expectations of society, financial markets, and
organizations, and promotes the value of professional
accountants in business to their organizations.
Organizational
needs areinvestment
evolving faster
than ever,
and
in
the bank industry,
and other
financial
professionalonaccountants
to
operations,
a domesticneed
leveltoasadapt
welltoasthese
on achanges
European
best serve
their
employers,
relevance
and
level.
It also
keeps
contacts and
withmaintain
the regulatory
bodies,
such
as the
Central
Bank
(CBC), the Cyprus
and
public
trust.
With
thisof Cyprus
new publication,
the PAIB
Securities
Exchange
Commission
(CySEC)
and
the
Committee is striving to support the global accountancy
Commissioner
of its
Insurance
in order to
profession and help
memberscompanies
guide their organizations
exchange
views
regarding
the
industry,
as
well
as other
to create sustainable value.
"In today's tough global economic climate, organizations
can fail because their drive for short-term success causes
them to overlook factors vital for their long-term survival,”
commentedthe
Roger
Tabor, crisis
IFACand
PAIB
chair.
monitored
economic
its Committee
consequences
in
“So,
in
Competent
and
Versatile,
we
focus
on
achieving
success that can be sustained. Professional accountants
abroad.
have the right instincts and tools to help their organizations
Below
topics
has
maintainare
the the
rightmain
balance
to dothat
this.the
But Committee
they must—and
concentrated
on over
three months:
can—be adaptable
to the
newpast
challenges
and supported in this
by their professional associations."
This publication identifies eight drivers of sustainable
organizational success—what organizations need to do to
achieve and sustain success in light of opportunities and
challenges in the business environment. These drivers are
the focus the
of organizations
to achieve
lasting
Following
passing of thestriving
legislation
by Parliament,
success,
and,
therefore,
provide
a
basis
for
determining
the
expected
key areasof the
of Central
competency
forCyprus,
professional
with
representatives
Bank of
during
accountants
in business.
which
various
concerns of ICPAC were discussed
Central
Bank of Cyprusapproach
which affect
directly
indirectly
This employer-driven
is aimed
at orhelping
the
members
of our Institute.
global accountancy
profession facilitate sustainable
organizational success through the education, training, and
In
addition, the
report to be accountants.
prepared by The
the regulator
of
development
of professional
publication,
and accompanying employer-focused brochure, is
intended to support IFAC members and associates in
understanding and promoting the diverse contribution of
professionalwill
accountants
in Central
businessBank
as creators,
enablers,
Committee
inform the
of Cyprus
of the
preservers,
and
reporters
of
sustainable
value.
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
NOTE RELATED TO ACCOUNTING AUDITING AND RELEVANT ISSUES
Institute News
By Tassos Anastasiades, Deputy Editor, Accountancy Cyprus
THE
BALLADEERACTIVITIES
OF THE BALANCE – SHEET
COUNCILʼS
Accounting has very few rock stars but Sir David Tweedie
is one of them. True, the Scot may not trash hotel rooms
met as
fourthe
times
andhead
considered
of interest
to ICPAC
but
first
of thematters
International
Accounting
and to the Board
profession
at large.
Other
dealt with
were,
Standards
(IASB),
which
setsissues
accounting
standards
among
following:
for
mostothers,
of the the
world’s
major economies outside America,
he is the profession’s towering figure. After ten years in the
chair,
he has handed
to Hans Hoogervorst,
Dutch
On 5 September
2011over
a delegation
of the Institutea headed
financial regulator, on July 1st. Sir David’s biggest project
has been convergence of IASB’s rules with those of
America’s Financial Accounting Standards Board (FASB).
discussed
measures
to deadline,
be taken for
facing
the problems
of
The
two had
set a June
timed
to coincide
with Sir
the
Cyprus
economy.
David’s retirement, to iron out their differences. That
won’t be met. In April they announced a postponement on
four
revenue
accounting,
On 7issues:
September
2011 recognition,
Mr. Christos lease
Kyriakides,
Senior
insurance
contracts
and
which
financial
instruments
to
record at “fair”, or market, value.
How to treat financial instruments is by far the toughest
On 13 September
2011 aitspress
conference
was Bob
held Herz,
at the
question.
In 2009, under
previous
chairman,
Officesnarrowly
of the Institute
concering
proposals
by be
ICPAC
for
FASB
voted 3-2
that all assets
should
booked
atthefair
valueeconomy.
on banks’The
balance-sheets.
IASBwas
proposed
a
Cyprus
press conference
given by
less
zealous,
split
model
whereby
loans
held
mainly
for
their income rather than for trading purposes could be
booked at amortised cost. Mr Herz left last year, to be
replaced by Leslie Seidman. FASB’s expanded, sevenMr. Theodoros
Parperis
and the General
member
board has
now “tentatively”
decidedManager
to moveMr.
in
Theodoros
Philippou
attended
a meeting of the Presidents
IASB’s
direction.
Under
a yet-to-be-released
proposal,
assets
to be traded
held for sale
would beofbooked
at fair
and CEOs
of theorEuropean
Federation
Accountants
value
in
profit-and-loss
statements.
SEC PUSHES FOR CHINA AUDITOR CHECKS TO
EASE ACCOUNTING FEARS
US regulators will push for a deal that would allow them
to inspect auditors based in China in an effort to ease rising
ACCOUNTING
COMMITTEE
investor
concerns STANDARDS
over the accounting
of many Chinese
companies.
amendments
IAS1USrelating
to changes
in the
Officials
fromin the
Securities
and Exchange
presentation and
of financial
statements
and IAS19
relating
Commission
Public Company
Accounting
Oversight
Board
to abolition
meet counterparts
in Beijing
to negotiate a
mainlyplan
to the
of the ‘corridor
method’.
deal. The talks with China’s finance ministry and
Securities
Regulatory
will centre
on allowing
It also initiated
a Commission
study of FEE’s
discussion
paper
PCAOB
inspectors
into
the
country
to
review
auditing
firms as required under the Sarbanes-Oxley law.
ACCOUNTANCYCYPRUS
CYPRUSññVOLUME
VOLUME104
104ññSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
whichSHIFTS
was published
in IN
April
2011 is open
for comments
SEC
FOCUS
PURSUING
INDIVIDUALS
In the years since the financial crisis began, US regulators
have
come
under fire for the limited number of cases
Marios
Agathangelou
brought
against
individuals.
Chairman
Recently, the US Securities and Exchange Commission
LARNACA – FAMAGUSTA CO-ORDINATING
embraced a potentially controversial tactic that seeks to
COMMITTEE
quell such criticism. The commission sued Edward
Steffelin, a manager at an investment advisory firm,
During the
third
of 2011
the Committee
carried
alleging
that
hequarter
committed
fraud
but did not
do out
so
the
following
activities:
intentionally. Former SEC staff members said the
commission’s decision to bring charges of unintentional
1. Onwas
13 April
2011
committee
organised ita faced
lunch inat
fraud
unusual
andthe
reflected
the challenge
Zephyros
Tavern
in Larnacainvolved
with the
newcrisis.
director of
pinning
blame
on individuals
in the
Russell Ryan, a former SEC enforcement attorney who is
now
in4private
practice,
said: “There
is a lot of pressure
on
2. On
May 2011
a seminar
was co-ordinated
at Sun Hall
the
agency
to
hold
individuals
accountable,
but
that
pressure
weighs against the reality that, in a lot of cases,
Inland Revenue.
people did not commit intentional fraud and it’s very
difficult to prove that they did”.
Panayiota Vayianou
Chairwoman
REGULATORS AGREE EXTRA BANK CAPITAL
PROTECTION
Central bankers and regulators have agreed to impose an
During
the charge
third ofquarter
of to2011
thecent
Corporate
extra
capital
1 per cent
2.5 per
of riskadjusted
assets on
the largest
banks
in aRisk
bid to Management
protect them
Governance,
Internal
Audit
and
from
the big
losses
that
another
financial
committee
has,
within
thecould
scopetrigger
of its terms
of reference,
meltdown.
The
agreement,
forged
in
Basel
represents
a
victory
for
countries
like
the
US
and
the
UK,
which
wanted 30 “global systemically important financial
institutions”
to carry
additional capital
to makeonthem
safer.
ñ Worked on
the development
of a survey
Corporate
After months of wrangling, bankers finally forged a
compromise deal that saw agreement on a smaller
surcharge in exchange for a buffer made purely of equity.
of ICPAC’s
The activities
surchargeplanned
comes for
on the
top celebration
of the worldwide
Basel50th
III
minimum of 7 per cent set last year for all banks. That
ñ Worked
on aeight
whiteofpaper
describing
the interconnected
role, duties and
means
roughly
the biggest,
most
responsibilities
of the
departments
an
banks
have to maintain
topfollowing
quality “core
tier onewithin
capital”
organisation:
equal
to 9.5 per cent of their risk-weighted assets by 2019.
About 20 more banks will face total ratios of 8 to 9 per
ñ Risk
cent.
■ Management
71
15
Institute News
ñ Internal Audit
Press Conference
The 10% corporation tax should be protected
as a treasure
proposals by ICPAC for the Cyprus Economy
organisation.
for September 2011.
Chairman
On the 13th September 2011 a press conference was given
at the Offices of the Institute of Certified Public
Accountants of Cyprus, by the President of the Institute,
Mr. Theodoros Parperis, during which the proposals of
ICPAC for the Cyprus economy were presented.
As stated bycommittee
Mr. Parperis
thethe
services
provided to on
foreign
education
and
IT committee
cocompanies
which
are
attracted
and
activated
in
Cyprus
is
the
healthiest
and
most
productive
sector
of
the
Cyprus
economy.
The development
prospects
of this sector as well
will
be offered
before the end
of the year.
as of Cyprus as an International Business Centre (IBC) are
unlimited.
The
ECFA-ebulletin Volume 1 Issue 1 was emailed to all
Competition
by other
European
Centres, as for
provided
positive
feedback
on thisBusiness
initiative.
example Luxembourg, Netherlands, Ireland, Malta etc is
intensified
thusarticles
any additional
should be
Finally,
thereand
are two
in this issuetaxes
of “Accountancy
Cyprus”
the efforts
ECFA column.
first onetois improve
authored the
by
avoided; inalso
should The
be exerted
abusiness
member environment
of our committee
and Leonidas
promoteIeronymides
Cyprus aswith
an
the
title “Fraud:
The auditor’s
International
Business
Centre. responsibilities
In this respectunder
two
ISA240”
the second
by a well-known
UK lawyer
examples and
concerning
Luxembourg
and Hungary
were
O’Shea
Eoin
on
the
Bribery
Act.
The
UK
Bribery
Act
will
given to prove the intensity of competition.
2
16
Chairperson
such as the CentralPROPOSALS
Bank of CyprusFOR
(CBC), the Cyprus and
DEVELOPMENT
Securities Exchange Commission MEASURES
(CySEC) and the
WHICH
CAN
BE
IMPLEMENTED
IMMEDIATELY
exchange views regarding
the industry, as well as other
ñRenegotiation
extension
of
Association of Cyprus
CommercialorBanks,
Insurance
Agreements
etc). for the avoidance of double
taxation with key countries.
- Renegotiation,
forits
example
with India,
monitored the economic
crisis and
consequences
in
Ukraine
and
the
USA
abroad.
- New agreements:
ñ G20
countries
as Brazil, Mexico,
concentrated on over
the past
three such
months:
Argentine, South Korea, Japan,
Indonesia,Bonds
Saudi Arabia, Australia.
ñ Law relating to Covered
ñ Hong
Kong studied the draft legislation and directive
The
Committee
ñ Countries
of the with
African
continent
which
will be
which
were discussed
the Central
Bank
of Cyprus.
selected on the basis of the prospects of attracting foreign
investments.
Following
the passing of the legislation by Parliament,
We believe
that theofteam
of officers
Ministry
of
with
representatives
the Central
Bankatofthe
Cyprus,
during
Finance
dealing
with
renegotiation
or
extension
of
the
double tax
should
strengthened
in
regarding
thetreaties
provisions
of thebeDirective
issuedand,
by the
cooperation
with
the
private
sector,
pursue
the
realization
of the above
targets.
members
of our
Institute.
ñ addition,
The promotion
forbe prepared
adoption byof
outstanding
In
the report to
the regulator
of
harmonization
bills
which
will
assist
the
Covered Bonds was discussed, as well as the issueinof the
development
of regulator. The Committee has decided
independence
of the
- Undertakings
of Collective
in
‘Agreed
Upon Procedures’
(‘AUP’). Investments
As such, the
Transferable
Securities
and
Alternative
Investment
Managers
decisionFund
to circulate
an illustrative example of the report to
- Fiduciary Services
1
Institute News
Press Conference
ñ Improvement of the taxation method of intellectual
property rights for attracting foreign companies so as to
use Cyprus in the administration of these rights, such
as:
i. Allowing depreciation on the cost of capital for
acquiring intellectual property rights, e.g. 25%
ii. Allowing a discount on the income from property
rights, e.g. 80%
as in the case of Luxembourg.
COUNCILʼS
ACTIVITIES
1.Immovable property sector
ñ
Profits
fromquarter
permanent
settlement
and
During
the third
of 2011 the
Council ofabroad
the Institute
dividends
from
abroad
to
be
completely
exempted
andfrom
to thetax.
profession at large. Other issues dealt with were,
ñ All interest received by a company to be subjected only
to corporation tax.
ñ All benefits in kind, including allowances both in the
public and the private sector should be taxed.
new Minister FOR
of Finance,
Mr.
Kikis MEASURES
Kazamias and
PROPOSALS
MEDIUM
– TERM
the Cyprus
economy. of our taxation system and the
For
the modernization
2. A study for designing a special taxation regime for the
Marios Agathangelou
repatriation
of funds, as for example a reduced defence tax
Chairman
rate on interest earned on such deposits at banks in Cyprus.
Institute News
removal of existing distortions which will help in
On 7 September
2011 Mr. Christos
Kyriakides,and
Senior
improving
the functioning
of the economy
the
competitiveness
of
Cyprus
as
an
International
Business
Centre,
we suggest
thatof Accountants
the following
should be
Mediterranean
Federation
in Rome.
considered:
Reforming the Cyprus economy
- Abolition of stamp duty for contracts
- Abolition of transfer fees
- The tax on immovable property should be an allowable
which wasfor
published
in April
2011 is open for comments
deduction
income tax
purposes.
LARNACA
3.
Abolition –orFAMAGUSTA
reduction or CO-ORDINATING
introduction of a fixed
COMMITTEE
registration
fee for companies taking into account the
competitive European centres, e.g. Luxembourg. The
During the
quarter
of competitive.
2011 the Committee carried out
existing
fee third
of 0.6%
is not
4. For promising development services, e.g. medical
1. On education
13 April 2011
the committee
organised
lunch at
sector,
etc special
concessions
could bea granted,
Zephyros
Tavern in
Larnaca
with the new director of
such
as accelerated
capital
allowances.
5. Modernization of taxation on gambling so as to increase
2. On
4 May 2011
a seminar
co-ordinated
Sun Hall
tax
revenues
and enable
thewas
State
to exerciseat effective
Hotel in■ Larnaca with a subject Field Audits from the
control.
Inland Revenue.
Panayiota Vayianou
Chairwoman
Cyprus economy: The opportunity
for major reforms should not be lost
When the Cyprus economy
began to experience serious
economic difficulties in
2008 the government was
ACCOUNTING STANDARDS
quickCOMMITTEE
to suggest that these
were the outcome of the
international
economic
crisis. Further-more, as
stated
confidently
by
President
Christofias
himself,
economy paper
was
It also initiated a study of
FEE’sthe
discussion
strong The
and discussion
would more
or
‘Combined Financial Statements’.
paper
By Dr. Andreas Theophanous*
2
dealtgowith
the following:
less
through
the crisis with little problems. The Ministry
of Finance and the government made such growth
ñ Worked that
on the
development
a survey
on Corporate
projections
a simple
searchofon
the internet
would
Governance.
The
survey
will
be
sent
to
the
listed
create great embarrassment today.
The reality though was very different. Then came the
events of July 11, which through unprecedented
activities planned for the celebration of ICPAC’s 50th
incompetence and irresponsibility further damaged what
were
false hopes
of economic
recovery.the
But,
it duties
has to and
be
ñ Worked
on a white
paper describing
role,
stressed,
irrespective
international
economic
crisis
responsibilities
of of
thethe
following
departments
within
an
and organisation:
the Mari naval base disaster, the Cypriot economy had
and continues to have serious structural problems. Even in
ñ Risk Management
1
17
Institute News
ñ
the Internal
absenceAudit
of regional and/or international shocks these
deep problems were bound to lead to high unemployment
ñ
andIndeed,
Methods
andOrganisation
soaring prices.
for some time now Cyprus had
been caught in the midst of stagflation.
For years there has been an unacceptable level of
complacency due to the successful record of what we have
organisation.
come to describe as the economic miracle. This in its turn
contributed
to a systematic
violation with
of basic
norms of
ñ
The committee,
in collaboration
the European
rational
management.
example,
how isonit
Unioneconomic
Affairs committee,
has For
designed
a seminar
possible
not to EU
have Funded
problemsProjects”.
with the viability
of pension
“Auditing
The seminar,
in
funds
when
there
are
contributions
and
benefits
of
two
for September
speeds
and which 2011.
are indirectly related? Specifically, the
ñ
The
committee
studied
Council
Green
pensions of employees
of the
the European
civil service
and of
the
Paper
on
Corporate
Governance
and
submitted
its
broader public sector are proportionately higher, despite
response
to
the
questions
posed
by
the
paper.
the fact that contributions from their salaries are lower than
the respective deductions of employees in the private
sector. Obviously this cannot continue.
Furthermore,
for years the
there
been a misguided
same time recognising
localhas
practicalities
and sizes.
assumption,
essentially
in
the
broad
public
sector,
ñ The committee has continued to monitor closely that
all
wages
and benefits
arose basically
European
and International
initiatives from
withincollective
its scope
domain and
continued
to contribute
articles ittois the
agreements.
It has
been forgotten
that ultimately
the
effectiveness
of the economy that constitutes the main
criterion for the terms of employment and prosperity.
Panicos
G. Papamichael
Consequently,
during the recession of the period 2008Chairman
2010 the public payroll increased annually on average by
about 8%. This was the outcome of automatic increments
and cost of living allowances (COLA) as well as new
personnel that was hired. Inevitably the fiscal indicators
deteriorated. Similar actions in the semi-public institutions
contributed
to the
increase
prices
of utilities and
on
organizing
seminars
hadofbeen
collaborating
withother
the
services. committee and the IT committee on coeducation
While
expenditures
on salaries
grew
recklessly
the
IT
and public
the other
on fraud detection
and
prevention.
Both
government
wanted
to
find
ways
to
increase
its
revenues,
partly to pay the increments in the civil service. The
The
ECFA-ebulletin
Issue 1as
was
emaileddid
to not
all
government
and the Volume
political1system
a whole
ECFA-SIG
(special
interest
group)
and
members
had
have the political courage to admit that before trying to
provided
feedback
this initiative.
increase positive
taxes further
it isonessential
to also rationalize
public spending. So far this has proved to be very difficult.
Obviously, most politicians fear the strong unions of
employees of the broad public sector.
It is also essential to acknowledge that the Cypriot labour
structureEoin
has on
changed
in theAct.
lastThe
25 UK
years.
While
the
O’Shea
the Bribery
Bribery
Actinwill
1980sserious
only about
30% of young
Cypriots
have
implications
on those
doing received
businesscollege
in the
2
18
Reforming the Cyprus economy
UK
or university
even thoseeducation,
who are doing
business
UK
and/or
this figure
has with
morea than
company
outside
the
UK.
doubled; today almost two out of three Cypriots receive
college and/or university education at different levels.
Maria
Krambia-Kapardis
Obviously,
their expectations are different than those of
Chairperson
their parents. Expectations that given the current
circumstances will remain unfulfilled.
The government
and
theas on
political
operations,
on a domestic level
as well
a European
level.
It
also
keeps
contacts
with
the
regulatory
bodies,
system as a whole did not have the
political courage to admit that before
Commissioner
Insurancetaxes
companies
in order
trying to ofincrease
further
it is to
essential to also rationalize public
spending.
Association
of Cyprus Commercial Banks, Insurance
If the economic structure does not change, inevitably there
will be higher unemployment. At the same time many
young Cypriots will either not return to Cyprus after they
abroad.
complete their studies or if they do they will be forced to
leave seeking
opportunities
elsewhere.
the time has
has
Below
are the
main topics
that theIndeed
Committee
come for a paradigm
is no
longer a matter of
concentrated
on over theshift.
past It
three
months:
choice. It is an absolute necessity.
The first package of economic measures adopted by the
The
Committee
studied theindraft
legislation
and
House
of Representatives
the last
few days
is directive
a step in
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
the right direction but much more remains to be done. It is
which
were
with thetheCentral
Bank of Cyprus.
essential
to discussed
also encourage
rationalization
of public
spending and revenues and to promote growth. Cyprus
needs new engines of growth and a rational approach to
public spending and taxes. To a great extent the deep crisis
of the Greek economy has been caused by the supremacy
of politics over economic rationale. It is of utmost
importance
this fatal
path. or
Last
but not
Central
Bankthat
of Cyprus
Cyprus avoids
which affect
directly
indirectly
least, the ofeconomic
crisis also offers the opportunity to
members
our Institute.
promote major reforms in public administration paving the
way
for moretheefficient
state
In
addition,
report and
to betransparent
prepared by
thestructures.■
regulator of
∗ Professor
of Political
Economy at the University of Nicosia and President of the
the
Institutes
members.
Cyprus Center for European and International Affairs.
3
Ιnterview
Institute News
Poland is the sixth most attractive country
Institute News
to invest in the world
Interview with H.E. the Ambassador of Poland Mr. Pawel Dobrowolski
To Ninos Hadjiroussos, Editor and
Anastasiades,
up toTassos
30 September
2011.
Deputy
Editor,
Accountancy
Cyprus
Journal
an interview
wewith
had were,
with
and to the profession at large.InOther
issues dealt
among others, the following:the Ambassador of Poland
Mr. Pawel Dobrowolski we
have been
inter
On 5 September 2011 a delegation
of theinformed,
Institute headed
alia, Parperis,
that throuout
by the President, Mr. Theodoros
met with the
the
Poland
new Minister of Finance,financial
Mr. Kikis crisis
Kazamias
and
managed
to
maintain
a
growth pattern based on
the Cyprus economy.
healthy finances, careful
management,
On 7 September 2011 Mr. debt
Christos
Kyriakides,vibrant
Senior
internal
consumption
Officer of the Institute, attended the Council meeting ofand
the
exports in
record.
Mediterranean Federation of good
Accountants
Rome. In the
case of manufacturing the
Mr. Pawel Dobrowolski
growth
rate this
an
On 13 September 2011 a press
conference
wasyear
held is
at the
impressive
9.2%
whileconcering
the overall
growthby rate
is for
an
Offices of the
Institute
proposals
ICPAC
estimated
4.5%.
the Cyprus
economy. The press conference was given by
Responding to our question on how Poland successfully
managed
a socialist
into
market
On 22 andto23transform
September
2011 the economy
President of
thea Institute
economy,
Mr. Dobrowolski
stated
this is Manager
a long story;
Mr. Theodoros
Parperis and
thethat
General
Mr.
but
a story Philippou
of successattended
which Europe
needs
to-day.
The
Theodoros
a meeting
of the
Presidents
polish
economy
in
1989
was
bankrupt.
It
was
a
so
–
called
“economy
of deficiency”,
which and
prevailed
in Meeting
all Soviet
(FEE) Member
Bodies in Vienna
a Special
of
Block
states.Assembly.
Its inflation was 100% and its currency was
the General
practically inconvertible. Poland embarked upon a Big
Bang programme and it tried to change the basis of the
COMMITTEESʼ
ACTIVITIES
economy
with a fundamental
overhaul in every area:
privatizing large segments of the economy, opening up the
ACCOUNTING
STANDARDS
COMMITTEE
market
and improving
the export and
work efficiency.
Duringregard
the last
committee
studied Mr.
the
With
to meeting
the Eurotheand
the Eurozone
Dobrowolski stated that the EU 17 should not become an
exclusive club and if the Eurozone is to remain attractive,
it should not distance itself from those who – for different
reasons – are outside at present. Referring to the EU debt
crisis and specifically the Greek debt crisis Mr.
Dobrowolski stated that during his speech at the European
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
Marios Agathangelou
Chairman
Parliament, at the launch of the Polish presidency, Prime
Minister Donald Tusk stated, inter alia, that “we wanted to
think
of Greece as the home of Pericles and not as an
COMMITTEE
indebted and crisis ridded EU member”.
The
interview activities:
with Mr. Dobrowolski follows:
the following
1. On
13 April 2011we
thewould
committee
a lunch at
Q:
Mr Ambassador
like toorganised
start our interview
by asking you to give us a broad outline of the economic
and other relations between Poland and Cyprus.
A:
In the
past geography
and history
distant.
Hotel
in Larnaca
with a subject
Field made
Auditsusfrom
the
There
were
instances
however,
where
we
had
contacts:
let
Inland Revenue.
me remind you that a King of Cyprus paid a visit to Poland
in
1348 andVayianou
we have records of his stay (we paid his bills!).
Panayiota
Chairwoman
Poland
recognised the Republic of Cyprus in 1961 and
signed many relevant bilateral agreements but the real
CORPORATE
GOVERNANCE,
AUDIT
“discovery”
occurred
when both our INTERNAL
countries joined
the
AND
RISK
MANAGEMENT
COMMITTEE
European Union. Please remember we joined on the same
day. Cyprus is a relatively small market and therefore the
volume of our bilateral trade is also rather insignificant. I
believe the balance – unfavourable to Cyprus - may be
improved.
Political
relations are stable
good:
arehas
at
commenced
the implementation
of its and
action
planweand
present
members
of
the
same
EU
trio
which
means
we
have developed many new intergovernmental contacts.
Governance.
Theussurvey
be sent
to the listed
Q: Could
you brief
on the will
economic
conditions
now
companies
in
Cyprus.
Its
results
will
be
sent
to
all
prevailing in Poland?
A: The Polish economy is considered by experts to be hot
– which doesn’t mean overheating! It is a healthy open
economy
providing
conditions
of sustained
Poland
ñ Worked
on a white
paper describing
thegrowth.
role, duties
and
is relatively
large:
its
population
is
37
million.
This
also
means
it is a large and diversified internal market.
organisation:
According to UNCTAD we are the sixth most attractive
ñ RisktoManagement
country
invest in the world.
11
19
Institute News
ñ
Q: Internal
Poland Audit
has managed to avoid recession following
the financial crisis and is now enjoying a positive
ñ
Organisation
andrate
Methods
economic
growth
of 4%. How did you manage it
that?
A: The 4,5% estimated GDP growth is impressive
considering contemporary European conditions.
organisation.
Throughout the crisis we have managed to maintain a
growth pattern based on healthy finances, careful debt
management,
vibrant
internalhas
market
consumption
Union Affairs
committee,
designed
a seminar and
on
good
exports’
record.
When
you
look
at
industrial
growth
“Auditing EU Funded Projects”. The seminar,
in
for September 2011.
Chairman
it is even more impressive – 9,2% this year. Our major
export market is Germany, followed by France and the
education committee and the IT committee on coUK: this means it’s a EU oriented economy.
Q: What
is your
fiscal
today?
will
be offered
before
theposition
end of the
year.
A: I ECFA-ebulletin
understand you ask
about1 debt
andto
bank
The
Volume
Issuemanagement
1 was emailed
all
conditions. Our
constitution
clause
that ratiohad
of
ECFA-SIG
(special
interestprovides
group) aand
members
debt
to
GDP
cannot
exceed
60%.
It
is
a
safety
valve,
perhaps useful as an example for others as well. It simply
Finally,
there government
are two articles
in this
issueresponsibility
of “Accountancy
makes each
think
about
first
Cyprus”
in
the
ECFA
column.
The
first
one
is
authored
by
before it embarks upon excessive spending plans. In recent
abank
member
our our
committee
Leonidas
stressoftests
largest bank,
PKOIeronymides
BP passed with
with
the
title
“Fraud:
The
auditor’s
responsibilities
under
flying colours. It is usual nowadays to speak of bad debts,
called sometimes Greek debts. Polish banks hold just
about 80 million Euros worth of it. A negligible sum. Our
2
20
Ιnterview
UK
even those
who are
a UK
own orcurrency
is stable,
butdoing
needsbusiness
careful with
monitoring
company
outside
the
UK.
considering the unstable monetary and stock price
conditions of recent months.
Chairperson
Q: How did you manage to successfully transform a
socialist economy into a market economy?
A: This is a long story. But a story of success, which means
a story that Europe needs today. Remember that we
inherited aonbankrupt
economy
in 1989,
so-called
operations,
a domestic
level as well
as on aa European
“economy
of
deficiency”
which
prevailed
in
all
Soviet
Just(CBC),
to givethe
one
example:
such as the CentralBlock
Bank states.
of Cyprus
Cyprus
and
our inflation
ran into
100’s %and
and the
the
Securities Exchange
Commission
(CySEC)
was companies
practically unconvertible.
Commissioner ofcurrency
Insurance
in order to
the industry,
as well
as other
Poland embarked
upon
a Big
Bang
organized groups
and we
associations
(fortheexample
program:
tried to change
basis of
Commercial
Banks,
Insurance
economy with a fundamental overhaul
etc).area: privatizing large segments
in every
of economy, opening the market,
During the second
quarter of the
the year
the and
Committee
improving
export
work
efficiency, at the same time paying off
old debts and announcing two major
abroad.
strategies for the country: in the area of
security we wished to join NATO, in the
areatheofpast
improved
life and economic
concentrated on over
three months:
conditions the EU became our target. It
took
couple Bonds
of years, and couldn’t have
ñ Law relating to
Covered
been achieved without a broad social
support.
worked out
The Committee studied
the But
draftitlegislation
and perfectly.
directive
issued by the Central
Bank of
Cyprus
and
cited
its opinions
Timothy
Garton
Ash
once
remarked
that
which were discussed
with the
Central Bank
of Cyprus.
a new
European
identity
lacks a
“credible story”: we would want to contribute ours, a story
Following
the passing
of the legislation
by Parliament,
of perseverance
and solidarity
that brought
best results
representatives
of
the
Committee
had
numerous
after the bitter last two centuries of Polish history.meetings
Q: What project do you pursue so as to be in a position
to co-host the Euro 2012 Football Championship?
A: Football is not just a sport – the Championships allow
us addition,
to open up
the areabyoftheinfrastructure:
In
the investments
report to be in
prepared
regulator of
road system,
tourist
and hotel base,
new
In
Covered
Bonds
was discussed,
as well
as stadiums
the issue etc.
of the
the times of austerity
this isThe
notCommittee
always easy,
but the
independence
of the regulator.
has decided
projects
are slowly
ahead.
National
Stadium
that
the report
of themoving
regulator
is toThe
be in
the form
of an
in
Warsaw
had
just
its
first
test
–
we
invited
the
people
of
Warsaw andwill
theinform
tourists
checkBank
how of
comfortable
Committee
thetoCentral
Cyprus of the
decision
seats are!to circulate an illustrative example of the report to
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Ιnterview
Q: All Europe faces an aging and pensions problem.
How do you intend to address the problem?
cannot distance itself from those who – for different
reasons – are outside at present.
A: This is a serious issue. It requires more than one country
can handle. We experience the same demographic
tendencies as the other countries. Our population is likely
to shrink, with the number of pension entitled people to
COUNCILʼS
double.
We are awareACTIVITIES
that migration is one of the answers,
but it needs a concerted EU approach since the responses
During
the countries
third quarter
2011 the
of the remains
Institute
from
other
are of
mixed.
An Council
Open Europe
met
four
times
and
considered
matters
of
interest
to
ICPAC
one of our priorities.
among
others,
the priorities
following:of the Polish Presidency of
Q:
What
are the
Q: When do you expect to join the Eurozone?
Institute News
the EU?
by We
theasked
President,
Mr. what
Theodoros
metwant.
withThe
the
A:
ourselves
kind ofParperis,
Europe we
new Minister
of toFinance,
Mr.priorities.
Kikis Kazamias
and
answer
brought us
identify the
It is a Europe
discussed
measures
to and
be taken
facingimplies
the problems
of
that
is growing,
secure
open.for
Growth
adopting
the
Cyprus
economy.
measures to combat the crisis, such as the Single Market
Act which should reduce the barriers we still have within
On EU
7 September
Mr. Christos
Senior
the
and foster2011
business.
Security Kyriakides,
includes both
the
Officer of
the Institute,
the Council
meeting
the
military
aspect
as well attended
as the energy
dimension.
In of
both
Mediterranean
Federation
of
Accountants
in
Rome.
there are things that need to be done: we want to initiate
that debate. Openness implies – as noted before – a debate
On immigration
13 Septemberpolicies,
2011 a press
conference
at the
on
as well
as on was
the held
issue
of
Offices of theAsInstitute
concering
proposals
by we
ICPAC
for
enlargement.
a relatively
new member
state
believe
the Cyprus
economy.
conference
wasisgiven
by
Europe
should
not closeThe
its press
door to
anyone who
willing
thetake
President
the Institute
Mr. Theodoros
Parperis. We
to
up theofEuropean
challenge
and responsibility.
started preparing for the Presidency almost 3 years ago and
On 22
23 September
the President
of the Institute
now
– and
despite
mounting 2011
problems
– we believe
we can
Mr.
Theodoros
Parperis
and
the
General
Manager
Mr.
successfully coordinate the European debate.
andWhat
CEOsareofthe
theviews
European
Federation
Q:
of Poland
about of
theAccountants
Euro and
(FEE)
Member Bodies in Vienna and a Special Meeting of
the
Eurozone?
A: There are those who believe that EU17 is to become an
exclusive club. It brings back the ghost of the so-called two
or multiple speed Europe. We believe this is a
counterproductive approach. Non-Eurozone members are
EU members as well and some, like Poland, perform
better than many Eurozone members. The benchmarks for
Eurozone
membership
another story,
but perhaps
I
amendments
in IAS1is relating
to changes
in the
should
not point
those who
at this time
not fulfil
the
presentation
of to
financial
statements
and do
IAS19
relating
criteria.
This
is
not
the
point.
If
we
are
to
solve
the
Eurozone problems – many, and quite difficult as we see
now
almost
every day
– it is of
onlyFEE’s
through
a concertedpaper
and
It also
initiated
a study
discussion
joint
action plan.
If theStatements’.
Eurozone is to
remain
attractive
it
‘Combined
Financial
The
discussion
paper
ACCOUNTANCY CYPRUS
104103
ñ SEPTEMBER
2011
ACCOUNTANCY
CYPRUSññVOLUME
VOLUME
ñ JUNE 2011
A: Today some could say: it’s a good guess, how and when
to join. We believe Eurozone shall survive the crisis. It is a
great European achievement. Our strategic goal is
2013/2014, but it is difficult to predict the details
considering
the turmoil of recent months and weeks ahead.
Marios Agathangelou
Chairman
Q: What are the views of both Poland and the Polish
Presidency
the EU debt CO-ORDINATING
crisis and specifically the
LARNACAabout
– FAMAGUSTA
Greek
debt crisis?
COMMITTEE
A:
The the
crisis
in quarter
public finances
hasCommittee
become a carried
European
During
third
of 2011 the
out
malaise.
We activities:
see a number of countries introducing
the following
austerity measures. They are inevitable, but the question
1. On 13are
April
2011 the
committee
a lunch
at
remains:
individual
societies
readyorganised
to accept such
harsh
Zephyrosafter
Tavern
withliving.
the new
of
solutions
yearsinofLarnaca
comfortable
The director
debt crisis
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
is also a test of our civic responsibility. During his speech
at the European Parliament at the launch of the presidency
2. On Minister
4 May 2011
a seminar
was co-ordinated
at Sun
Hall
Prime
Donald
Tusk said
that we wanted
to think
of Greece as the home of Pericles and not as an indebted
Inland Revenue.
and crisis ridden EU member state. It shows our intention
of a positive evaluation. At the same time we are aware
Panayiota Vayianou
how critical the public finance sector crisis is. EU17 had
Chairwoman
made its decisions to provide Greece with a second
bailout.
It needs toGOVERNANCE,
be seen now how Greece
uses that
time.
CORPORATE
INTERNAL
AUDIT
IAND
speakRISK
of Greece
but
there
are
more
countries
at
stake.
MANAGEMENT COMMITTEE
Q:
What the
are the
views
of the of
Polish
about
During
third
quarter
2011Presidency
the Corporate
the
EU budgetInternal
for 2014-2020?
Governance,
Audit and Risk Management
A:
The Commission
initiated the of
dialogue
on plan
the new
commenced
the implementation
its action
and EU
has
budget
in June.
Poland shall play the role of an honest
dealt with
the following:
broker as we wish to broaden the debate and achieve a
ñ Workedononthis
thevital
development
of shall
a survey
on challenge
Corporate
consensus
issue. This
be the
Governance.
The survey
willCyprus.
be sentLater
to the
for future
Presidencies,
including
this listed
year
companies
in
Cyprus.
Its
results
will
be
sent
to
the Polish Presidency is going to organize a conference all
in
which all players shall participate. Its aim is an exchange
of views on the future EU budget. Personally I would
expect a debate to focus on two general approaches: a
conservative
inclusive
which the
would
ñ Worked onand
a white
paperone,
describing
role,argue
dutiesthat
and
when
in
crisis
you
cannot
risk
much,
and
an
outward
–based
one which assumes that the challenges need to be
organisation:
faced by ambitious goals. As they often say in diplomacy:
we
■
ñ shall
Risk see.
Management
31
21
Institute News
ñ Internal Audit
Reducing fiscal deficit
Consensus on a strong expenditure - based
fiscal package needed.
The repeated creditworthiorganisation.
ness downgrades of Cyprus,
and the significant
increase
ñ The committee, in collaboration
with the European
in
the
cost
of
government
borrowing, The
are strong
indica“Auditing EU Funded Projects”.
seminar,
in
tions
that
the
image
of
the
Cyprus economy, at home
for September 2011.
andEuropean
abroad, Council
is negative.
Green
and been
submitted
its
Cyprus has
virtually
by the
paper.
excluded
from
international
ñ The committee has embarked
a study
of the
markets,on
while
the possibiliInstitute’s Governance procedures.
The objective
the
ties for further
domesticofgovstudy is to assist the Institute
governance
ernmentdevelop
borrowing
have narBy Dr.
Michael which
Sarris will incorporate
processes
practices, at The
the
rowed best
significantly.
Former
Minister
of Finance the main
same
time recognising
local practicalities
and
sizes.
reasons for this negañ The committee has continued
to monitor
closelyconall
tive image
are serious
European
and
International
initiatives
within
its
scope
cerns about the size and the future course of the fiscal
domain
and continued
to We
contribute
articlesa critical
to the
deficit
and government
debt.
have reached
Institute’s
magazine.
point. Further downgrades would put at serious risk the
stability of our banking system and the health of the serPanicos
G. Papamichael
vices sector,
thereby causing significant unemployment in
Chairman
all sectors and damaging the prospects for continued economic development and social progress. Managing these
ECONOMIC
challenges is CRIME
difficult AND
but itFORENSIC
is still possible if we act
ACCOUNTING
(ECFA)
COMMITTEE
quickly and decisively. Only with immediate and convincing steps leading to a drastic and sustainable fiscal deficit
During
theand
thirda quarter
the ECFA
subcommittee
reduction
reversalofof2011,
the upward
trend
of governon
organizing
hadtobeen
collaborating
the
ment
debt, we seminars
will be able
gradually
begin to with
improve
education
committee
and
the
IT
committee
on
cothis negative image.
Specifically,
webefore
need the
urgently
strong
will
be offered
end ofa the
year.consensus among
political parties and social partners around a fiscal consolidation
programme with
the following
objectives:
to
The
ECFA-ebulletin
Volume
1 Issue 1 clear
was emailed
to all
reduce the deficit
to atinterest
least 6%group)
of GDPand
in 2011
(compared
ECFA-SIG
(special
members
had
to
the
now
projected
deficit
of
over
7%
and
of
4.5%
voted
in the 2011 Budget), 2% of GDP in 2012, eliminating the
deficit in
2013
to maintain
a zero budget
Finally,
there
areand
twocommitting
articles in this
issue of “Accountancy
deficit orinsurplus
for at
least the
Of paraCyprus”
the ECFA
column.
Thenext
firstfive
oneyears.
is authored
by
mount
importance
is
the
absolute
commitment
to
effective
and timely
implementation
of all agreements
withoutunder
devithe
title “Fraud:
The auditor’s
responsibilities
ations
or
second
thoughts.
have
serious implications
business
the
The measures
that should on
be those
taken doing
to achieve
the in
above
2
22
Chairperson
objectives are well known, they are being elaborated by
the Ministry
Finance
and theremonitors
is no need
of further
The
Financial of
Services
Committee
developments
detailed
commentary.
it to say
for sustained
in
the bank
industry,Suffice
investment
andthat
other
financial
deficit reduction
the focus level
shouldasbe
on as
controlling
public
operations,
on a domestic
well
on a European
expenditure
thatcontacts
this cannot
achieved
without
siglevel.
It alsoand
keeps
withbethe
regulatory
bodies,
nificantly
the cost
of the (CBC),
civil service
and much
such
as thereducing
Central Bank
of Cyprus
the Cyprus
and
Securities
Exchange
Commission
(CySEC)
andbased
the
better targeting
the entire
system of social
benefits
Commissioner
ofwhile
Insurance
companies
in order
to
on family income,
imposing
truly deterrent
penalties
exchange
regarding thetheindustry,
as inwell
as other
for fraud. views
To be convincing,
reduction
government
organized
groups
and associations
(forbe structural
example
spending cannot
be temporary
but it should
Association
of
Cyprus
Commercial
Banks,
Insurance
and permanent.
The measures approved recently by Parliament are a step
During
the second
quarter
of the be
year
the Committee
in the right
direction
and should
implemented
with
monitored
the
economic
crisis
and
its
consequences
in
resolve. To be effective, however, the approval of these
regards
to must
all areas
economic
Cyprus and
measures
be of
followed
by activities
an early inagreement
to
abroad.
implement a broader programme of fiscal consolidation.
Because the mixture of tax increases and spending cuts to
Below
are deficit
the main
topicssothat
reduce the
is crucial
that,the
on Committee
the one handhasit
concentrated
on over thedeficit
past three
months:
achieves a sustainable
reduction
and on the other
hand it limits, as much as possible, the negative impact on
economic activity and growth, the measures that will be
included in the second package should focus solely on conThe Committee studied the draft legislation and directive
trolling expenditures.
The experience of several countries suggests that fiscal
adjustment based on reducing government spending (while
protecting public investment), rather than on increasing tax
revenue, is more likely to lead to a sustainable reduction of
the fiscal deficit and public debt. In many cases, unlike
what is often suggested, the control of public spending has
a positive effect on growth because it reinforces the expecCentral Bank of Cyprus which affect directly or indirectly
tations of consumers and investors for a reduced need for
future taxation and, in parallel it leads to a decline in interestaddition,
rates and the
in the
real to
cost
borrowing,
which
our econIn
report
beofprepared
by the
regulator
of
omy
needs
badly.
It is the
therefore
that the
Government
presents
that
report imperative
of the regulator
is to
be in the form
of ana
binding medium-term
budgetary
framework
linking
‘Agreed
Upon Procedures’
(‘AUP’).
As such,
the
medium
term
targets
with
public
expenditure
ceilings,
Committee will inform the Central Bank of Cyprus of that
the
civil
society,
political
parties
and
trade
unions
endorse
this
framework
that Ministries implement rigorously their
the
Institutesand
members.
restrictive budgets. ■
1
The Social Dialogue
Institute News
A socialInstitute
dialogueNews
for the minority
I respect every working
person. But this does not
mean I have to accept the
social
being
During the third quarter of 2011 the
Councilinjustice
of the Institute
perpetrated
against
met four times and considered matters of interest to ICPAC the
overwhelming majority of
working people by a few
hundred privileged public
sector employees. Most
public employees do not
belong to this category, but
they will be called to pay the
very high price for their
Averofeconomy.
Neophytou
theBy
Cyprus
colleagues’ selfishness.
Deputy President
Democratic Rally
Of course I see the
usefulness of social dialogue, which has contributed, over
Mediterranean
of peace.
Accountants
Rome.take a look
many years,Federation
to industrial
But weinshould
at the requirements for proper social dialogue. This
On includes
13 September
2011 aboth
press
was held
at private
the
all workers,
theconference
82% employed
in the
Offices
of and
the Institute
concering
by in
ICPAC
for
sector
the remaining
18%proposals
employed
the broader
the public
Cyprus sector.
economy.
The
press
conference
was
given
by
Secondly, social dialogue must include
the employer
President organizations.
of the InstituteAnd
Mr. finally
Theodoros
thereParperis.
is the state. Here
we have a big misunderstanding promoted by PASYDY
On leader
22 andGlafcos
23 September
2011 the
President
of the Institute
Hadjipetrou,
who
provocatively
claims that
Mr.the
Theodoros
Parperis
and
the
General
Manager
Mr. is
employer of the workers in the broader public sector
Theodoros
Philippou The
attended
a meeting
the Presidents
the government.
employer
is theof Cypriot
taxpayer,
andwho
CEOs
of the European
of Accountants
is represented
in the Federation
social dialogue
by the elected
(FEE)
Member
Bodies
in Vienna
andby
a Special
Meeting
of
executive
- the
government
- and
the elected
legislative
the authority
General Assembly.
- the House of Representatives.
In the so-called social dialogue that took place at the
and the union
leadership of public and broader public sector workers
ACCOUNTING
COMMITTEE
were present. STANDARDS
The representatives
of the House and the
employers’ organizations were absent.
Those insisting on the need for ‘social dialogue’ have
trampled on it and violated it, tailoring it to impose their
immoral unionist behavior on all workers, all taxpayers
and the entire political leadership.
Who authorized Hadjipetrou, SEK’s Nicos Moiseos and
COMMITTEESʼ
ACTIVITIES
presidential palace only
the government
ACCOUNTANCY
CYPRUS
ñ VOLUME
104 104
ñ SEPTEMBER
20112011
ACCOUNTANCY
CYPRUS
ñ VOLUME
ñ SEPTEMBER
PEO’s Bambis Kyritsis to confer with only one part of the
state,
government,
who2011
know
does
not have a
which
wasthepublished
in April
is that
openitfor
comments
up to
30 September
2011.part, the legislature? They were also
majority
in the other
aware that the majority of the legislature had different
Marios
ideasAgathangelou
from the one-party executive of the state.
Chairman
From where did the 3 union leaders and the President of
LARNACA
– FAMAGUSTA
the Republic
derive the rightCO-ORDINATING
to impose 6 new taxes on the
COMMITTEE
population in the absence of the employers’ organizations,
the taxpayer and the legislature?
Do I need to remind anyone that the reason unions exist is
to safeguard the interests of workers and not to impose
taxes? And if Hadjipetrou has an excuse to seek other
measures than those agreed, what is the motivation of the
other 2 union leaders? It should also be mentioned that
Hadjipetrou
hada seminar
unilaterally
these
measures
2. On
4 May 2011
waspresented
co-ordinated
at Sun
Hall at
the inrecent
PASYDY
He Audits
publiclyfrom
announced
Hotel
Larnaca
with aconference.
subject Field
the
the
increase
of
VAT
to
17%,
without
even
committing
Inland Revenue.
himself to the amendment of the Cost of Living
Allowance.
Panayiota
Vayianou
Chairwoman
So we had the union leaders deciding on a 2% increase in
VAT, an increase
that would hurt
low income
groups,
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
AND
RISKthe
MANAGEMENT
namely
vast majority of COMMITTEE
workers in the private sector,
which constitute 82% of the work-force. Kyritsis and
During
the even
thirdhave
quarter
of (Hadjipetrou
2011 the Corporate
Moiseos
the nerve
is entitled to
Governance,
Audittoand
Riskto bring
Management
because it isInternal
in his interest)
threaten
the workers
committee
has,
within
the
scope
of
its
terms
of
reference,
out on strike if the legislature failed to approve the package
commenced
the implementation
of itsaudacity
action plan
of measures.
They have the
to and
use has
strike
dealt
with
the
following:
blackmail to put pressure on the legislature to approve
higher VAT.
I wonder - and this is also a challenge - if the two union
leaders would be able to get even one of the 82% of private
sector workers out on the streets to demand higher VAT in
support
this immoral
union behavior,
which 50th
seeks to
activitiesofplanned
for the celebration
of ICPAC’s
impose additional tax burdens on the non-privileged
because
leader
of the privileged
workers
ñ workers
Worked on
a whitethe
paper
describing
the role, duties
and has
demanded
it.
organisation:
To advertise their alleged sense of responsibility, union
ñ leaders
Risk Management
cite their acceptance of the measures for all new
11
23
Institute News
ñ
Internal
Audit
recruits
to the
public service. While these measures of a
structural nature are correct and find us in full agreement,
ñ
Organisation
at the
same time,and
theyMethods
bring home the abject dishonesty of
the three union chiefs. Who among them represents youth
The
white
document
will Who
be circulated
to allthem
members
of
in the
social
dialogue?
authorized
to take
ICPAC
and
will
help
clarify
the
boundaries
and
the
decisions on behalf of the younger generation? How did
these people, who champion social dialogue, agree to take
organisation.
measures affecting youth, in the absence of youth
organizations?
It is shameful for society to accept such dishonesty. They
refuse
to agree that
of theCommittee,
broader public
sector
coordination
withworkers
the Education
is planned
should
make a substantial
for September
2011. contribution, but are prepared to
sacrifice
the future of
their children,
by hanging
on toGreen
their
ñ
The committee
studied
the European
Council
conquests.
I am
that by has
expressing
theseonviews
I willofmake
ñ
Theaware
committee
embarked
a study
the
Institute’s
Governance
procedures.
The objective
of thea
myself
a target
of the three
union leaders.
Yet I feel
study is sense
to assist
the Institute
develop
compelling
of political
and social
duty, asgovernance
an elected
processes
which
will
incorporate
best
practices,
at the
representative of the people, to express what the people
same
time
recognising
the
local
practicalities
and
sizes.
would want to say.
I want to speak on behalf of those who have no platform to
air their views or choose to keep quiet.
1) The 82% of the workers in the tough private sector.
Chairman
2) The majority of the workers in the broader public sector
who will be CRIME
the mainAND
victims
of Demetris Chrisofias’
ECONOMIC
FORENSIC
decisions and those
of the COMMITTEE
union leaders
ACCOUNTING
(ECFA)
3) The the
30,000
whothehave
rarely
heard the
During
third unemployed
quarter of 2011,
ECFA
subcommittee
union
leaders seminars
talk abouthad
thebeen
nightmare
they are
living
on
organizing
collaborating
with
the
through andcommittee
would nowand
be burdened
with a higher
education
the IT committee
on VAT.
coThey wouldtwo
be seminars.
forced to One
borrow
moneydetection
(as they utilizing
have no
organising
on fraud
income)
in other
orderon
to fraud
contribute
to the
preservation
the
IT
and the
detection
and
prevention.ofBoth
will
be offered
the hundred
end of theprivileged
year.
privileges
of before
the few
employees
protected by Hadjipetrou, Moiseos and Kyritsis.
ECFA-SIG
(special
interest group)who
anddomembers
4) The thousands
of self-employed
not belonghad
to
provided
feedback
on this
unions orpositive
employers’
groups
andinitiative.
have no platform to
express their views and be heard. They will be burdened
Finally,
arenew
two articles
this issue
of “Accountancy
with a there
host of
taxes toin fund
the privileges
of the
Cyprus”
in
the
ECFA
column.
The
first
one
is
authored
by
pampered minority in the broader public sector even
athough
member
our committee
Leonidas Ieronymides with
theirofincomes
have declined.
5) The thousands of small businesses which constitute the
backbone of our economy and which for years were the
engine of our country’s development but are now closing
2
24
The Social Dialogue
UK
or one
evenafter
those
areasdoing
business
a UK
down,
thewho
other,
a result
of the with
bankrupted
company
outside
the
UK.
policies of the current government.
Maria
6) TheKrambia-Kapardis
professionals of the services sector who are anxious
Chairperson
because their clients are having second thoughts about
keeping their businesses in Cyprus.
7) The pensioners of the private sector who, despite their
paltry pension, will also have to contribute to our
profligate and inefficient state.
8) The financial sector, which has had to cope with one
negative development after another. Despite the high
charges and highofinterest
rates, we
cannot ignore
that it to
is
Commissioner
Insurance
companies
in order
the
most
dynamic
sector
of
our
economy,
making
exchange views regarding the industry, as well as othera
significant contribution
to the
growth and prosperity
of the
organized
groups and
associations
(for example
country (I would
like to point
out hereBanks,
that myInsurance
relations
Association
of Cyprus
Commercial
with
this
sector
is
of
the
type
every
borrowing
citizen
has
with it).
Those insisting on the need for ‘social
dialogue’ have trampled on it and
abroad.
violated it, tailoring it to impose their
immoral
unionist
behavior
concentrated
on over
the past three
months: on all
workers, all taxpayers and the entire
political leadership.
But let us note what has actually happened. The 3 union
leaders, who represent 18% of the working population, but
not their interests, decided the employees would make the
same contribution, irrespective of their incomes. So an
employee of the broader public sector on €5000 would
contribute the same percentage of his or her salary as a
colleague on
Is thisofsocially
fair? Andissued
this has
regarding
the€1500.
provisions
the Directive
bybeen
the
fully
endorsed
by
the
leading
campaigner
for
social
justice,
President of
Christofias.
At the same time, they have decided
members
our Institute.
to tax income progressively, but this probably suited them.
This clique
decided
andaswant
to impose
Covered
Bonds
waseconomic
discussed,policy
as well
the issue
of theit
on
the
political
parties,
on
82%
of
the
workers
who
are in
the the
private
sector,
100% is
of tothe
medium
that
report
of theon
regulator
be small
in the to
form
of an
‘Agreed
Procedures’
(‘AUP’). on
As100%
such,of the
companies,Upon
on 100%
of the pensioners,
the
Committee
will inform
Central
Banklowly-paid
of Cyprus in
of the
self-employed,
and onthe
100%
of the
decision
to circulate
an illustrative
of the of
report
to
broader public
sector,
by recourseexample
to the myth
social
the
Institutes
members.
dialogue. ■
Institute News
Reducing fiscal deficit
One for
two or two
for one
Institute
News
Countries
facing fiscal
problems struggle to reduce
their
budget ofdeficits
by
During the third quarter of 2011
the Council
the Institute
spenmet four times and considereddecreasing
matters ofgovernment
interest to ICPAC
ding
and
increasing
taxes.
Most countries give more
emphasis on the expenditures site rather than on
taxation.
new Minister of Finance,Ireland
Mr. Kikis
Kazamias
for example,
whichand
is
discussed measures to be taken
for
facing
the
problems
of
under the supervision of IMF
the Cyprus economy.
has come up with a €15
By Marios Mavrides,
billion
package
which
Professor
of Economics,
On 7 September
2011 Mr. includes
Senior
€10
billion
European University of Cyrpus reduction of expenditures
Member of the Parliament
€5 billion
in taxes, a
Mediterranean Federation of and
Accountants
in Rome.
ratio of two for one.
which was
April 2011
is open for
towards
thepublished
Europeaninbailout
mechanism
andcomments
that the
up
to
30
September
2011.
measures taken are not enough to fix the public finances.
They also know that if the country asks for financial
Marios Agathangelou
assistance
from Europe, the economy will probably fall
Chairman
into
a recession. But the government doesn’t want to take
blame.
COMMITTEE
Many
times government officials said that previous
The
government
of the concering
United Kingdom,
is notfor
a
Offices
of the Institute
proposalswhich
by ICPAC
eurozone member, has come up with a package which
consists of cuts and taxes in a four to one ratio. Portugal,
Spain, Italy and France have developed similar plans,
trying to put their house in order by focusing more on
spending and less in taxes. Some of these countries are also
Mr. Theodoros
Parperis in
andsalaries
the General
Manager
proceeding
with reduction
in the order
of 5%.Mr.
In
Theodorossalaries
Philippou
a meeting
the Presidents
Greece,
andattended
pensions
have ofbeen
reduced
and CEOs ofin the
Federation
significantly,
the European
order of 25%
to 30%, of
as Accountants
the country
(FEE) Member
struggles
for its Bodies
survival.in Vienna and a Special Meeting of
While all the above are happening in Europe making
headlines in the news every day, the government of Cyprus
COMMITTEESʼ
ACTIVITIES
doesn’t
seem to understand
what is going on. Cyprus is
facing similar problems other countries face in Europe,
ACCOUNTING
yet,
the measures STANDARDS
that are taken soCOMMITTEE
far are very light, and
they are focused on taxes rather than on spending cuts.
amendments
IAS1
relating toof Cyprus
changesrefuses
in the
The
main reasoninthat
the government
to
presentation
financial
and IAS19 relating
take
measuresofthat
reducestatements
spending significantly
is that
mainly
to the
abolition
of the ‘corridor
method’.
they
do not
want
to be confronted
with the
Unions. This is
The main reason that the government of
partly due to the ideology of the ruling party AKEL which
It also
study
discussion
likes
to initiated
be called athe
part of
of FEE’s
the working
class.paper
The
‘Combined knows
Financial
The
discussion
paper
government
veryStatements’.
well that the
economy
is headed
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
governments have caused all these problems. They seem to
Duringhowever,
the thirdthat
quarter
2011part
the of
Committee
carried for
out
forget
theyofwere
the government
the
following
activities:
most of the years during the past decades. All of the
political parties bear responsibility for the problems we are
1. On 13
April
committee
organised
a lunch
at
facing
today
and2011
the the
same
story applies
to most
of the
Zephyrosthat
Tavern
in Larnaca
with theItnew
director
of
countries
are facing
debt problems.
is clear
that the
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
government of Cyprus tries to transfer the political cost to
others.
Inland Revenue.
Cyprus
refuses
Panayiota
Vayianou
Chairwoman
to take measures that
reduce spending significantly is that they
do not want
to be confronted
with AUDIT
the
CORPORATE
GOVERNANCE,
INTERNAL
AND
RISK MANAGEMENT COMMITTEE
Unions.
Governance,
Internal isAudit
Risk Management
Their
primary concern
to gainand
politically
as much as
committee
has,
within
the
scope
of
its
of reference,
possible, especially because the otherterms
political
parties
commenced
the
implementation
of
its
action
plan
and
has
suggest stronger measures than the ones suggested by the
dealt
with
the
following:
government. But the rating agencies are not interested on
who will take the blame. The rating agencies want to see
ñ Worked
the development
of budget
a survey
on Corporate
action
taken on
towards
reducing the
deficit
through
Governance.
The
survey
will
be
sent
to
the
listed
cost cutting rather than through taxes. If that doesn’t
companies
in
Cyprus.
Its
results
will
be
sent
to
all
happen, rating agencies will continue to lower the rating
members.
It
is
also
envisaged
that
the
results
be
for Cyprus bonds. Time is running out as by December
presented
during
a press
conference, within the
Cyprus
won’t have
any more
money.
There will be no money to pay government employees,
pensions, social payments etc. And then Cyprus will have
to ask for financial assistance from the European Stability
organisation:
Mechanism. ■
ñ Risk Management
11
25
Institute News
ñ Internal Audit
The Cyprus Economy
The prerequisites for a successful
set of economic measures
organisation.
Since the outburst of the
globala seminar
economic
Union Affairs committee,current
has designed
on
crisis,
late
2007/early
2008,
“Auditing EU Funded Projects”. The seminar,
in
our
Government,
and
the
political parties, have been
for September 2011.
Europeanover
Council
discussing,
and Green
again,
and submitted
its
the adoption
of several
by
the
paper.
measures.
Yet it has to be realized that
the success of any measures
that have, or will in the
By
Ioannis
M. Violaris
future tobemonitor
adopted,
depends
ñ Dr
The
committee
has continued
closely
all
Associate
Professor
of
oninitiatives
certain prerequisites
that
within its scope
Economics
us all:articles to the
domain and continued toconcern
contribute
Frederick
University
Institute’s
magazine.
As individuals we need to
Panicos
G.
Papamichael
intensify our efforts, wherever we are employed, to
Chairman
enhance our productivity. We do not need to wait for any
special measures to be adopted to do that. It is our
ECONOMIC
FORENSIC
responsibility, CRIME
towards AND
our selves,
families and Country, to
offer to the maximum of our abilities.
We need also to do everything possible to cut-down
unnecessary expenses and support the goods and services
education committee and the IT committee on coof our Country.
organising
two seminars. One on fraud detection utilizing
The be
enterprises
need tothe
adopt
that will lead to an
will
offered before
end measures
of the year.
improvement of their productivity and quality of the
products
offered. As much
as possible
also opt
to
The
ECFA-ebulletin
Volume
1 Issue 1they
wasneed
emailed
to all
ECFA-SIG
(special
interest ingroup)
employ local
personnel,
orderand
to members
alleviate had
the
provided
positive
feedback on this initiative.
unemployment
problem.
Finally,
there are two
articles
in this issueneed
of “Accountancy
Both individuals
as well
as enterprises
also to try to
Cyprus”
in
the
ECFA
column.
The
first
one
authored
by
be punctual in their responsibilities towardsisthe
State (tax
payments, social insurance etc), as otherwise the State
wont be able to offer back to them.
Yet the State needs to act with more sensitivity, as during
2
26
Chairperson
periods of economic crises there are many individuals and
enterprises on
thata domestic
simply cannot,
if on
they
want to,
operations,
level aseven
well as
a European
level.
It to
also
keeps
respond
their
responsibilities.
The most privileged, such as civil servants and bank
employeesviews
earning
high incomes,
need toas
avoid
for
exchange
regarding
the industry,
wellasking
as other
organized
groups
andto be
associations
(for temporary
example
more benefits
and have
willing to accept
Association
of
Cyprus
Commercial
Banks,
Insurance
reductions on these benefits, otherwise they might loose
their benefits altogether.
monitored
theparties,
economic
crisisinand
consequences
The political
especially
suchitshard
times, need in
to
regards
to
all
areas
of
economic
activities
in
Cyprus
and
set aside their own political aspirations and interests, and
abroad.
instead positively support the government’s efforts as in
times like
Countries
to survive has
the
Below
are this
thethe
main
topics that
thatmanage
the Committee
concentrated
on whose
over the
past three
months:
crises are those
people
are indeed
united.
It is obvious from the above suggestions that the success of
any Committee
measures adopted
economicand
crisis
wont
The
studied to
theface
draftthe
legislation
directive
issued
by the Central
of Cyprus
its opinions
have much,
if any, Bank
success,
unlessand
thecited
people
of the
which
were
discussed
with
the
Central
Bank
of
Cyprus.
Country realize that they are not only victims of the crisis
but that they are part of its solution and as such they need
also to positively
support
the measures
and at meetings
the same
representatives
of the
Committee
had numerous
with
of the Central
Bank of Cyprus,
during
time representatives
refrain from creating
more problems,
by focusing
on
which
various
concerns
of
ICPAC
were
discussed
their own selfish interests.
For example
theInstitute.
Civil servants unions, and other unions
members
of our
for that matter, need to accept a reduction in their benefits,
In
addition,because
the report
be prepared
the regulator
especially
it isto obvious
that by
a good
number of
of
these benefits, at least during this period of time, are
beyond
ability
of regulator
the economy,
they
that
the the
report
of the
is tolet
bealone
in thethat
form
of are
an
‘Agreed
Upon Procedures’ (‘AUP’). As such, the
globally unique.
Let us hope that the above suggestions will be positively
seen and adopted. ■
1
Institute News
The strengthening of banks in the EU
TimeInstitute
to put our
banking
News
sector in order
Since 2008, the whole world
has been facing an unpreceDuring the third quarter of 2011 the Council of the Institute
dented financial crisis with
the banks at the center of it.
In order to restore stability in
the banking sector and
ensure that credit continues
to flow to the real economy,
both the EU and its Member
States adopted a broad range
of unprecedented measures
the Cyprus economy.
with the taxpayer ultimately
By Androulla Kaminara
footing the related bill. In
On 7of September
Christos Kyriakides, Senior
Head
the European2011 Mr. 2008
and 2009, more than €2
Officer of the
Institute, attended the Council meeting of the
Commission
Representation
trillion were effectively used
Federation of Accountants in Rome.
inMediterranean
Cyprus
in the form of state aid measures to financial instituOn 13 September 2011 a press conference was held at the
tions.
However, actions like that should only come as a last
resort. Many voices have been raised asking for the authorities to take action, so as to ensure that banks are well preOn 22 and 23 September 2011 the President of the Institute
pared to face a similar crisis in the future-and that the taxMr. Theodoros Parperis and the General Manager Mr.
payers will not foot a similar bill. Given the extensive
cross-border activity of European banks, as seen in the
table, this is an issue that cannot be dealt with by national
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
authorities; a unilateral response would be counterproducup to 30 September 2011.
tive. We need to act at a European level. This is why last
July
the Agathangelou
European Commission brought forward a package
Marios
consisting
Chairman of a Directive and a Regulation aiming to
change the behaviour of the 8000 banks that operate in
Europe.
COMMITTEE
With this package, we want to ensure that the banks hold
During
thebetter
third quarter
Committee
out
more
and
capital of
to 2011
resistthe
future
shocks carried
by themthe
following
activities:
selves. Institutions entered the last crisis with capital that
was insufficient both in quantity and in quality, leading to
unprecedented support from national authorities. With its
proposal, the Commission translates in Europe the internaInland Revenue of Larnaca Mr Marios Kourouniades.
tional standards on bank capital agreed at the G20 level
known as the Basel III. Europe will be leading on this mat2. On 4 May 2011 a seminar was co-ordinated at Sun Hall
ter,
applying
these rules
thanField
8000Audits
banks, from
amountHotel
in Larnaca
with toa more
subject
the
ing
for 53%
of global assets.
Inland
Revenue.
We are also proposing the set up of a new governance
framework
giving supervisors new powers to monitor
Panayiota Vayianou
banks
more closely and take action through possible sancChairwoman
tions when they spot risks, for example to reduce credit
CORPORATE
AUDIT
when
it looks likeGOVERNANCE,
it's growing into a INTERNAL
bubble.
Finally, we aim to improve both transparency and enforceDuring
the third
quarter
of 2011applicable
the Corporate
ment
by putting
together
all legislation
on this
matter in a Single Rule Book for banking regulation.
organisation:
ñ Risk Management
11
27
Institute News
The strengthening of banks in the EU
ñ
Internal Audit
ENSURING
EFFECTIVE AND PROPORTIONATE
UK
even those
are doing
business
withthea G20
UK
first or
jurisdiction
at who
a global
level to
transpose
company
outside
the
UK.
commitments concerning Basel III. Still, financial stability
SANCTIONS
The Regulation which is part of the package contains the
detailed prudential requirements for credit institutions and
investment firms and it covers the issues of capital, liquidinteraction of these three functions within and
ity, leverage ratio and counter party risk. It is directly
organisation.
applicable without the need for national transposition and
accordingly
eliminates
source of such
The
ñ
The committee,
in one
collaboration
withdivergence.
the European
Regulation
also
sets
a
single
set
of
capital
rules.
with
Education
Committee,
is planned
On coordination
the other hand,
thetheproposed
Directive
covers
areas of
for
September
2011.
the current Capital Requirements Directive where EU proñ
The need
committee
studied thebyEuropean
Council
visions
to be transposed
Member States
in Green
a way
suitable to their own environment, such as the requireresponse to the questions posed by the paper.
ments for access to the taking up and pursuit of the busiñ The committee has embarked on a study of the
ness of banks, the conditions for their exercise of the freeInstitute’s Governance procedures. The objective of the
domstudy
of establishment
freedomdevelop
to provide
services,
is to assist and
thethe
Institute
governance
the processes
definitionwhich
of competent
authorities
and
the principles
will incorporate
best
practices,
at the
governing
prudential
supervision.
same time
recognising
the local practicalities and sizes.
International
its scope
TheEuropean
Europeanand
Union
is not justinitiatives
living upwithin
to its responsidomain
anda continued
to itcontribute
articles
bilities
to avert
future crisis;
is taking the
lead. Ittois the
the
Chairman
is a global objective, and the new rules will only be effecMaria
tive if Krambia-Kapardis
they apply equally and at the same time to everyChairperson
body. So we now expect our partners to live up to their
responsibility too, and act to ensure stability for the finanFINANCIAL SERVICES COMMITTEE
cial system globally.■
For more
onof
theCyprus
new proposals
onCyprus
Capitaland
such
as theinformation
Central Bank
(CBC), the
Securities
Exchange
Commission
(CySEC)
and the
Requirements, check
Commissioner
of Insurance companies in order to
http://ec.europa.eu/internal_market/bank/regcapital/index
exchange
views
regarding the industry, as well as other
_en.htm
Check our website at
http://ec.europa.eu/cyprus/index_en.htm to keep up with
EU developments, as well as Cyprus-specific issues.
Follow us
at
regards
to at
allFacebook,
areas of economic
activities in Cyprus and
http://www.facebook.com/#!/pages/Europeanabroad.
Commission-in-Cyprus/112732195470659
Cyprus and the next Greek crisis
education committee and the
IT committee
on been
coA mighty
struggle has
organising two seminars. Onetaking
on fraud
detection
utilizing
place
in Athens.
Like
IT and the other on fraud detection
and prevention.
the Greek
heroes of Both
old,
will be offered before the endGeorge
of the year.
Papandreou has been
engaged in a struggle against
barbarians
(foreigntoand
The ECFA-ebulletin Volume the
1 Issue
1 was emailed
all
save Greek
ECFA-SIG (special interest domestic)
group) andto members
had
Let us hope that
provided positive feedback onfinances.
this initiative.
Papandreou succeeds in
leading
Greece
away from
Finally, there are two articles in
this issue
of “Accountancy
the
brink
of
its
biggest
Cyprus” in the ECFA column. The first one is authored
by
economic
crisis
in
modern
history.
Even if he succeeds
the title “Fraud: The auditor’s
responsibilities
under
it
is
just
as
well
to
keep
in
By
Dr. Jim and
Leontiades
ISA240”
the second by a well-known UK lawyer
mind
that
this
is
only
O’Shea
on the
Bribery Act. The UK Bribery Act willa
CIIM,
TheEoin
Cyprus
Business
in abusiness
war which
is
have serious implications on skirmish
those doing
in the
School
2
28
far from won. This
second
bail-outhad
wasnumerous
desperately
needed
representatives
of the
Committee
meetings
to save
the not only the
Greek
economy
major default
with
representatives
of the
Central
Bankfrom
of Cyprus,
during
but
also
the
banks
as
well
as
the
finances
of
other
member
countries. In
heat of the
it is easy
to lose
regarding
thethe
provisions
ofstruggle
the Directive
issued
bysight
the
of the fact
thatofstaving
financial
is not the
Central
Bank
Cyprusoff
which
affect bankruptcy
directly or indirectly
same as laying
foundations for prosperity. This appears
members
of ourthe
Institute.
to be as elusive as ever. Although some of the measures
Greece
was pushed
to adopt
no doubt
and even
In
addition,
the report
to beare
prepared
bymerited
the regulator
of
beneficial,
therewas
is still
no coherent
plan
target
Covered
Bonds
discussed,
as well
as or
theeven
issuea of
the
date for a return
to prosperity.
independence
of the
regulator. The Committee has decided
The prospect
of an
economic recovery
‘Agreed
Upon
Procedures’
(‘AUP’).hasAsscarcely
such, been
the
mentioned in
theinform
currentthe
frenzy
of bargaining
between
Committee
will
Central
Bank of Cyprus
of the
troika (the
ECB,IMF,
and theexample
Greeks.ofThis
been
decision
to circulate
anEU)
illustrative
the has
report
to
all Institutes
about avoiding
a near term Greek default and saving
the
members.
the Euro-zone. It is now clear that the basis for any further
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
assistance to Greece will be a demand for more cut backs
and austerity. Even though such cut backs may be
warranted for fiscal reasons they have little to do with
economic recovery.
MESSAGE FROM THE FINANCIAL MARKETS
Institute News
The economists and other technocrats working on the
current crisis seem to have completely overlooked the
human
and politicalACTIVITIES
dimension. Whatever the economic
COUNCILʼS
arguments, an indefinite number of years of future
austerity on top of what has already been imposed does not
appear to be even remotely socially or politically
met four times
and considered
interest
acceptable.
Whether
this meansmatters
Greeceof
will
leaveto
theICPAC
Euro
to the
at large.
Other issues
dealt with
were,
isand
still
oneprofession
of the “known
unknowns’.
However
a future
amongeconomic
others, thecrisis,
following:
Greek
if not quite a certainty, is certainly
a high probability.
RISE
ILL FEELING
by theOF
President,
Mr. Theodoros Parperis, met with the
Complicating
an already
clouding
discussed measures
to be difficult
taken forsituation
facing theand
problems
of
the future is the rise of acrimony in the Eurozone
the Cyprus economy.
negotiating process. The once friendly “all in it together”
feeling between Euro-zone members seems to be
On 7 September
2011
Kyriakides,
Senior
evaporating.
Germany
hasMr.
not Christos
tried to hide
its reluctance
to
Officer
the of
Institute,
attended the Council
meeting
the
make
theofsort
major commitment
the situation
callsoffor.
of Accountants
in Rome.
ItMediterranean
has agreed Federation
with France
that any future
financial
commitments to countries in economic difficulties will not
only
limited in2011
scope
(totally
inadequate)
but atalso
On 13beSeptember
a press
conference
was held
the
accompanied
by
severe
economic
regulations
on
top
of
those
already
implemented.
Even more ominous is the demand by Finland that any
future funds which they commit as part of the Greek rescue
effort have to be matched with collateral! If someone
Mr. Theodoros
Parperis
and
themay
General
Manager
Mr.
borrows
money from
a bank
they
be asked
to give the
Theodoros
Philippou
attended
a meeting
of theIfPresidents
bank
the mortgage
to their
house
as collateral.
they fail
and
CEOs
of the European
Federation
of Accountants
to
meet
the payments
the bank keeps
the house.
What sort
of
collateral
does
Finland
expect?and
The
only likely
assets
(FEE)
Member
Bodies
in Vienna
a Special
Meeting
of
available
to Assembly.
Greece for this purposed have already been
the General
incorporated in the planned privatization programme.
Perhaps the Acropolis will be acceptable?
If Finland succeeds in obtaining collateral, other counties
are
sure to follow STANDARDS
with similar requests.
Austria, Holland,
ACCOUNTING
COMMITTEE
Slovenia and Slovakia have already said they want the
same
deal.
not the the
spiritcommittee
of partnership
which
During
theThis
last ismeeting
studied
the
characterized
the
beginnings
of
the
Eurozone.
As
much
as
anything,
this of
spirit
of grudging
cooperation
underlines
the
presentation
financial
statements
and IAS19
relating
limited
nature
of
the
contributions
to
be
expected
from
the
other Eurozone countries in such emergencies. In other
words, something far short of what is required to save
Greece and other peripheral countries from default..
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
The international community is already asking: Is Cyprus
another “Greece”? Cyprus already shares one feature
which is common to all the peripheral countries currently
in crisis, public sector spending that is out of control. To
finance this, Cyprus has been turning increasingly to
foreign
borrowing.
Even
hint 2011
of another
Greek
crisis will
which was
published
in aApril
is open
for comments
shake
international
up to 30
Septembermarkets
2011. and affect the already soaring
costs of Cypriot borrowing.
.Marios Agathangelou
The
government has recently had to offer local Cypriot
Chairman
investors a 7% return for their funds, considerably higher
than
the 5.37%
required in Spain.
International investors
LARNACA
– FAMAGUSTA
CO-ORDINATING
now
require
more
than
11%
to
invest
in Cyprus 10 year
COMMITTEE
bonds. This is better than the 18% demanded for Greek
finance
Cyprus
far of
behind?
The
rapidity with
which
During but
the is
third
quarter
2011 the
Committee
carried
out
the
cost
of
financing
national
debt
has
been
changing
is
one of the key features of this crisis. Countries that thought
they were financially secure suddenly found they could not
afford to pay the unexpectedly higher price for new capital
that the market suddenly demanded.
A DROP IN CONFIDENCE
Inland Revenue.
The rising interest charges demanded by international
markets reflect a sharp drop in international confidence.
Panayiota Vayianou
This is indicated in the successive downgrades of Cypriot
Chairwoman
finances
awarded by the international rating agencies. It is
reflected in the many statements of unease and uncertainty
CORPORATE
GOVERNANCE,
INTERNAL
by
business leaders,
local and international,
uponAUDIT
which
AND
RISK
MANAGEMENT
COMMITTEE
much of this economy depends. These are the people, not
the politicians or the public servants, which finance the
During
the ofthird
of has
2011
the accustomed
Corporate
high
standard
livingquarter
the island
become
Governance,
Internal
anddropping
Risk Management
to.
That standard
of livingAudit
has been
recently and
committee
has,
within
the
scope
of
its
terms
we should realize that it may drop much more.of reference,
dealtgovernment
with the following:
The
should not underestimate the speed with
which an economic tsunami can descend on us. As a
ñ WorkedCypriot
on the preparation
developmentforoffuture
a survey
on Corporate
minimum,
financial
shocks
survey
will be
sentand
to athesharply
listed
callsGovernance.
for a much The
reduced
national
deficit
companies
in Cyprus.
Its results
will Itbealso
sent
to for
all
reduced
dependence
on foreign
borrowing.
calls
members.
It
is
also
envisaged
that
the
results
be
much greater economic literacy than has characterized the
presented recent
duringhandling
a pressofconference,
within The
the
government’s
national finances.
activities
planned
for the celebration
of ICPAC’s
50th
beginning
toward
improvement
of the current
situation
is
not that complicated. It starts with a realistic restructuring
of
public on
sector
Populism,
ñ Worked
a whitefinances.
paper describing
the role,indecision,
duties and
government
by pressure
and departments
cronyism allwithin
carry an
a
responsibilities
of the group
following
major
responsibility for the current depressing economic
organisation:
situation in Cyprus. ■
ñ Risk Management
31
29
Institute News
ñ Internal Audit
The Cyprus Economy and “vested rights”
In the Lobby of the operating theatre
In the
past threewithin
years I have
interaction of these three
functions
and
had the privilege of
organisation.
discussing with hundreds of
with who
the European
businessmen
confided
Union Affairs committee,inhasme
designed
seminarand
on
their ainsights
The
seminar,
concerns over the course in
of
coordination with the Education
Committee,
is
planned
the Cypriot economy. I
for September 2011.
listened very carefully to
what they had to say.
Businessmen, by their
nature, on
tenda to
constantly
study
of the
monitor
the
markets
Institute’s Governance procedures. The objective of and
the
By Michael
Pilikos
keep
a
very
close
eye
on
study is to assist the Institute develop governancea
Director
General
number best of
economic
processes
which will incorporate
practices,
at the
Cyprus
Employers
and
same
time recognising
the indicators;
and
sizes.
like financial
Industrialists
Federation
to monitor they
closely can
all
seismographs,
(OEB)
initiatives
within
its
scope
register even the slightest
domain and continued totremors.
contribute articles to the
At the outbreak of the global financial crisis,
businessmen’s concerns were mostly about the difficulties
Chairman
of securing financing for their companies. “The crisis
overtook us” and
otherAND
overoptimistic
proclamations from
ECONOMIC
CRIME
FORENSIC
the
government’s
side
was
wishful
thinking
that did little
to calm fears within the business community. Later on,
concerns
from weathering
crisissubcommittee
to retaining
During
theshifted
third quarter
of 2011, thethe
ECFA
on
organizing
seminars in
had
beendifficult
collaborating
with the
personnel
and surviving
a very
and unforgiving
education
committee and the IT committee on coeconomic environment.
IT
and the other
on fraud
detection
and prevention.
Following
the first
damage
estimates
for the Both
Mari
will
be
offered
before
the
end
of
the
year.
explosion and the expected electricity price hike, these
voices of concern became cries of despair. The cost of
producing goods and services, as everyone knows, is
passed on to the end user, in this case the Cypriot
consumers and businesses.
The launching
of the social
dialogue
announced
two years
Cyprus”
in the ECFA
column.
The first
one is authored
by
ago
aiming
to
correct
some
impossible
to
ignore
economic
distortions
was, to put
mildly, unfruitful.
The timidunder
halfthe
title “Fraud:
Theit auditor’s
responsibilities
measures
taken
proved
ineffective
at
tackling
the
serious
O’Shea
Eoin
on the of
Bribery
Act. TheMeanwhile,
UK Briberywhile
Act will
structural
problems
our economy.
the
have
seriousleadership
implications attended
on those doing
business in and
the
political
“productive”
2
30
Chairperson
“constructive”SERVICES
meetings onCOMMITTEE
the economy, unemployment
FINANCIAL
rose to unprecedented levels and tens of thousands of
people
now Services
face an Committee
uncertain, monitors
gloomy developments
future while
The
Financial
in
the bank
industry,
and other financial
struggling
to make
ends investment
meet.
level.
keeps
contacts withone
thewould
regulatory
Under Itthealso
present
circumstances,
expectbodies,
that all
such
as
the
Central
Bank
of
Cyprus
(CBC),
the
Cyprus
social actors would rise to the occasion and for the sakeand
of
Securities
Exchange
(CySEC)
andaside
the
saving the country
fromCommission
its predicament
would set
their differences and make mutual concessions and
compromises. This is precisely what private sector
employees and businesses did two years ago with the
Agreement for the Viability of the Social Insurance Fund
whereby, under much better economic circumstances, both
parties increased
contributions.
Unfortunately,
the
During
the secondtheir
quarter
of the year
the Committee
leadership the
of PASYDY,
the public
employees’
monitored
economic crisis
and itssector
consequences
in
union, has
failed
to show
the slightest
willingness
to act
in
regards
to all
areas
of economic
activities
in Cyprus
and
an equally responsible manner, refusing even to discuss the
abroad.
issue, ignoring the alarming findings of the relevant
Below
theand
main
topics
that that
the the
Committee
actuarialare
study
despite
the fact
economy ishas
in
concentrated
on
over
the
past
three
months:
a downward spiral.
Shielded behind vested rights and privileges that the public
finances cannot sustain, PASYDY’s leadership behaves in
an anachronistic and callous manner, as if it were
completely detached from the economic realities of
Cyprus. While private sector employees contribute a
significant the
proportion
for their
retirement,
Following
passingofoftheir
the income
legislation
by Parliament,
public sector employees
contribute
less and
enjoy
representatives
of the Committee
hadmuch
numerous
meetings
muchrepresentatives
more generous
retirement
benefits
with the
first
with
of the
Central Bank
of Cyprus,
during
effectively
subsidising
the oflatter.
Whilewere
private
sector
which
various
concerns
ICPAC
discussed
regarding
issuedknees
by the
employeesthe
andprovisions
businesses of
begthe
theDirective
banks on their
for
Central
Bank
of
Cyprus
which
affect
directly
or
indirectly
a loan, public sector employees enjoy financial solvency
members
of through
our Institute.
guaranteed
their protected employment. While
private sector employees see their salaries and benefits
In
addition,
be prepared
by thepublic
regulator
of
moving
in the
linereport
with totheir
productivity,
sector
employees enjoy salaries and benefits that bear no
resemblance to their productivity or the financial
soundness of their employer.
Like theto aristocracy
behind theexample
gilded ofwalls
of the
decision
circulate an illustrative
the report
to
Versailles
on
the
verge
of
the
French
revolution,
PASYDY’s leadership fails to understand why there is
1
Institute News
The Cyprus Economy and “vested rights”
such turmoil and commotion outside. They fail to
understand that their excessive privileges cannot be
sustained. They fail to understand why the overwhelming
majority of private sector employees and businesses are no
longer willing to work so that a minority may go on
enjoying benefits disproportional to its contributions.
that ensued resulted in a watered-down version of this
agreed package which was then approved by the
parliament. A promised second set of measures is
underway whose decisiveness to tackle the structural
problems of our economy we, and the markets, wait to see.
There is no doubt in my mind that proper measures will be
taken eventually. The laws of the economy under which we
too are subject to, despite claims otherwise, have their way
of
normalising
abnormalities. What makes me worry is the
Marios
Agathangelou
way
with which these measures will be decided and the
Chairman
severity with which they will be applied. In Greece too, the
unions
invoked
their acquired
rights and with a
LARNACA
– FAMAGUSTA
CO-ORDINATING
COMMITTEE attitude refused to make the slightest
confrontational
compromise. In Greece too, the governments
During the third quarter
2011 the Committee
out
accommodated
every of
unreasonable
demandcarried
through
the
following
activities:
excessive borrowing and the result today is a very sad
Institute News
One would expect that in the aftermath of the greatest
disaster since 1974, after all the public indignation and
justified anger, our political leadership would seize this
opportunity to make bold reforms that would correct
structural wrongs, rescind distortions and advance social
justice. Alas, for the past two years valuable time was lost
in a blame game and pointless discussions with no one
making any decisions or taking responsibility for anything.
The consensus reached on July 22nd between the
government and political parties on a first set of measures
the Cyprus economy.
for fiscal consolidation offered a glimmer of hope. Though
inadequate in its entirety, this agreed set of measures was
a step forward and to the right direction since it put its
weight on the reduction of public expenses. The debate
spectacle to watch. By refusing for years to take the bitter
medicine of fiscal prudence, Greece is now on the
operating table. I am very afraid that we are following in
its footsteps… ■
Inland Revenue.
Vayianou
Τhe future of the Eurozone and the Euro Panayiota
Chairwoman
The future of the Eurozone and the Euro
For more than one year the
crisis of public debt of the
Eurozone was moving from
one country to another. First
in Greece then to Ireland and
later to Portugal. Then again
to Greece with the decision
by the Eurozone leaders to
offer Greece an extra bail –
out of €109 billion.
A pleasant development is
that the German Federal
Constitutional Court decided
By Demetris S. Vakis, Board that German participation in
‘Combined
Financial
Statements’. The discussion paper
Member,
KPMG
Ltd
the Greek rescue was legal
2
and
that the Government
has theofright
to issue
loans
commenced
the implementation
its action
plan
andand
has
guarantees
–
so
long
as
it
obtains
approval
from
the
parliadealt with the following:
mentary budget committee. After this decision Mrs
Merkel,
Germany’s
Chancellor, stated
that theonEuro
is not
ñ Worked
on the development
of a survey
Corporate
going
to fail.
Governance.
As professor
argues, thethat
Eurozone
today be
is
members.Joseph
It is Stiglitz
also envisaged
the results
at a presented
stage whichduring
will decide
whether
the
Euro
will
survive
a press conference, within the
but also
whether
the world
economy
will again
relapse50th
into
activities
planned
for the
celebration
of ICPAC’s
recession.
Alsoresponsibilities
as argued by of
many
analysts the
Euro today
is at an
a
the following
departments
within
turning
point:
either
the
Eurozone
will
deepen
in
an
ecoorganisation:
nomic and fiscal union or the weakest members will be
forced
leave the Eurozone. Recently however, Mrs.
ñ RisktoManagement
1
31
Institute News
ñ
Internal
Audit
Angela
Merkel
has ruled out the possibility of Greek insolvency or even an exit by Greece from the Euro. With
ñ
Organisation
and Methods
regard
to the deepening
of the Eurozone the President of
the European Central Bank, Mr. Jean - Claude Trichet has
The
white
document
be circulated
to all members
of
recently
proposed
thewill
setting
up of a Treasury
for the EU.
ICPAC
and
will
help
clarify
the
boundaries
and
the
Mr. Trichet had originally suggested this idea when he was
interaction
of Central
these Bank
threeof France,
functions
within
Governor of the
i.e. the
settingand
up
organisation.
of a Treasury which would supervise economic policies
and the budget and would represent the Euro abroad.
Affairsofcommittee,
has designed
a seminar
on
TheUnion
Chairman
the Eurogroup
Mr. Jean
– Claude
“Auditing
EU Funded
The seminar,
in
Yuncker
and other
officials Projects”.
of the Eurozone
have sugcoordination
with
Education
Committee,
is planned
gested
the issuing
of athe
Eurobond
which
will be issued
colfor September
lectively
by the 172011.
members of the Eurozone as a solution
ñ
Thesovereign
committee
studied
European
Green
to the
debt
crisis.the
The
issue of Council
the Euorobond
Corporate
and
submitted
its
willPaper
lead toonlower
interest Governance
rates for needy
countries
and the
response
to
the
questions
posed
by
the
paper.
debt will be manageable. Greece, Spain and the opposition
ñ
The ofcommittee
embarked
on ofa the
study
of the
parties
Germany has
support
the issue
Eurobond.
Institute’s
Governance
procedures.
The
objective
of theit
However, Germany is concerned that with the Eurobond
is to to
assist
Institute
develop
governance
willstudy
be forced
pay the
higher
interest
rates because
the
processes
which
will
incorporate
best
practices,
at
the
southern indebted countries will also be participating. This
same time
recognising
the local practicalities
sizes.
however,
depends
on developments.
If the crisis and
continues
ñ
The committee
has continued
closely
to worsen
most countries
will findtothemonitor
Eurobond
to bealla
European
and
International
initiatives
within
its
scope
cheaper solution than the bail-out of the countries which
and Mr.
continued
to contribute
to ecothe
facedomain
problems.
Olli Rehn,
who is in articles
charge of
Institute’s
magazine.
nomic and monetary affairs at the European Commission,
has stated that by the end of the year the Commission will
Panicos
G. to
Papamichael
be ready
propose a system of common issue of
Chairman
Eurobonds. As Mr. Mario Monti, President of Bocconi
University and former EU Commissioner, stated, it is not
ECONOMIC
CRIME
FORENSIC
yet obvious whether
theAND
cost of
financing for solvent counACCOUNTING
(ECFA)
COMMITTEE
tries will be higher with the issue of the Eurobonds that
with the present turmoil in the public debt markets of the
During
the third
of 2011,
the ECFA
subcommittee
Eurozone.
As a quarter
consequence
it will
be difficult
to find a
on
organizing
seminars
been collaborating
the
permanent
solution
to thehad
Eurozone
crisis without with
the issue
education
committee
and
the
IT
committee
on
coof the Eurobonds.
IT
the clear
other and
on fraud
detection
and for
prevention.
Both
Theand
only
effective
solution
the Eurozone
will
be offered
end expected
of the year.rate of growth.
would
be a before
higher the
than
Unfortunately, however, there is no expectation for a
The
ECFA-ebulletin
Volume
1 Issue 1the
was
emailedistofacall
higher
economic growth.
In parallel,
Eurozone
ECFA-SIG
(special
interest
group)
and
members
had
ing a relatively high exchange rate of the Euro which is an
provided
positive
on this
obstacle to
higherfeedback
exports, with
theinitiative.
exception of Germany
and one or two Northern European countries which if it
Finally,
articles they
in thiswould
issue have
of “Accountancy
were notthere
for are
the two
Eurozone,
faced probCyprus”
in
the
ECFA
column.
The
first
one
is
authored
by
lems for exports since the Euro’s exchange rate would
ahave
member
our committee
Leonidas
Ieronymides
with
been of
higher.
In the last
few years
the economic
the
title
“Fraud:
The
auditor’s
responsibilities
under
growth which took place in Greece, Ireland and Portugal
ISA240”
andinthe
by awas
well-known
UK
and perhaps
Italysecond
and Spain
the result of
lowlawyer
interO’Shea
onEurozone,
the Briberywhich
Act. The
UK Bribery
Act will
est ratesEoin
in the
reduced
the pressure
for
have
serious
implications
on while
those the
doing
the
tackling
structural
problems,
lackbusiness
of fiscalinregu-
2
32
Τhe future of the Eurozone and the Euro
UK
or encouraged
even those the
whorecycling
are doing
business
with ainUK
lations
of fiscal
surpluses
the
company
outside
the
UK.
form of irrational borrowing.
Maria
On theKrambia-Kapardis
21st July 2011 the Eurozone leaders promised an
Chairperson
extra €109 billion official lending to Greece from other
members of the Eurozone and the IMF. This bail – out
FINANCIAL
COMMITTEE
involves loansSERVICES
and asking Greece’s
private bond holders to
choose from a menu of options under which they can sell
The
Financial
Services
Committee
monitors
bonds
at a discount
or swap
them for
15 or 30developments
year - bonds,
in
the now
bankor industry,
and process,
other financial
either
when theyinvestment
mature. This
officials
operations,
on delay
a domestic
level on
as €135
well as
believe, could
repayment
bn on
foraasEuropean
much as
level.
It also
with
the regulatory
bodies,
30 years.
Twokeeps
weekscontacts
before this
decision,
the Ministers
of
such
as the
Bank ofsigned
Cyprusa(CBC),
Cyprus anda
Finance
of Central
the Eurozone
Treatythe
establishing
Securities
Exchange
Commission
(CySEC)
and the
new permanent
€500 billion
bail – out
fund, called
the
Commissioner
of Mechanism
Insurance (ESM).
companies
in order
to
European Stability
It is noted
that the
exchange
viewsfor
regarding
the industry,
as well
as other
ESM provides
similar “haircuts”
when
it comes
into
organized
groups and associations (for example
force in 2013.
The leaders of
ofCyprus
the Eurozone
Association
etc). have promised to take any
measures needed so as to save the Euro. But what is actually needed?
Certainly
more of
money.
The analysts
believe
During
the second
quarter
the year
the Committee
that the EFSF
at a latercrisis
stageand
the ESM
will be reliable
monitored
the and
economic
its consequences
in
when the
they
available
increases
to €1 and
trilregards
to money
all areas
of have
economic
activities
in Cyprus
lion. Mr. Sarkozy avails himself of the opportunity to purabroad.
sue his vision for an “Economic Governance” with frequent meetings
the leaders
the Eurozone.
In facthas
the
Below
are the ofmain
topicsofthat
the Committee
debt crisis of on
theover
Eurozone
proves
was argued by varconcentrated
the past
threewhat
months:
ious economists and analysts that a monetary union must
be supported
by atofiscal
Union
and specifically the exisñ
Law relating
Covered
Bonds
tence of a Treasury. But something like this would be
opposed
by taxstudied
– payers
solvent
countries,
such as
The
Committee
the of
draft
legislation
and directive
Germany.
collapse
thecited
Euro
be
issued
by theNevertheless,
Central Bankaof
Cyprusof
and
itswould
opinions
risky,
dangerous
and
costly.
Fortunately
the
two
main
parwhich were discussed with the Central Bank of Cyprus.
ties of Germany, the social democrats and the Greens are
supporting the
European
and consequently
would
Following
passingsolutions
of the legislation
by Parliament,
support Mrs. Merkel
and the Minister
of Finance,
Mr.
representatives
of the Committee
had numerous
meetings
Wolfgug
Schauble
to
pursue
the
issue
of
the
Eurobonds,
something
whichconcerns
would enhance
the links
Germany
which
various
of ICPAC
wereof discussed
with
the
Euro.
Recently
Mr.
Joschka
Fischer,
the
regarding the provisions of the Directive issued Greens’
by the
elder statesman
called for
a United
oforEurope
and
Central
Bank of Cyprus
which
affectStates
directly
indirectly
something
similar
was
stated
also
by
the
former
social
democratic chancellor Gerhard Schroder. Also Mr.
Schroder
hadthe
a meeting
together
other ex
In
addition,
report toinbeBrussels
prepared
by thewith
regulator
of
– leadersBonds
– Felipe
of as
Spain,
Verhotstadt
of
Covered
wasGonzales
discussed,
well Guy
as the
issue of the
Belgium
and
Matti
Varhanen
of
Finland
calling
for
the
issuethe
of report
Eurobonds
a European
■ of an
that
of theand
regulator
is tofederation.
be in the form
Note: The views
and opinions
expressed
herein
areof
those
Committee
will inform
the Central
Bank of
Cyprus
the
of
the
author
and
do
not
necessarily
represent
the
views
andInstitutes
opinions
of KPMG International Cooperative
the
members.
(“KPMG International”) or KPMG member firms.
3
Institute News
The services sector
Distress
signals
from
Institute
News
the services sector
The financial upheavals
undergone by the Cyprus
economy in the first half of
met four times and considered2011
mattersand
of interest
the to ICPAC
tragic
and to the profession at large.explosion
Other issuesatdealt
withwhich
were,
Mari
among others, the following:destroyed half the island's
electricity generating capaOn 5 September 2011 a delegation
of left
the the
Institute
headed
city and
government
in disarray
havemet
added
to the
Parperis,
with
the
a new Kazamias
recession, and
new Minister of Finance, risk
Mr.ofKikis
and
have
led
to
a
downgrading
of
Cyprus's credit rating and an
the Cyprus economy.
increase in bond yields,
By Elias A. Neocleous
putting the public finances
On Chairman
7 September
2011ofMr. Christos Kyriakides, Senior
Vice
and Head
under severe strain.
Commercial/Corporate
Department
More worryingly for the
of Andreas Neocleous
longer term, the gover&On
Co13
LLC
September 2011 a press
conference
wasinability
held at the
nment's
apparent
to
Offices
of
the
Institute
concering
proposals
by
ICPAC
for
guarantee political and financial stability puts Cyprus's
the Cyprus
economy.as The
pressfinancial
conference
wasatgiven
by
hard-won
reputation
a leading
centre
risk. In
the President
of thetoInstitute
Mr. Theodoros
Parperis.
order
for investors
have confidence
in a financial
centre
a stable environment is a sine qua non.
In
years afterParperis
joining the
2004 theManager
RepublicMr.
of
Mr.theTheodoros
andEU
theinGeneral
Cyprus
made
great progress
in aimproving
quality,
Theodoros
Philippou
attended
meeting ofservice
the Presidents
transparency
and
the
coordination
of
public
finances,
while
its in
comparative
over its
(FEE) maintaining
Member Bodies
Vienna and aadvantage
Special Meeting
of
competitors within the EU and worldwide. As a result
Cyprus became the portal of choice for investment
between the EU and the dynamic economies of Central and
Eastern
Europe, India, China
and beyond. Adoption of the
COMMITTEESʼ
ACTIVITIES
euro in 2008 further consolidated the island's position as a
bridge
for investments
and capital flows
within and outside
ACCOUNTING
STANDARDS
COMMITTEE
the European market. The services sector grew to be the
backbone
of the
modern
Cyprus
providing
many
During the
last
meeting
theeconomy,
committee
studied
the
thousands
of
people
with
employment,
generating
substantial
and attracting
deposits
and
presentationrevenues
of financial
statementsforeign
and IAS19
relating
investments,
so
strengthening
the
domestic
banking
system and providing liquidity.
The
presenceFinancial
of some Statements’.
fifty thousand
Russian
permanent
‘Combined
The
discussion
paper
residents in Cyprus reflects not only the close cultural links
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
between
two nations,
up to 30 the
September
2011.but also the beneficial business,
investment and taxation regime which Cyprus offers,
particularly
with the double taxation agreement between
Marios Agathangelou
the
two countries. The Russian community is a significant
Chairman
economic force, strengthening the domestic market for
goods
and services.
LARNACA
– FAMAGUSTA CO-ORDINATING
COMMITTEE
However, the progress made in the first decade of the
twenty-first
century
risks
beingthelost
unless rapid
During the third
quarter
of 2011
Committee
carriedand
out
effective
actionactivities:
is taken to reassure investors and potential
the following
investors. Cyprus needs to reform and improve its
government
infrastructure,
particularly
its civila lunch
service,
1. On 13 April
2011 the committee
organised
at
and
build
alliances
with
neighbouring
countries
and
other
financial
centresofwithin
to promote
common
Inland Revenue
Larnacathe
MrEU
Marios
Kourouniades.
interests more effectively. Cyprus needs to get itself off the
danger
candidates
the European
support
2. On 4 list
May of
2011
a seminar for
was co-ordinated
at Sun
Hall
mechanism
so
that
it
can
regain
its
influence
in
the
debate
on
reform
of the internal market and effectively promote
Inland
Revenue.
its national interests.
Panayiota Vayianou
ItChairwoman
is particularly important that Cyprus should do this as
soon as possible in the light of the threat posed by
European
proposals
for tax harmonization
the
CORPORATE
GOVERNANCE,
INTERNALand
AUDIT
adoption
of a MANAGEMENT
common consolidated
tax base. If a common
AND RISK
COMMITTEE
consolidated tax base were allowed to develop into a
Europe-wide
tax rate,of
which
has been
suggested
During the minimum
third quarter
2011
the Corporate
in
some
quarters,
this
would
seriously
damage
the
economies
smaller
such
as Cyprus,
and
committee of
has,
withincountries
the scope
of its
terms of Malta
reference,
Ireland
that
base
their
competitiveness
on
their
comparative
advantages.
dealt with thetaxfollowing:
Since
tax harmonisation
is largely
a Franco-German
ñ Worked
on the development
of a survey
on Corporate
initiative,
and
since
the
influence
of
France
and
Germany
Governance. The survey will be sent to the
listed
is strong
due into Cyprus.
their current
position
Europe's
companies
Its results
will beas sent
to all
paymasters,
every means
at itsresults
disposal
members.Cyprus
It is will
alsoneed
envisaged
that the
be
in order
to effectively
the proposals.
The within
impending
presented
during resist
a press
conference,
the
Cyprus
EU Presidency
and
long-running
reunification
activities
planned for
thethe
celebration
of ICPAC’s
50th
negotiations with Turkey add a further dimension to the
issue.
The organisation:
need for action is urgent, as the lack of investor
confidence is starting to be reflected in the financial
ñ Risk Management
statistics,
with deposits at banks in Cyprus falling by 1%
11
33
Institute News
ñ
Internal
Audit
(€1.8
billion)
during the month of June, and the relocation
of shipping offices away from Cyprus.
With increased mobility within the single European market
The
document
be circulated
to allsuch
members
of
therewhite
is a prospect
thatwill
financial
institutions
as banks
ICPAC
and
will
help
clarify
the
boundaries
and
the
and finance companies will also abandon Cyprus. Further,
interaction
of these
three yields
functions
withindebtand
financial instability
is pushing
on public
to
organisation.
unprecedentedly high levels, which add to the erosion of
investor confidence. Bank of Cyprus, the country's largest
ñ
The committee,
collaboration
with
European
commercial
bank, hasinpublicly
expressed
its the
concerns
over
Affairs
has designed
on
the Union
prospects
forcommittee,
the economy,
receivinga seminar
widespread
“Auditing
EU
Funded
Projects”.
The
seminar,
in
coverage in the international media.
Septemberneeds
2011. to take rapid, radical measures to
Thefor
government
ñ
The
committee
the European
Council
Green
return the economystudied
to sustainable
growth
and restore
Paper international
on Corporate
Governance and submitted its
Cyprus's
image.
The services sector
UK
or even
those whoofarethedoing
business
with
a UK
Within
the framework
services
sector,
there
are
company
outside
the
UK.
already significant initiatives in the right direction, such as
the bill to update the International Trusts Law of 1992 and
Maria
removeKrambia-Kapardis
certain obstacles to investment, which is under
Chairperson
consideration by the Parliament. Businesses, banks and
trade associations have made a concerted appeal to
FINANCIAL
SERVICES
COMMITTEE
expedite passage
of the law
so as to encourage existing
investors, some of whom have holdings of billions of euro,
The
Financial
Committee
monitors to
developments
to keep
faith Services
with Cyprus,
and hopefully
attract new
in
the
bank
industry,
investment
and
other
financial
investors.
level.
It of
alsothe
keeps
contacts
withwill
the involve
regulatory
bodies,
Reform
public
finances
substantial
such
as the
Central
(CBC),
the Cyprus
and
changes,
which
areBank
likelyoftoCyprus
be fiercely
resisted
by certain
Securities
Exchange
Commission
(CySEC)
and
sectoral interests, but it is essential if Cyprus is to retainthe
its
Commissioner
of Insurance
companies
in order
to
position as a reliable,
reputable financial
centre,
regain its
exchange
views
regarding
the
industry,
as
well
as
other
influence in Europe and re-establish control over its
organized
groups■ and associations (for example
economic destiny.
abroad.
Wage Indexation
The graduated wage indexation
and the competitiveness of the economy
Chairman
discussion
is now with
goingthe
on
on organizing seminars had A
been
collaborating
about
the
reform
of
the
wage
education committee and the IT committee on cosystem (Kown
in
organising two seminars. Oneindexation
on fraud detection
utilizing
Cyprusand
as prevention.
ATA) so as
to
Both
become
more
equitable.
The
wages in Cyprus are adjusted
The ECFA-ebulletin Volume 1every
Issuesix1 months
was emailed
all
in linetowith
ECFA-SIG (special interest general
group) and
members
changes
in had
the
provided positive feedback onConsumer
this initiative.
Price Index as
compiled by the Statistical
this issue
“Accountancy
Service
of ofCyprus.
Wage
Cyprus” in the ECFA column.Indexation
The first oneisis authored
by
a serious
a member of our committee structural
Leonidas Ieronymides
problem with
and
By Tassos Anastasiades,
should
be
reformed.
From
Economist, Deputy Editor
the discussions in the local
press it seems that there are suggestions to render this
2
34
institution fairer by offering a higher wage rate to those at
the lower salary scales and less or nothing at the higher
scales.
The wage indexation, and especially in the case of Cyprus
which is a member of a monetary Union and thus it cannot
devalue its
leads to the rise in costs, increase in
members
ofcurrency,
our Institute.
prices and downgrading of its competitiveness with the
final
result the
the report
decrease
in prepared
exports and
the regulator
increase of
in
In
addition,
to be
by the
unemployment.
But discussed,
with the as
suggestion
to issue
render
the
Covered
Bonds was
well as the
of the
system
fairer,
the
situation
will
worsen.
This
is
due
to
the
fact the
thatreport
the costs
of regulator
a businessisare
affected
the of
large
that
of the
to be
in theby
form
an
number ofUpon
employees
with lower
salaries As
and such,
not by the
the
‘Agreed
Procedures’
(‘AUP’).
Committee
will of
inform
Central
Bank of Cyprus
of the
small number
high the
salary
employees.
Consequently
decision
circulate anfor
illustrative
example
of the
report to
with thetosuggestion
a graduated
wage
Indexation
the
Institutes
members.
system the downgrading of the Cyprus Economy will
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Wage Indexation
continue and unemployment will be rising.
situation relative to the four neighboring countries –
Belgium, France, Germany and the Netherlands.
Institute News
There is no excuse for the increase in salaries if the
Government raises indirect taxes, whether VAT or any
other indirect tax. In the public sector the tax revenue
collected by the Government in six months will be given
back in higher salaries and thus the wage bill will rise
COUNCILʼS
while
in the case ACTIVITIES
of the private sector the cost of
production will rise and prices will rise with the final result
During
the third
quarter
the products
Council ofand
theservices.
Institute
the
decrease
in the
salesof
of2011
Cyprus
met
four
times
and
considered
matters
of
interest
to
If the increase in the consumer price index is due ICPAC
to the
and
to
the
profession
at
large.
Other
issues
dealt
with
were,
worsening of the terms of trade, i.e. increase in the prices
among
others,
the following:
of
imported
goods,
such as petrol, again there is no excuse
for the increase of wages. This is because the firms,
On 5 September
2011 prices
a delegation
of the Institute
headed
besides
paying higher
for importing
row materials
by the
President,goods,
Mr. Theodoros
met with
the
and
intermediate
they will Parperis,
also be paying
higher
new increases.
Minister of Finance, Mr. Kikis Kazamias and
wage
In
EU there
are only four countries which have the
thethe
Cyprus
economy.
wage indexation system: Cyprus, Malta, Belgium and
Luxembourg.
But in
the Mr.
threeChristos
countries
wages riseSenior
only
On 7 September
2011
Kyriakides,
once
in
a
year
and
not
twice
like
in
Cyprus.
If
wages
Officer of the Institute, attended the Council meeting ofrise
the
once
in a year Federation
the undesirable
effect on competitiveness
Mediterranean
of Accountants
in Rome.
will be limited as related to the twice a year system. The
increase
in wages should
based
exclusively
theatrise
On 13 September
2011 a be
press
conference
was on
held
the
in
productivity
of
the
business
unit
or
the
economic
sector.
As
above
besides
Cyprus,
which have
thestated
President
of the
the countries,
Institute Mr.
Theodoros
Parperis.
the wage indexation system are Malta, Luxembourg and
Belgium.
most
automatic
On 22 andIn
23 Belgium
Septemberfor2011
the workers,
President the
of the
Institute
adjustment
takes
place
once
a
year
during
the
first
quarter.
Mr. Theodoros Parperis and the General Manager
Mr.
However
the
Government
monitors
closely
the
system
in
order
to prevent
upsurge inFederation
relative labour
costs. At
and CEOs
of thean European
of Accountants
present,
the
forecasts
of
increases
in
foreign
hourly
labour
(FEE) Member Bodies in Vienna and a Special Meeting
of
costs
amongAssembly.
trading partners (France, Germany and the
the General
Netherlands) serves as maximum wage increase limit at all
levels. The Federation of Belgium Enterprises, however,
fears
negative consequences
for the competitiveness of the
COMMITTEESʼ
ACTIVITIES
Belgian economy if the wage indexation system is
maintained
in its current
form. COMMITTEE
ACCOUNTING
STANDARDS
During
the lastthemeeting
the revaluing
committeeof studied
the
In
Luxembourg
automatic
wages and
amendments
in
IAS1
relating
to
changes
in
the
salaries takes place once the CPI has risen above 2.5% in
presentation
IAS19
the
previous ofsixfinancial
months.statements
However and
in the
caserelating
of a
mainly
to
the
abolition
of
the
‘corridor
method’.
worsening economic situation the Government may resort
to the Tripartite Coordination Committee which may
It also initiated
a study
of FEE’s
discussion
recommend
temporarily
to suspend
indexation.
This paper
body
is also in charge of assessing the economic and social
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
In Malta wage indexation dates back to 1990. As a result
since 1990 wages are adjusted according to the rate of
inflation over the previous twelve months, as calculated by
the Retail Price Index (RPI). A derogation procedure is
also provided for, which can be invoked by companies
facing economics difficulties.
Marios Agathangelou
It is evident that the other three countries which still have
Chairman
the wage indexation system are concerned about the loss of
competitiveness
of their economy
and the rise in
CO-ORDINATING
employment.
COMMITTEECyprus is the only country which is not
concerned because it has not yet realized that it is a
member
of third
a monetary
union
a commoncarried
currency
During the
quarter of
2011with
the Committee
out
which
it cannotactivities:
devalue. Also none of the three countries
the following
has a graduated indexation system and, to protect their
1. On 13 April 2011
organised
a lunch to
at
competitiveness,
they the
havecommittee
also introduced
provisions
Zephyroswage
Tavern
in Larnaca
with the new
directorare
of
suspend
adjustment
if economic
difficulties
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
faced, or if wages in competitive countries rise at a lower
rate.
Hotel in Larnaca
a subject
Field
Audits should
from the
Therefore
the wage with
indexation
system
in Cyprus
be
Inland
Revenue.
reformed so as to protect our competitiveness by
introducing provisions so that this system may be
Panayiota Vayianou
suspended if the country is facing economic crisis (as it is
Chairwoman
The wage indexation, and especially
AND
COMMITTEE
in RISK
the MANAGEMENT
case of Cyprus
which is a
member of a monetary Union and thus
it cannotInternal
devalue
its and
currency,
leads
Governance,
Audit
Risk Management
committee
the scope
of its terms
reference,
to thehas,
risewithin
in costs,
increase
in of
prices
downgrading
of its comdealtand
with the
following:
petitiveness with the final result the
decrease in
andbethe
increase
Governance.
Theexports
survey will
sent
to the listed
companies
in Cyprus. Its results will be sent to all
in unemployment.
presented
during
pressin conference,
within
the case
now) and
that awages
general cannot
rise atthe
a
higher rate than those in competitive countries. In any way
while the ideal is its abolition as it happened in all but four
countries in the EU, at least it should be provided once a
year in combination with provisions to suspend it in case
organisation:
of economic crisis. ■
ñ Risk Management
31
35
Institute
Newsof corruption in the EU
The fighting
ñ Internal Audit
Clear political will needed in members states to
effectively fight corruption - MEPs
Despite
anti-corruption
organisation.
legislation, an estimated
€120 billion, or 1% of EU
GDP, is lost to corruption in
the EU each year and 80% of
citizens consider corruption
to be a major problem in
for September 2011.
their country. So what is
European
Green
going
wrong -Council
is it a lack
of
and
submitted
its
proper enforcement or is the
by the
paper.
problem
a lack
of political
study of
the
will in on
the amember
states?
Institute’s Governance procedures.
The objective
of the
On 1 September
2011,
study is to assist the Institute
develop
Members
of thegovernance
European
By Tasos
Georgiou
Parliament
(MEPs)
processes
best practices,
at the
Headsame time recognising the discussed
the issue
when
and sizes.
European
Parliament
they
looked
at
the
European
Office in Cyprus
Commission's
fighting
initiatives within its
scope
corruption
package.
Sophisticated EU-level anti-corruption law is in place, but
implementation and enforcement among EU countries is
uneven and remains unsatisfactory, reflecting a "lack of
Chairman
political commitment on the part of leaders and decision
makers to combat corruption in all forms", according to a
ECONOMIC
CRIME AND FORENSIC
Commission statement.
EU ANTI-CORRUPTION REPORT
It will
thereforeseminars
set up the
Anti-Corruption
to
on
organizing
hadEU
been
collaborating Report
with the
monitor andcommittee
assess member
to fight corruption
education
and state
the efforts
IT committee
on coand to encourage
more One
political
engagement.
should
organising
two seminars.
on fraud
detectionItutilizing
help
countries
better
enforce
legislation
and
underline
2
36
Chairperson
failures and vulnerabilities, a Commission representative
told Financial
the CivilServices
Liberties
Committee
of the
European
The
Committee
monitors
developments
Parliament. "What we need most is not necessarily new
legislation or institutions, but stronger enforcement of
what is already in place."
such
the Central
Bank
Cyprus
(CBC), of
thepolitical
Cyprus will
and
MEPsasagreed,
calling
forof
a clear
statement
Securities
Exchange
Commission
(CySEC)
and
from ministers. "We have to push Council to takethea
Commissioner
of Insurance
in order
to
position, one way
or another,"companies
Belgian Liberal
Louis
exchange
views
regarding
the
industry,
as
well
as
other
Michel said, while British Conservative Timothy Kirkhope
organized
and"toassociations
(for problem".
example
said politicalgroups
will is vital
finally tackle this
Association
Cyprus
Commercial
Banks, Insurance
Level playingoffield,
speedier
action - MEPs
The Commission will issue the report every two years, the
first in 2013
and saysquarter
it won't
an additional
burden
During
the second
ofmean
the year
the Committee
for memberthe
states
or duplication.
"We
use different,
monitored
economic
crisis and
its will
consequences
in
existing,
monitoring
mechanisms,
but
also
independent
experts, businesses, civil society," the representative said.
abroad.
MEPs welcomed the report but called for earlier
publication, or interim reports focusing on the biggest
problems.
A number of MEPs said the fight against corruption should
start in the European Parliament to show citizens that this
ñ
Law
relating
to CoveredinBonds
body
is tough
on corruption
politics.
The
Committee
studiedraised
the draft
legislation
andfor
directive
Among
other issues
were
the need
better
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
protection for whistleblowers, faster investigations and the
which
were
discussed
with the Central
Bank
Cyprus.
need to
smooth
out differences
across
theofEU
in how
bribery by multinationals of state officials in third
countries isthe
treated.
Following
passing of the legislation by Parliament,
WHAT'S
NEXT? of the Central Bank of Cyprus, during
with
representatives
The discussion
will continue
in the
next plenary
regarding
the provisions
of the
Directive
issued session
by the
when three questions on the subject will be put to the
Commission and Council, including, how the EU can
ensure the necessary political commitment in each member
state to combat corruption.
Covered
Bonds was
well
as athe
issueofofother
the
The Commission
willdiscussed,
also comeasup
with
series
independence
of the regulator.
The Committee
has decided
measures, including
participation
in the Council
of
that
the
report
of
the
regulator
is
to
be
in
the
of an
Europe's group of states against corruption andform
proposals
‘Agreed
Uponon Procedures’
(‘AUP’).assets,
As such,
the
for new rules
confiscating criminal
improving
Committee
will inform
the Centralstepping
Bank of up
Cyprus
of and
the
criminal financial
investigations,
police
judicial cooperation,
training
for law
decision
to circulate anbetter
illustrative
example
of enforcement
the report to
officers
and amembers.
stronger focus on anti-corruption in the EU's
the
Institutes
enlargement process and development policy. ■
1
Detection and combating Fraud
Institute News
Detection Institute
and Combating
News of Fraud
In recent years, scandals with
a significant international
impact such as those of
Enron
and WorldCom
have
the Council
of the Institute
alerted
organizations
to
the
and to the profession at large.significant
Other issuesrisk
dealt of
withfraud.
were,
Such
scandals
have
also
been
a
stimulus
for
the
enhancement
and
further
implementation
Parperis, metofwithantithe
corruption
mechanisms
within
the European
Union.of
for facing
the problems
By
Andreas
M
Lambrianou
the Cyprus economy.
Commissioner of Internal
The word fraud encompasses
Audit
the Republic2011 Mr. aChristos
wide range
of irregularities
On 7of September
Kyriakides,
Senior
ofOfficer
Cyprusof the Institute, attended
andthe Council
illegal
acts,
meeting of
the
deliberate
Mediterranean Federation of characterized
Accountants inby
Rome.
deception or deliberate falsification of data. Fraud may be
committed
either for
personal
- at the was
expense
On 13 September
2011
a pressgain
conference
heldof
at the
the
organizationor
even
for
the
benefit
of
the
organization
itself.
The main forms of fraud include embezzlement of an
organizations’
assets by 2011
employees
(whichofisthethe
most
the President
Institute
common
form
of
fraud),
corruption
such
as
bribery,
perks,
conflicts
of Philippou
interest and
even economic
for the
Theodoros
attended
a meeting extortion
of the Presidents
benefit
of the
for the personal
gain of
and CEOs
of organization
the EuropeanorFederation
of Accountants
employees.
It also
includes
the fraudulent
presentation
(FEE) Member
Bodies
in Vienna
and a Special
Meeting of
of
financial
statements.
This
last
form
of
fraud
is
committed
by management in order to present financial statements
that do not give a true and fair view of the financial
position
and performance
of the organization thereby
COMMITTEESʼ
ACTIVITIES
misleading its stakeholders (e.g. shareholders, creditors,
ACCOUNTING
COMMITTEE
banks,
or even theSTANDARDS
public as a whole
in the case of Public
Organizations).
amendments
in ofIAS1
relatingantoincentive
changes
in the
The
commitment
fraud requires
emanating
either from the personal circumstances of the person
committing it, or due to pressure for the achievement of
unrealistic goals within the organization or even for the
manipulation of financial and other results. Persons who
commit fraud are likely to try to justify their actions in a
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
number of ways in order to alleviate any moral or social
concerns.
The opportunity to commit fraud stems from weaknesses
Marios
Agathangelou
in
the internal
control systems of an organization which
Chairman
lack appropriate controls for the prevention and detection
of fraud. Individuals who have a very good knowledge of
the systems and procedures of an organization or
COMMITTEE
individuals who are considered very important or
irreplaceable are the ones most likely to commit fraud.
Opportunities may also appear as a result of weaknesses in
internal processes and operations of an organization.
In
the case Tavern
of the Public
Sector, with
the Internal
Audit
Service
Zephyros
in Larnaca
the new
director
of
of
the Republic
in Mr
its role
as the
Internal Auditor
Inland
RevenueofofCyprus
Larnaca
Marios
Kourouniades.
of the entire Public Sector, can play a key role in
2. On 4 May
2011
a seminar
co-ordinated
at Sun
preventing
and
combating
thewas
various
forms of
fraudHall
in
Hotel Organizations.
in Larnaca with a subject Field Audits from the
Public
Inland Revenue.
Cases of fraud may be identified through our audit work
Panayiota
Vayianou
using
various
methods such as:
Chairwoman
ñ Identification of fraud risks during the planning and
CORPORATE
INTERNAL
AUDIT
performance GOVERNANCE,
of an audit, taking
into account
the
AND
RISK
MANAGEMENT
COMMITTEE
operating environment of the audited organization,
previous audits and other relevant information.
ñ
Development
of appropriate
auditRisk
programs
for the
Governance,
Internal
Audit and
Management
detectionhas,
andwithin
investigation
fraud
which
include
committee
the scope of
of its
terms
of reference,
analysis of
scenariosofand
of has
its
commenced
thepossible
implementation
its investigation
action plan and
symptoms.
ñ Identification of the symptoms of fraud when
encountered during the performance of an audit (eg
when evaluating correcting entries, amendments or
changes to contracts and documents or even alterations
to information systems).
activities planned
for the celebration
ICPAC’s 50th
ñ Collection
and investigation
of fraudofsymptoms
that
are brought to the auditor’s attention irrespective of
ñ their
Worked
white paper
sizeon
orafrequency
of describing
occurrence.the role, duties and
organisation:
In cases
of circumstances that raise suspicion of possible
fraud or irregularity or significant damage on the assets of
ñ Risk Management
11
37
Institute News
Detection and combating Fraud
ñ
an Internal
audited Audit
organization, or the State, Article 12 of the
Internal Audit Law of 2003, requires the Commissioner of
ñ
Organisation
Methods
Internal
Audit and
of the
Republic of Cyprus,” to act
immediately to stop such activities. In such a case, a
special report will be prepared and submitted immediately
to the relevant authorities.
organisation.
The Internal Audit Service believes that the most effective
wayThe
of dealing
with in
fraud
in an organization
is to
prevent
ñ
committee,
collaboration
with the
European
it from
in the firsthas
place,
by establishing
an
Unionoccurring
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designed
a seminar on
appropriate
culture
procedures
such The
as: seminar, in
“Auditing
EU and
Funded
Projects”.
UK implementation
or even those who
are doing
with
UK
of policies
and business
procedures
thata will
company
outside
minimize
it tothe
an UK.
acceptable level.
ñ for
Establishment,
implementation and continuous
September 2011.
monitoring
of astudied
culture
honesty,Council
sincerityGreen
and
ñ The
committee
theofEuropean
morality
amongst
the
employees
of
the
organization
under a positive
and fairposed
working
environment.
This
response
to the questions
by the
paper.
can be
enhanced has
withembarked
the development
of a code
of
ñ The
committee
on a study
of the
conduct
or
a
code
of
ethics.
ñ Assessment of the risk of fraud by the organization and
significant
in reducing
Public Sector
in forming
such
as the role
Central
Bank of Cyprus
(CBC),costs,
the Cyprus
and
Securities
Exchange
Commission
(CySEC)
and
the
and maintaining
a positive
Public Opinion
about the
Public
Commissioner
of strengthening
Insurance companies
in order and
to
Service and in the
of the management
exchange
views
regarding
the
industry,
as
well
as
other
internal control systems of the entire Public Sector. All
organized
and in
associations
(for of
example
these can actgroups
as a catalyst
the minimization
Public
Association
of
Cyprus
Commercial
Banks,
Insurance
Sector Risks and in the enhancerrent of Public
Governance. ■
Chairman
ñ Developing
and strengthening supervisory procedures
Maria
Krambia-Kapardis
and
managerial
controls (appropriate management
Chairperson
information systems, levels of approvals, etc.) for the
preventionSERVICES
of fraud. COMMITTEE
FINANCIAL
Through
a scientific,
systematic
approach,
The
Financial
Servicesdisciplined
Committeeand
monitors
developments
and
in
accordance
with
the
International
Standards
for the
ProfessionalonPractice
of Internal
Auditing,
Internal
operations,
a domestic
level as well
as on the
a European
Audit ItService
of the
Republic
can bodies,
play a
level.
also keeps
contacts
withoftheCyprus
regulatory
abroad.
The Excel Wizard
The Excel Wizard
education committee and the
IT committee on coBy Stratos Panayides,
BA(Econ),
organising two seminars. One on fraud ACA
detection
utilizing
Training Consultant at AKTINA
Question: What is the use of names in Excel?
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defined
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• Formula in F5 is just the summation of the 3 months’ Sales: =SUM(C5:E5)
2
38
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
The Excel Wizard
Institute News
the Cyprus economy.
Marios Agathangelou
Chairman
COMMITTEE
Inland Revenue.
C2
may of
bethe
named
as concering
Rate, as follows:
Offices
Institute
proposals by ICPAC for
Panayiota Vayianou
Select
C2
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economy.
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youdiscussion
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‘Combined
Financial
Statements’.
paper represented by that name. ■
ñ Risk Management
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
31
39
Institute News
ñ Internal Audit
Fraud and the auditor’s responsibilities
Fraud: The auditor’s responsibilities
under ISA240
ISAfunctions
240 sets the
auditor’s
within
and
responsibilities relating to
organisation.
fraud in an audit of financial
statements.
withThe
the re-drafted
European
(as part of the Clarity ISAs
project) ISA 240 is effective
for audits of financial
Committee,
statements
for is planned
periods
for September 2011.
beginning on or after 15
European2009
Council
December
(so Green
it is
andyears
submitted
effective for
ended its
31
December
2010).
by the
paper.
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scope
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prevention
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domainonand
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articles to This
the
involves
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magazine.to creating a culture of honesty and
ethical behavior.
So what is the auditor’s responsibility? The auditor is
Chairman
responsible for “obtaining reasonable assurance that the
financial statements taken as a whole are free from
ECONOMIC
CRIME AND
FORENSIC
material misstatement,
whether
caused by fraud or error”.
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inherent
limitations of an audit, there
ACCOUNTING
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COMMITTEE
is always a risk that some material misstatements of the
financialthestatements
mayofnot
be detected
even
though the
During
third quarter
2011,
the ECFA
subcommittee
audit
is
properly
planned
and
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in
accordance
with the ISAs. This risk is higher if the material
education committee and the IT committee on comisstatement is the result of fraud, due to the potential
organising
twoperpetrators
seminars. One
on fraud
detection
utilizing
attempt of the
of fraud
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it. This
risk
IT
and
the
other
on
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prevention.
Both
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will
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the end
year.
misstatement
resulting
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management
fraud (as
opposed to employee fraud), because management is
frequently
in a position
to directly
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The
ECFA-ebulletin
Volume
1 Issue
1 was emailed
to all
accounting
records,
present
fraudulent
financial
ECFA-SIG (special interest group) and members
had
information
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override
control
procedures
designed
to
prevent similar frauds by other employees.
The standard lists the following three objectives of the
auditor:
identify
the risks
of material
misstatement
a- To
member
of and
our assess
committee
Leonidas
Ieronymides
with
of the
financial
statements
due to fraud;
the
title
“Fraud:
The auditor’s
responsibilities under
- To obtain sufficient appropriate audit evidence regarding
the assessed risks of material misstatement due to fraud,
2
40
Chairperson
through designing
and COMMITTEE
implementing
FINANCIAL
SERVICES
responses; and
appropriate
- To respond appropriately to fraud or suspected fraud
identified during the audit.
To achieve
there
a number
of
level.
It also these
keeps objectives
contacts with
the are
regulatory
bodies,
requirements:
- the auditor needs to maintain “professional skepticism”
throughout the audit. This is, in my opinion, the most
exchange
industry,
other
important views
aspect regarding
that needsthe
to be
presentasinwell
orderasfor
the
organized
groups andunder
associations
auditor’s responsibilities
this standard(for
to be example
met. It is
Association
Commercial
Insurance
probably notofa Cyprus
coincidence
that it isBanks,
the requirement
mentioned of
first
in the
Association
Cyprus
etc).standard. The auditor’s past
experience of the honesty and integrity of management and
those charged
with quarter
governance
not Committee
affect the
During
the second
of theshould
year the
auditor’s
professional
skepticism.
It
should,
however,
monitored the economic crisis and its consequences be
in
noted that documents and records presented to the auditor
can be accepted as genuine unless there is a reason to
abroad.
believe the contrary, in which case, further investigation
should be persued including consideration as to the need to
Below
the ofmain
topics to
thatassess
the Committee
has
use the are
work
an expert
the documents’
concentrated
authenticity. on over the past three months:
- a Law
discussion
needs
to take place
among the engagement
ñ
relating
to Covered
Bonds
team members placing an emphasis on how and where the
entity's financial statements may be susceptible to material
The
Committeedue
studied
the draft
legislation
directive
misstatement
to fraud,
including
how and
fraud
might
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
occur. Once again the team’s belief of the honesty
and
which
wereofdiscussed
with theand
Central
Bankcharged
of Cyprus.
integrity
management
those
with
governance should be set aside during this discussion.
- risk assessment
should
take
place to meetings
obtain an
representatives
ofprocedures
the Committee
had
numerous
understanding of the entity and its environment, including
the entity's internal control. Such procedures include
which
of ICPAC
were
discussed
making various
inquiries concerns
of management
regarding
its assessment
regarding
of statements
the Directive
by the
of the risk the
thatprovisions
the financial
mayissued
be materially
Central
Bank
of
Cyprus
which
affect
directly
or
indirectly
misstated due to fraud including the nature, extent and
members
Institute.
frequencyofofour
such
assessments, as well as management's
process for identifying and responding to the risks of fraud
in the
entity.the
Anreport
understanding
should by
alsotheberegulator
obtained of
of
In
addition,
to be prepared
how
those
charged
with
governance
exercise
oversight
of
management's processes for identifying and responding to
the risks of fraud in the entity and the internal control that
management has established to mitigate these risks.
‘Agreed
(‘AUP’).
As such,those
the
Inquiries Upon
should Procedures’
also be made
of management,
Committee
will
inform
the
Central
Bank
of
Cyprus
of
the
charged with governance and the internal audit function
decision
to circulate
illustrative
example
of the
report
to
(where one
exists),anto
determine
whether
they
have
knowledge
any actual, suspected or alleged fraud
the
Institutesof
members.
affecting the entity.
1
Institute News
Fraud and the auditor’s responsibilities
- if any unusual or unexpected relationships have been
identified in performing analytical procedures, at the start,
during but also near the end of the audit, the auditor should
evaluate whether they are indicative of risks of material
misstatement due to fraud. If a misstatement is identified
which is indicative of fraud, the auditor shall evaluate the
implications of the misstatement in relation to other
aspects of the audit, particularly the reliability of
COUNCILʼS
ACTIVITIES
management
representations,
recognizing that an instance
of fraud is unlikely to be an isolated occurrence. In
addition
shall
During thethe
thirdauditor
quarter of
2011reevaluate
the Council the
of theprevious
Institute
assessment of the risks of material misstatement due to
fraud and its resulting impact on the nature, timing and
and to of
theaudit
profession
at large.
Other issues
with risks.
were,
extent
procedures
to respond
to thedealt
assessed
others,
thefactors
following:
Ifamong
any fraud
risk
(defined as events or conditions
that indicate an incentive or pressure to commit fraud or
provide
an opportunity
commit of
fraud)
are identified,
On 5 September
2011 a to
delegation
the Institute
headed
appropriate responses should be determined to address the
assessed risks of material misstatement due to fraud. Such
new Minister
Finance,
Mr. Kikis
and
assessed
risks of of
material
misstatement
due Kazamias
to fraud should
discussed
measures
to be
taken
facing theto
problems
of
be
treated as
significant
risks
andfor
accordingly,
the extent
not
alreadyeconomy.
done so, the auditor shall obtain an
the Cyprus
understanding of the entity's related controls, including
control activities, relevant to such risks. In relation to
revenue recognition, the starting point is a presumption
Officer
of the
Institute,
of the
that
there
ARE
risks attended
of fraud the
in Council
revenuemeeting
recognition.
Mediterranean
Federation
of Accountants
in Rome. is not
Where
the auditor
concludes
that this presumption
applicable in the circumstances of the engagement and,
accordingly,
has not
identified
revenue recognition
a
On 13 September
2011
a press conference
was held atasthe
risk of material misstatement due to fraud, this conclusion
needs to be appropriately documented.
thepart
President
the Institute
Mr.identified
Theodoros
Parperis.
As
of theofresponses
to the
risks,
personnel
with appropriate knowledge, skill and ability should be
assigned
accounting
policies
by
On 22 andand
23 supervised,
September 2011
the President
of adopted
the Institute
the entity, particularly those related to subjective
measurements and complex transactions, should be
Theodoros whether
Philippouthey
attended
meeting ofof
thefraudulent
Presidents
evaluated
are aindicative
and CEOsreporting
of the European
Federation
of Accountants
financial
and an element
of unpredictability
should
be
incorporated
in
the
selection
of the
nature,
(FEE) Member Bodies in Vienna and a Special
Meeting
of
timing
and
extent
of
audit
procedures.
- For significant transactions that are outside the normal
course of business for the entity, or that otherwise appear
to be unusual evaluate whether the business rationale (or
the lack thereof) of the transactions suggests that they may
have been entered into to engage in fraudulent financial
reporting or to conceal misappropriation of assets.
Institute News
In addition to the above, and given that the risk of
management override of controls should always be
COMMITTEESʼ
ACTIVITIES
considered
as a risk of material
misstatement due to fraud
and thus a significant risk, the auditor should perform the
ACCOUNTING
STANDARDS COMMITTEE
following
procedures:
-During
Test the the
appropriateness
of journal
entries recorded
in the
last meeting
the committee
studied
the
general
ledger
and
other
adjustments
made
in
the
preparation
financialstatements
statements.and IAS19 relating
presentationofofthefinancial
- Review accounting estimates for biases and evaluate
whether the circumstances producing the bias, if any,
It also initiated
a studymisstatement
of FEE’s discussion
represent
a risk of material
due to fraud.paper
2
In all cases specific written representations from
which was published
in April
2011 is those
open for
comments
management
and, where
appropriate,
charged
with
up to 30 September
governance
need to2011.
be obtained and the auditor is
responsible to communicate to the appropriate level of
management
any identified fraud or information obtained
Marios Agathangelou
that
indicates that a fraud may exist.
Chairman
Appropriate audit documentation should always be
included in the auditor’s file. Such documentation should
COMMITTEE
include the following:
the third quarter
of 2011
the Committee
carried out
-During
The significant
decisions
reached
during the discussion
the
following
activities:
among the engagement team regarding the susceptibility of
the entity's financial statements to material misstatement
due
to fraud;
1. On
13 April 2011 the committee organised a lunch at
-Inland
The Revenue
identified
and assessed
of material
of Larnaca
Mr Mariosrisks
Kourouniades.
misstatement due to fraud at the financial statement level
and at the assertion level.
in Larnaca
with to
a subject
Field risks
Audits
the
-Hotel
The overall
responses
the assessed
of from
material
Inland
Revenue.
misstatement due to fraud at the financial statement level
and the nature, timing and extent of audit procedures, and
the
linkageVayianou
of those procedures with the assessed risks of
Panayiota
material
misstatement
due to fraud at the assertion level;
Chairwoman
- The results of the audit procedures, including those
designed to address the risk of management override of
controls;
the thirdabout
quarter
of 2011
the Corporate
-During
Communications
fraud made
to management,
those
Governance,
Internal Audit
and and
Risk
Management
charged
with governance,
regulators
others.
-commenced
If a conclusion
has been reached
that
the presumption
the implementation
of its
action
plan and has
that
there
is
a
risk
of
material
misstatement
due to fraud
related to revenue recognition is not applicable in the
circumstances of the engagement, the auditor shall include
in the audit documentation the reasons for that conclusion.
companies
in should
Cyprus.always
Its results
will be
to all
Finally,
an auditor
remember
that,sent
although
members.
It
is
also
envisaged
that
the
results
be
the primary responsibility is with those charged with
presentedandduring
a press and
conference,
within
governance
management,
although if
fraud the
is
activities planned
celebration
of ICPAC’s
50tha
subsequently
identifiedforitthe
does
not necessarily
indicate
failure to comply with ISAs, in such a case the auditor’s
procedures
come paper
into describing
question and
scrutiny.
is
ñ Worked will
on a white
the role,
dutiesItand
therefore
extremely
important
that
appropriate
procedures
in organisation:
accordance with ISAs are always designed,
implemented and documented. ■
ñ Risk Management
1
41
Institute News
ñ Internal Audit
Τhe UK Bribery Act 2010
The UK Bribery act 2010
Chairperson
Βy Eoin O'Shea Partner, Head of Anti-Corruption, Lawrence Graham LLP1, and
interaction
theseLawrence
three Graham
functions
Alex Shattock of
Solicitor,
LLP within and
organisation.
in
the the
bank
industry,
investment
other financial
induce
recipient
or another
personand
to perform
relevant
INTRODUCTION
operations,
8 on a domestic level as well as on a European
functions improperly, or reward him for doing so, or with
knowledge or belief that it is improper for the recipient to
The Bribery Act 2010 (the "Act") revolutionises the anticoordination with the Education Committee, is planned
accept any such advantage. The relevant functions in
corruption
laws of2011.
the United Kingdom. The Act provides
for September
question includeoffunctions
in both
the publicinand
private
for The
a new
corporatestudied
offencethe
under
which companies
will
ñ
committee
European
Council Green
Commissioner
Insurance
companies
order
to
sectors, which
expected the
to be
performed
in good
faith,
be Paper
vicariously
liable for
bribes paid
"associated
on Corporate
Governance
andbysubmitted
its
exchange
viewsareregarding
industry,
as well
as other
response
to the questions
posed
by theunless
paper."adequate
or impartially,
or take and
place by
the exercise (for
of a position
of
persons"
(including
employees
or agents)
organized
groups
associations
example
9
2
ñ
The committee
has to
embarked
on a study
of the
amounts
to a breach
of the
above
trust. Impropriety
Association
of Cyprus
Commercial
Banks,
Insurance
procedures"
are in place
prevent bribery.
It expressly
Institute’s
Governance
procedures.
The
objective
3 of the
Association
expectationsofofCyprus
good etc).
faith, impartiality or trust, and is
criminalises the bribery of foreign public officials. It also
study is to assist the Institute develop
governance
4
judged according to the standard of a "reasonable person in
re-defines the nature of bribery itself and significantly
processes which will incorporate best practices, at the5
During
theKingdom".
second quarter of the year the Committee
the United
widens UK jurisdiction over offences committed abroad
andThe
non-UK
commercial
entities. toFacilitation
payments
ñ
committee
has continued
monitor closely
all
6
Section 2 of the Act applies similar provisions to the
are European
not permitted
under the initiatives
Act. Thiswithin
articleitsbriefly
and International
scope
abroad.
"receiving offences"10 i.e. makes it criminal to seek or
summarises
thiscontinued
complexto statute
which
will tohave
domain and
contribute
articles
the
Institute’s effects
magazine.
receive advantages
in exchange
for improper
performance
considerable
on international business practices.
Below
are the main
topics that
the Committee
has
Panicos
G. Papamichael
PURPOSE
OF THE ACT
Chairman
Britain's current corruption laws date back to the
nineteenth century . They were generally believed to make
prosecutions of bribery occurring overseas very difficult.
The need
reform
hadoflong
been
but a key
During
thefor
third
quarter
2011,
the recognised
ECFA subcommittee
trigger
was the
UK's had
ratification
of the OECD
on
organizing
seminars
been collaborating
with and
the
Conventioncommittee
on Combating
of ForeignonPublic
education
and the
theBribery
IT committee
coOfficials intwo
International
Business
Transactions
1998.
organising
seminars. One
on fraud
detection in
utilizing
IT
theisother
on fraudtodetection
Theand
Act
an attempt
improveand
theprevention.
regulatoryBoth
and
will
be offered
business
climatebefore
of thethe
UKend
up of
to the
andyear.
beyond the standards
of the OECD Convention and seeks to bring about an
The
ECFA-ebulletin
Issue 1 was emailed to all
associated
change to Volume
business1culture.
SECTIONS 1 AND 2 OF THE ACT: RE-DEFINING
BRIBERY
1 provides
for offences
by someone
providing
aSection
member
of our committee
Leonidas
Ieronymides
witha
bribetitle
(P) known
"active
bribery".responsibilities under
the
“Fraud:as The
auditor’s
O’Shea
Eoinelements
on the Bribery
Thepromise
UK Bribery
Act of
willa
The main
are theAct.
offer,
or gift
have
serious
on those
business
in the
"financial
or implications
other advantage",
withdoing
an intention
either
to
2
42
of their functions
likethe
circumstances.
concentrated
on over
past three months:
BRIBERY
OF FOREIGN
ñ
Law relating
to CoveredPUBLIC
Bonds OFFICIALS
The
Committee
studied
draft legislation
andproviding
directive
Section
6 of the
Act the
specifically
outlaws
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
advantage to overseas public officials in order to influence
which
the Central
Bank
Cyprus.the
the inwere
theirdiscussed
official with
capacity.
To be
an ofoffence
advantage must also be intended to obtain or retain
Following the passing of the legislation
by Parliament,
business or a business advantage.11 The mental element
does not require an intention to induce or reward
"improper
performance".
the standard
conduct
which
various
concerns Thus
of ICPAC
were ofdiscussed
required ofthethose
dealing of
with
public
officials
is
regarding
provisions
theforeign
Directive
issued
by the
higher than
to domestic
officials.
Central
Bankthat
of applicable
Cyprus which
affect directly
or indirectly
members
Institute. close to Article 1 of the OECD
Section 6of
is our
conceptually
Convention and the FCPA. However, the FCPA allows
In
addition,which
the report
to be under
prepared
bylaw,
the regulator
of
payments
are lawful
local
whereas the
Covered
Bonds
was
discussed,
as
well
as
the
issue
of
the
UK exception is narrower: only payments in circumstances
where the official is allowed or required to be influenced
by such a payment under the local written law applicable
to the Foreign Public Official are lawful under the Act. 12
Further, tothere
is no
exception
forthebona
decision
circulate
an specific
illustrative
example of
reportfide
to
expenses
connected
to
promotional
activities
or the
performance of contracts, although normal and justifiable
1
Institute News
promotional expenses and corporate hospitality which is
not over-lavish is unlikely to be of concern to the UK
authorities.
Section 6 does not apply to domestic bribery or bribery of
people in the private sector.
ñ Due diligence – involving and checking up on the
background and honesty of parties the company does
business with.
NEW CORPORATE OFFENCE
ñ Monitoring and review.
A general counsel, chief executive or another senior figure
should
responsibility for initiating and operating the
Mariostake
Agathangelou
procedures.
Chairman There is no one-size-fits-all set of procedures
which will be adequate in all cases. The procedures need to
LARNACA
– FAMAGUSTA
CO-ORDINATING
fit
the risk-profile
of the organisation
in question.
COMMITTEE
Institute News
Section 7 of the Act creates an entirely new offence. It
creates an exception to the usual rule of English law that
companies are only guilty of criminal offences when a
person identified as a "directing mind" of the company has
the relevant mental element.13 A company or other
commercial organisation ("C") will be guilty of an offence
under section 7 in circumstances where an "associated
person" ("A") (which could be an employee, director or
agent)14 pays a bribe intending to obtain or retain business
or an advantage in the conduct of business for the
the Cyprus economy.
company. It is a defence if the company can show that it
had "adequate procedures" in place to prevent bribery.15
What is an "associated person"? Much will depend on the
circumstances of each case but the legal test is always
whether the "associated person" performs services for or
on behalf of the company. There is a presumption that an
employee is an associated person, unless proven otherwise.
Subsidiaries, agents and joint venture may also be
associated persons, depending on the facts..
ADEQUATE PROCEDURES
The UK Government has published guidance as to what it
believes will constitute adequate procedures.16 It refers to
six "principles":
ñ Proportionate Procedures – which are relevant to the
nature, scale and risk profile of each business. They
COMMITTEESʼ
ACTIVITIES
should be clear, practical and accessible;
ñ Top level commitment;.
ñ
Risk Assessment
– this
shouldto bechanges
the firstinstep,
amendments
in IAS1
relating
the
presentation
financial
statementsofand
IAS19
relating
involving aofproper
consideration
the risks
of bribery
mainly
the abolition
the ‘corridor
method’.including
beingtocommitted
onofbehalf
of the business,
risks associated with certain territories, business
It partners
also initiated
a study The
of FEE’s
discussion should
paper
and practices.
risk assessment
‘Combined
Financial
Statements’. The discussion paper
inform other
procedures.
2
ñ Communication and Training;
TERRITORIAL APPLICATION
therespect
following
activities:
In
of the
section 1,2 or 6 offences, the UK courts
will have jurisdiction if the offence takes place in the UK17
or, in respect of an offence not taking place in the UK, the
person committing the offence has a "close connection" to
the UK.18 A close connection to the UK will cover both
British
companies
in the
UK Hall
and
2. On 4citizens,
May 2011
a seminarincorporated
was co-ordinated
at Sun
19
people
who
are ordinarily
the UK.
Hotel in
Larnaca
with a resident
subject in
Field
Audits from the
Inland Revenue.
Under section 7, the offence will occur even if the act of
bribery
takes
place outside of the UK20 and the person
Panayiota
Vayianou
Chairwomanit does not have to have a "close connection"
committing
to the UK.21 A commercial organisation which carries on a
CORPORATE
AUDIT
business,
or part GOVERNANCE,
of a business, in theINTERNAL
UK22 is within
the
AND
RISK
MANAGEMENT
COMMITTEE
jurisdiction of the Act. So a foreign-based company which
has sales or operations in the UK could face criminal
liability for bribery elsewhere in the world.
PENALTIES
The maximum penalty for an individual is a term of
imprisonment
updevelopment
to 10 years (raised
from on
theCorporate
previous
ñ Worked onofthe
of a survey
7 year
term), or anThe
unlimited
Governance.
surveyfine.
will be sent to the listed
members.
is also envisaged
thatthethe
results
be
In the
case of aItcommercial
organisation,
penalty
is an
presented
a remedial
press conference,
within
unlimited
fine, during
and other
measures may
also the
be
activities
planned
for
the
celebration
of
ICPAC’s
50th
ordered. In addition, where a commercial organisation or
individual is convicted of a corruption offence under the
Act, they face permanent debarment from tendering for
public contracts in the EU pursuant to section 23 of the
organisation:
Public Contracts Regulations 2006. This is likely to apply
to
convicted under sections 1 or 6. The section
ñ companies
Risk Management
1
43
Institute News
ñ
InternaltoAudit
7 "failure
prevent" offence may not trigger debarment.
ñ
Organisation and Methods
CONCLUSION
It is very early days in the development of the Bribery Act.
It does not come into force until 1 July 2011. It will take
years before some of the key principles within it are fully
organisation.
developed by case-law. However, there is no doubt it has
ñ
1.
2.
3.
4.
5.
ñ
6.
7.
8.
9.
ñ
10.
11.
12.
13.
ñ
14.
UK
or even
who inare
doing business
with aofUK
already
causedthose
a change
corporate
culture because
its
company
outside
the
UK.
high profile and the desire of companies with business in
the UK to reduce the risk of liability. This was one of the
main aims of the Government in enacting the legislation,
Chairperson
whose effects may take many years to be fully understood.
The article was first published in the ECFA-ebulletin June
2011.
■
The
Financial
Services Committee monitors developments
The committee, in collaboration with the European
Union
Affairs
has designed
on Jordanoperations,
Eoin O'Shea
is the committee,
author of The Bribery
Act 2010:aA seminar
Practical Guide,
Publishing, 2011.
“Auditing
EU7(2)Funded Projects”. The seminar, in
Section 7(1) and
Section 6
coordination
with the Education Committee, is planned
On which see further below
for September 2011.
Sections 7(5) and 12 and further detail below
The
committee
studied
the
European
Council
Green
Commissioner
of Insurance companies in order to
Contrast the US Foreign Corrupt Practices Act 1977 ("FCPA") USC 78dd-1(b),
78dd2(b), 78dd-3(b)
Paper
on Corporate
Governance
and submitted
its Acts 1906
Public Bodies
Corrupt Practices
Act 1889, Prevention
of Corruption
and 1916 and
numerous
commonthe
lawindustry,
cases
exchange
views
regarding
as well as other
The statutory
is "functions
or activities".
.
response
tolanguage
the questions
posed
by the paper.
Sections 1 and 3
The
committee has embarked on a study of the
Association
Cyprus
Commercial
Banks,
Insurance
Under section 2 an offence is committed by a recipient if they request, agree
to receive or of
accept
a financial
or other advantage
intending
that in
Institute’s
Governance
procedures.
The
objective
of
the
of variations
Cyprus etc).
consequence a relevant function or activity should be performed improperly. Association
There are further
of this offence within section 2.
study
Section 6(2)
Section 6(3)(b)
processes
which will incorporate best practices, at the
Corporate liability is still possible under sections 1,2 and 6 of the Bribery Act 2010 if senior people in the company approve of or perhaps even know
same
time recognising the local practicalities and sizes.
of the relevant facts
The
committee
has
continued
to
monitor
closely
all
"Associated person" is defined in section 8(1) as a person who performs services
for orto
on all
behalf
of the
regards
areas
ofcompany
economic activities in Cyprus and
European
initiatives
within
Section 7(2).and
The International
meaning of "adequate
procedures"
willits
be scope
considered further
below
abroad.
www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf
domain
and continued to contribute articles to the
Section 12(1)
Institute’s
magazine.
15.
16.
17.
18. Section 12(2)(c)
19. Section 12(4)
Panicos
G.12(5)
Papamichael
20. Section
21.
Section
7(3)
Chairman
22. Section 7(5)
education committee and the IT committee on coorganising two seminars. One on fraud detection utilizing
Exchange rates
Turmoil in the international
monetary system
The
ECFA-ebulletin
Volume 1 Issue 1 was emailed to all
By KPMG
Ltd
Last August was the 40th anniversary of the collapse of the
International
Monetary
System
of fixed
rates as
Finally,
there are
two articles
in this
issueexchange
of “Accountancy
was
set
–
up
after
World
War
II,
known
as
the
Bretton
Cyprus” in the ECFA column. The first one is authored
by
Woods
system,
when
on
15
August
1971
the
USA
defaulted
on its gold
obligation. However
the
title “Fraud:
Theconvertibility
auditor’s responsibilities
under
ISA240”
the second
a well-known
UK lawyer
the dollarandcontinues
to byplay
a major role
in the
O’Shea
Eoin
on
the
Bribery
Act.
The
UK
Bribery
Act
will
International Monetary System and its use has many
have
seriousalthough
implications
on those
doing business
advantages
the system
has become
sensitiveintothe
its
2
44
ACCOUNTANCY CYPRUS ñ VOLUME 103 ñ JUNE 2011
In
addition,Proposals
the reportwhich
to be prepared
the regulator
of
problems.
have beenbymade
at various
times include the setting – up of an international reserve
currency and the use of more currencies, as reserve
currencies. In 2008 China had proposed that the SDR,
issued by the IMF could replace the US dollar as the world
reserve currency.
this purpose
the yuan
other
decision
to circulateFor
an illustrative
example
of theand
report
to
currencies
of members.
emerging economies could be represented in
the
Institutes
the basket of currencies which determine the value of the
3
Institute News
Exchange rates
SDR. Such a move could render the SDR the international
reserve currency. But the USA and the European Central
Bank disagree with this idea which argue that the
currencies which determine the value of the SDR should
be used widely in the international trade and be fully
convertible. The USA states that China maintains the
exchange rate of the yuan at a low rate in relation to the
dollar for encouraging exports and discouraging imports.
currency. In this respect the President of Brazil Mrs. Dilma
Rousseff has stated that “Brazil will fight back the
currency manipulators.
Institute News
Statistics show that the Central Banks are diversifying
their reserves in the main currencies at a more rapid pace.
As professor Kenneth Rogoff argues, if the euro survives
and goes ahead to acquire equal status with the dollar as a
reserve currency it will lead to a strong trend of
combination of other currencies as for example of the yuan
and the yen. It is noted that the countries of G20 have
decided to deal with the reform of the international
monetary system and although the original enthusiasm has
the Cyprus economy.
waned, yet the reform of the International Monetary
System is as urgent as ever.
The American sovereign debt has been downgraded by
Standard & Poor’s but the dollar continues to be the main
reserve currency. As the IMF states there are 66 countries
which have their currencies pegged to the dollar. The only
competitive currency to the dollar is the Euro, which has a
much smaller circle of influence in 25 countries besides
the 17 countries of the Eurozone. The 66 countries of the
dollar bloc collectively constitute the 14% of the world
economy. The largest by far member of the dollar bloc is
China which keeps a tight control on the yuan’s
movements against the dollar. But China has the ambition
to create its own reserve currency. But for this to happen it
must fully liberalize its capital markets.
The Central Banks desperately try to put an end to the
destabilizing movements of capital which lead to the
increase of the value of their currencies. The Minister of
Finance
of Brazil, STANDARDS
Mr. Guido Mandega
has warned that the
ACCOUNTING
COMMITTEE
loose monetary policy of the USA will lead to exchange
rate
war and
will the
take committee
any measures
neededthe
to
During
the thus
last Brazil
meeting
studied
avoid
the rise ofintheIAS1
exchange
rate of to
its currency,
amendments
relating
changes the
in real.
the
presentation
of financial
IAS19
Also
the Minster
of Financestatements
of Norwayand
stated
that relating
he will
mainly
to the abolition
the the
‘corridor
method’.
take
measures
to headofoff
rise of
the Norwegian
currency. In parallel the Central Bank of Japan has
It also initiated
a yen.
studyButofthese
FEE’s
discussionlead
paper
intervened
by selling
developments
to
‘Combined
Financial
Statements’.
The
discussion
paper
a situation where each Central Bank is trying to weaken its
4
It seems that pressure will be exerted on the monetary
authorities of the yen and the Swiss franc to intervene
more decisively to stem the increase of their currencies
while there are fears about the world economy and
specifically the American and that of the Eurozone. The
exchange
rates both of the yen and the Swiss franc
Marios Agathangelou
registered
Chairman significant increases while investors have been
seeking for safe havens due to fears for the growth rate of
the
world economy
and worriesCO-ORDINATING
about the sovereign debt
LARNACA
– FAMAGUSTA
COMMITTEE
of
the Eurozone. The Swiss franc exchange rate increased
from 1.0094 francs to the euro at the beginning of August
During
thirdtoquarter
of 2011
the Committee
out
to
1.20 the
francs
the euro
in September.
Thus carried
the Swiss
the
following
activities:
National Bank (Central Bank) has fixed a minimum target
of 1.20 franc to the euro, a policy which will be put in
effect with determination by being ready to buy any
foreign exchange in unlimited quantities. However the
Japanese Central Bank is not expected to take similar
action since Japan as a founder member of the Group of 7
most
is expected
to honour
its
Hotel important
in Larnacaeconomies
with a subject
Field Audits
from the
obligation
for
the
free
movement
of
capital.
Inland Revenue.
The
Central
Banks have accumulated about $10.000
Panayiota
Vayianou
billion
of foreign exchange reserves, of which China has
Chairwoman
$3.000 billion, mostly in dollars. Thus while the Central
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
Banks
recognize that
their exposure to
foreign currencies
AND
RISK
MANAGEMENT
COMMITTEE
is not wise, yet they believe that there is no other
alternative solution to the dollar and thus efforts should be
During tothe
third the
quarter
of 2011
the the
Corporate
exerted
increase
currencies
in which
Central
Banks keep their reserves. For the improved functioning of
the International Monetary System, the international
economy should depend on a larger number of reserve
currencies. This is because there is a possibility that
countries
with
reserve currencies,
dollar,
ñ Worked
onthe
themain
development
of a surveylike
on the
Corporate
to continue
to face
slow down
in
Governance.
Thea survey
will of
betheir
sent economies
to the listed
relation
to the emerging
economies,
China
companies
in Cyprus.
Its resultsaswill
be and
sentBrazil,
to all
which
are expected
register
high growth
in the
members.
It is to
also
envisaged
that therates
results
be
yearspresented
ahead. ■ during a press conference, within the
of theexpressed
following
departments
an
Note:responsibilities
The views and opinions
herein
are those of within
the author
and do
not necessarily represent the views and opinions of KPMG
organisation:
International Cooperative (“KPMG International”) or KPMG member
firms.
ñ Risk Management
1
45
Institute News
ñ Internal Audit
Νatural Gas Discovery
Natural Gas Discovery:
Will Make Us or Break Us?
Thefunctions
discovery of
new fossil
within
and
fuel deposits in the midst of
organisation.
high and rising energy prices
is celebrated
salvation
for
withasthe
European
an energy-hungry world and
a panacea for a resource“Auditing EU Funded Projects”. The seminar, in
poor country in the midst of
energy shortages, economic
for September 2011.
crisis and unsustainable
Europeandeficits.
Council Green
budget
Yet,
submitted
experienceand
teaches
us thatitsit
by theItpaper.
is neither.
is at best a
on a study
of thea
mixed blessing
or rather
The
objective
double-edged sword,of the
at
By Theodore
Panayotou
governance
worst, develop
a Pandora’s
box,
Cyprus
International
processes
whichInstitute
will incorporate
best acquired
practices,aatnew
the
which has
meaning
after
the
experience
same
time
recognising
the
local
practicalities
and
sizes.
of Management*
of thetotragic
events
in Mari
monitor
closely
all
andEuropean
the destruction
of the country’s
main within
power its
station.
and International
initiatives
scopeI
am domain
not referring
here to the to
danger
that Turkey
might
act
and continued
contribute
articles
to the
on its
threats,
especially
when
we
have
demonstrated
that
we hardly need an enemy to wreck havoc on our
infrastructure
and the economy, let alone the loss of life.
Panicos
G. Papamichael
Chairman
But surely, fossil fuel discoveries can not possibly be bad
for the country that successfully claims them as its own;
and, no one except Turkey challenges our claim to these
ACCOUNTING
(ECFA)
resources. Especially
whenCOMMITTEE
they are located well offshore
there is hardly any opportunity cost for the area and any
During
the thirdcosts
quarter
of 2011,
the ECFAinto
subcommittee
environmental
are easily
externalized
the marine
on
organizingSuddenly,
seminars out
hadofbeen
collaborating
with the
environment.
nowhere,
a huge amount
of
education
committee
the into
IT committee
on from
cocash will begin
to be and
injected
the economy
royalties and
sharing
thisutilizing
would
organising
tworevenue
seminars.
One onarrangements;
fraud detection
certainly
a country
a high
deficitBoth
and
IT
and thehelp
other
on fraudfacing
detection
andbudget
prevention.
rising
foreign
debt
like
Cyprus.
Yet, ECFA-ebulletin
the risks are equally
compelling
conveniently
The
Volume
1 Issue 1though
was emailed
to all
ignored, if perceived at all. First, the funds may be
squandered to maintain and expand an over-bloated, overprovided positive feedback on this initiative.
paid and profligate public sector; to give out subsidies to
interest groups and to raise social spending to
Finally,
there arelevels.
two articles
issue of
“Accountancy
unsustainable
Easyin this
money
will
encourage
Cyprus”
in
the
ECFA
column.
The
first
one
is authored
by
governments of any shade and color to undertake
more
ahigh-cost,
member oflow-return
our committee
Leonidas
Ieronymides
public
projects
with with
high
the
title “Fraud:
The such
auditor’s
under
environmental
impact
as theresponsibilities
planned Paphos-Polis
ISA240”
the second
a well-known
lawyer
four-lane and
highway.
Worst by
easy
money will UK
reduce
the
pressureEoin
and on
putthe
offBribery
the restructuring
of the
economy
and
O’Shea
Act. The UK
Bribery
Act will
the public
whichonisthose
badly
needed
to regain
have
serious sector
implications
doing
business
in the
2
46
Chairperson
international competitiveness.
FINANCIAL
SERVICES COMMITTEE
THEFinancial
RESOURCE
CURSE
The
Services
A second well known risk goes by the name “resource
curse” which, is defined as the paradox that countries with
an abundance of non-renewable natural resources like oil
and natural gas, tend to have lower levels of development
Securities
Exchange
Commission
(CySEC)
the
than countries
with fewer
natural resources
due and
to many
Commissioner
different reasons:of Insurance companies in order to
organized
and associations
(for
example
ñ A declinegroups
in the competitiveness
of other
sectors
Association
Cyprus Commercial
Banks,
Insurance
ñ Volatility of
of revenues
from the natural
resource
sector
due to exposure
to etc).
global commodity market swings,
Association
of Cyprus
and
ñ Government
mismanagement
resources,
or weak,
During
the second
quarter of theof year
the Committee
ineffectual,
unstable
or
corrupt
institutions
(possibly
monitored the economic crisis and its consequences
in
due
to
the
easily
diverted
actual
or
anticipated
revenue
stream from extractive activities).
abroad.
The resource curse goes also by the name of “Dutch
disease”, a term coined in 1977 by The Economist to
concentrated
over the
three months: sector in the
describe the on
decline
of past
the manufacturing
Netherlands after the discovery of a large natural gas field
ñ
Law relating
to Covered
Bonds
in 1959.
The Dutch
experience
was repeated time and
again by Mexico, Venezuela, Saudi Arabia, and most other
The
Committee
studied
the draft
legislation
and politician
directive
oil and
natural gas
exporters.
As the
Venezuelan
Perez Alfonzo,
one ofBank
the founders
ofand
OPEC,
issued
by the Central
of Cyprus
citedprophetically
its opinions
stated were
whendiscussed
Venezuela
first
oil.of“Ten
years
which
with
thediscovered
Central Bank
Cyprus.
from now, twenty years from now, you will see: oil will
bring us ruin
Oil isofthetheDevil’s
excrement”.
Indeed,
Following
the …
passing
legislation
by Parliament,
Venezuela
has
been
literally
ruined
politically
and
economically.
The most pernicious and lasting effect of the resource
curse is the retardation of the country’s human and
Central
Bankdevelopment.
of Cyprus which
affectofdirectly
or indirectly
institutional
The flow
easy revenues
from
members
of
our
Institute.
resource extraction lessens the pressure to develop a
knowledge-based economy, an entrepreneurial and
In
addition,culture
the report
to be prepared
by of
thepublic
regulator
of
innovation
and robust
institutions
finance
Covered
Bonds was discussed,
as well
as the issue
the
and macroeconomic
management.
Furthermore,
the of
newly
found wealth of
creates
demandsThe
forCommittee
more jobshas
anddecided
salary
independence
the regulator.
increases
in the
sector,
to failing
that
the report
of thepublic
regulator
is to subsidies
be in the form
of an
enterprises,
and
to
organized
interest
groups.
As a result,
economic
growth slows
downofand
political
decision
to circulate
an illustrative
example
the report
to
development gets retarded. From 1965–98, in the OPEC
countries, GDP decreased on average by 1.3% per annum,
1
Institute News
Νatural Gas Discovery
while in the rest of the developing world, per capita growth
was on average 2.2%. The current social unrest and
political crisis throughout the Arab world is not unrelated
to the resource curse.
education, research and innovation which will continue to
be generating wealth even when the newly discovered
resources are long gone.
Institute News
TURNING THE CURSE INTO A BLESSING
Only few resource exporters such as Malaysia, Norway,
COUNCILʼS
ACTIVITIES
Kuwait,
Botswana, New
Zealand, Chile and the province
of Alberta in Canada managed to contain the resource
Duringbythetaking
third quarter
of 2011
the Council
of the Institute
curse
deliberate
measures
to neutralize
the
effects
oftimes
natural
discoveries
oninterest
their economic,
met four
andresource
considered
matters of
to ICPAC
political
and
institutional
development.
They
save
of
and to the
profession
at large.
Other issues
dealt
withpart
were,
the revenues in special funds and bring them into the
economy slowly to reduce the spending effect and to
stabilize the revenue stream which otherwise varies widely
Ona 5result
September
2011 a delegation
of the Institute headed
as
of commodity
market swings.
By
the boom
revenues, Mr.
theseKikis
countries
are sharing
newsaving
Minister
of Finance,
Kazamias
and
their
exhaustible
resource
with
future
generations.
Invariably,
prudent and provident countries have
the Cyprus these
economy.
created sovereign wealth funds such as the Alberta
Heritage Savings Trust Fund, the Kuwait’s Future
On 7 September
Mr.Norway
Christos
Kyriakides,Pension
Senior
Generations
Fund 2011
and the
Government
Officerwhich
of the Institute,
the Council
of the
Fund,
save andattended
invest the
resourcemeeting
revenues
in
Mediterranean
Federation
of Accountants
Rome.
education,
research
and development,
andinenvironmental
restoration.
OPPORTUNITY TO ACCELERATE REFORM
Thus, instead of allowing the revenues from natural gas
the President
of the Institute
Mr.and
Theodoros
Parperis.
and
oil discoveries
to derail
retard the
country’s
institutional and economic development, we can sterilize
them
creatively
process
of
On 22and
anduse
23 them
September
2011 to
theaccelerate
President the
of the
Institute
reform
to regain international
Mr. Theodoros
Parperis andcompetitiveness:
the General Manager Mr.
ñ reform the public sector to reduce its size and improve
its productivity and efficiency
(FEE)
Member
in Vienna
and a Special
ñ reform
and Bodies
capitalize
the pension
fund toMeeting
make of
it
thesolvent
General Assembly.
ñ invest in educational reform and human resource
development and knowledge creation
COMMITTEESʼ
ACTIVITIES
ñ
invest in research and
development and promote
entrepreneurship and innovation
ñ
invest in renewable
energy technology
development to
ACCOUNTING
STANDARDS
COMMITTEE
exploit the country’s abundant solar energy and to
exportthe
solarlast
technology
During
meeting the committee studied the
ñ
establish
an
fund forto future
adversities,
amendments ininsurance
IAS1 relating
changes
in the
natural disasters, and economic crises.
ñ establish a Future Generations Fund for long term
investments in sustainable development
It this
alsoway
initiated
a study
of FEE’s the
discussion
paper
In
we would
be converting
non-renewable
‘Combined
Financialinto
Statements’.
The discussion
paper
fossil
fuel resources
renewable knowledge
resources,
2
LOOK BEFORE YOU LEAP
Cyprus should not rush, like the all-gifted but foolish
Pandora, to open gods’ glistening gift box with the
promise of vast deposits of fossil fuels, without first
deciding how to use the flow of natural gas revenues.
Unlike Israel, a mighty technological machine, that will
Marios
Agathangelou
put
its resource
revenues to good use, Cyprus is at risk of
Chairman
distorting its economic priorities and forgoing the
development of its most abundant resources, the sun and
LARNACA
its
people. – FAMAGUSTA CO-ORDINATING
COMMITTEE
While the hope that the worst can be avoided remains still
locked
Pandora’s
box, of
it is
not the
prudent
to embark
on this
Duringinthe
third quarter
2011
Committee
carried
out
journey
without
a road map and a compass. Prometheus,
the following
activities:
the god of forethought and resourceful counsel, not
Epimetheus
the 2011
god of
and lamea excuses,
1. On 13 April
theafterthought
committee organised
lunch at
should guide our actions. Without a well thought-out
strategy, tapping our newly found natural gas deposits is
tantamount to playing with fire. With the right strategy,
cognizant of both opportunities and risks, our newly found
2. On 4 May
a seminar
co-ordinated
Hall
wealth
can 2011
launch
Cypruswasinto
economicat Sun
reform,
Hotel in Larnaca
withand
a innovation,
subject Field
Audits from
the
investment
in research
development
of our
Inland
Revenue.
solar energy potential, and the creation of a sovereign fund
for adverse times and future generations.
Panayiota Vayianou
Having
already decided, without much forethought, to
Chairwoman
begin the immediate exploitation of these resources, it is
imperative,
that aGOVERNANCE,
Future GenerationsINTERNAL
Fund is established,
CORPORATE
AUDIT
as
a
matter
of
the
utmost
urgency,
and
any revenues from
the exploitation of natural gas resources is deposited in this
fund. The use of the fund should be restricted by law to
only long term investments such as infrastructure, research
and innovation, and renewable energy resource
development that would raise the country’s international
of its action
planOnly
and has
competitiveness
which is steadily
slipping.
a
dealt
with
the
following:
specified part of the income from these investments (i.e.
the interest not the capital) can be used as government
ñ Worked
the development
of a survey
on Corporate
revenues
foronrecurrent
expenditures.
Only then
can the
Governance.
The survey
will from
be sent
to theinto
listed
natural
gas discovery
be turned
a curse
a
companies
in Cyprus. Its results will be sent to all
blessing.
■
* Theodore Panayotou is Director of the Cyprus International Institute of
Management (CIIM) and Professor of Environmental Economics, Business Ethics
and Corporate
Social
Responsibility.
at Harvard University
for the past
25
activities
planned
for He
thetaught
celebration
of ICPAC’s
50th
years. He studied economics at the Universities of Athens (Greece) and York
(Canada) and holds a PhD in Economics from the University of British Columbia.
He
many on
governments
China, Indonesia,
Mexico,
Russia,
ñ advised
Worked
a whiteincluding
paper Brazil,
describing
the role,
duties
and
Thailand, and the USA and consulted with the World Bank and the UN. He has an
responsibilities
of therecord
following
an
extensive
research and publication
in the areasdepartments
of Environmentalwithin
Economics,
Climate
Change and Sustainable Development. Professor Panayotou was
organisation:
recognized as contributor to the 2007 Nobel Peace Prize won by the
Intergovernmental Panel on Climate Change (IPCC). He can be contacted at:
[email protected]
ñ Risk Management
1
47
Institute News
ñ Internal Audit
Integrated Energy policy
Integrated energy policy for Cyprus
functions
withinEnergy
and
In my
book The
organisation.
Future of Cyprus (Το Ενεργειακό Μέλλον της Κύπρου)
published in 2009 I wrote,
“…the energy model sup“Auditing EU Funded Projects”. The seminar, in
ported the economic and
social
development
in
for September 2011.
Cyprus,
is inefficient,
European
Council unecoGreen
nomic,
catastrophic
for
Paper on Corporate Governance and submitted the
its
environment
and unable to
by the paper.
a study
the
respond on
to recent
andoffuture
The
objective
of
challenges. The time the
for
study
is toPoullikkas
assist the Institute
governance
By Dr.
Andreas
drawingdevelop
a strategic
plan conprocesses
practices,
at the
Assistant
Manager,
cerning best
the energy
future
of
Electricity Authority of
Cyprus has arrived. Energy,
Cyprus
environmental, economic
and social reasons impose a
revision
of themagazine.
current situation. The shift towards a susInstitute’s
tainable development model is a matter of survival of our
country…”.
Today, after the catastrophic explosion at
Panicos
G. Papamichael
Mari,
which
severely affected the operation of Vasilikos
Chairman
power station we need to move fast in order to draw a susECONOMIC
AND
tainable energyCRIME
policy for
theFORENSIC
future of Cyprus! We need to
ACCOUNTING
(ECFA)
COMMITTEE
act fast with a scientifically supported long-term integrated
energy strategy, as it is the main subject of the above book,
During
theisthird
quarter how
of 2011,
the ECFA
where it
described
Cyprus
could subcommittee
transform its
uneconomic energy system into a sustainable system by
education committee and the IT committee on co2050.
will
offered
the end
the year. relating to the
It is be
a fact
thatbefore
in Cyprus
allofdiscussions
energy concern only the electrical sector, which is wrong.
The
Volume
1 Issuetransport,
1 was emailed
all
The ECFA-ebulletin
sectors of heating
and cooling,
energytosavECFA-SIG
(special
interest
group)
and
members
had
ing and management of hydrocarbons are equally imporprovided positive feedback on this initiative.
tant. For example how many electric cars are expected in
Cyprus until 2020 or 2050? Where the charging points of
these cars will be located by 2020 and with what incenCyprus” in the ECFA column. The first one is authored by
tives? How we can explore Cyprus hydrocarbons deposits
within
development?
How we
can
the
titlea sustainable
“Fraud: Thedriven
auditor’s
responsibilities
under
promote the
solar heating?
What is the UK
Cyprus
tarISA240”
anduse
theofsecond
by a well-known
lawyer
get
for
the
integration
of
all
types
of
renewable
energy
sources
by 2030
or 2050? on
What
is the
long-term
target
of
have
serious
implications
those
doing
business
in the
2
48
Chairperson
FINANCIAL
SERVICESfrom
COMMITTEE
Cyprus for independency
conventional fuels and for
the shift towards the hydrogen economy? How many green
The
Services
monitors
developments
jobs Financial
are expected
in theCommittee
coming years?
All these
questions
concern long-term energy planning which is under study
by many EU countries with some of them already publevel. It also keeps contacts with the regulatory bodies,
lished their targets up to year 2050.
Commissioner
Insurance
companies
order We
to
It is clear that it isofnow
the time for
changes ininCyprus.
exchange
views
regarding
the
industry,
as
well
as
other
need to redefine the energy priorities of Cyprus, which
organized
associations
(for example
should aim, groups
(a) on theand
long-term
energy planning
with the
Association
of
Cyprus
Commercial
Banks,
Insurance
aim of gradually shifting from the use of oil to the use of
Association
etc).energy waste with the introducnatural gas, of
(b)Cyprus
to reduce
tion of compulsory energy saving measures, especially in
the building sector, (c) the use of decentralised generation
and (d) in the efficient and effective promotion of renewregards to all areas of economic activities in Cyprus and
able energy sources and in particular of the solar systems,
abroad.
since they can provide under certain conditions, energy
sufficiency
protecBelow
are and
the independence
main topics with
that simultaneous
the Committee
has
tion
of
the
environment.
For the scientific investigation of the above issues we need
to change the existing decision making structures, since,
energy matters are scattered within various ministries,
resulting in the creation of an inefficient, complex and stawhich were discussed with the Central Bank of Cyprus.
tic system, providing a very complex decision making system for Cyprus
energy issues.
is now the time
as we sugFollowing
the passing
of theItlegislation
by Parliament,
gested, and strongly
for had
the last
6 years,
for the
representatives
of thesupport,
Committee
numerous
meetings
creation
of
a
national
energy
strategy
council,
which
will
be composed
by energy
experts
order towere
develop
an intewhich
various
concerns
of in
ICPAC
discussed
regarding
the provisions
of the for
Directive
by durthe
grated long-term
energy strategy
Cyprus.issued
Already,
Central
Bank
of
Cyprus
which
affect
directly
or
indirectly
ing the last 2 years a positive position for the need to cremembers
our Institute.
ate such aofcouncil
expressed from various bodies and parties. The national energy strategy council will submit proIn
addition,
report
to betheprepared
by the
regulator
of
posals
to thethestate
where
suggested
policies
will be
approved by the Council of Ministers and will be impleindependence of the regulator. The Committee has decided
mented by the various competent Governmental departthat the report of the regulator is to be in the form of an
ments. A lack of long-term integrated energy planning will
lead our country into adventures, which have just started.
We can to
nocirculate
longer depend
on theexample
wait and
scenario
decision
an illustrative
of see
the report
to
since
day
by
day
the
additional
cost
for
the
Cypriot
conthe Institutes members.
sumer is increasing. ■
1
Institute News
Knowledge: the main source of success
The society
of News
knowledge
Institute
To understand what is a
business environment we
must
understand
the
activities of business. We
must give answers to the
many changes experienced
by the Council
businessofarea
the through
Institute
unprecedented
met four times and consideredanmatters
of interesteconomic
to ICPAC
crisis, but also through
contemporary society. Interamong others, the following:
national researchers and
economists have noted that
of the Institute
headed
the knowledge
society
has
changed
the demands
of
Parperis,
met with the
work
and
then
contributed
to
By
Rena
Christofidou
the
sustainable
management
Gregoriou
and decision making within
MBA,
BSc economy.
the Cyprus
an organization.
Ministry of Finance
concepts
of “work
On 7 September 2011 Mr. The
Christos
Kyriakides,
Senior
knowledge”
and
“industry
knowledge”
have
been
known
for the last forty years. However, these are not understood
by managers as far as productivity increase and
management of people are concerned. The Davenport
On 13 argues
September
2011 a press
conference
at the
(2002)
that "business
people
considerwas
theheld
empirical
knowledge
as
the
center
for
the
preservation
and
extension
of
organization."
Unfortunately,
the organizations,
the an
Cyprus
economy. The
press conference
was given by
although train their staff with knowledge as they had
drafted the industrial workers at the time of the "Industrial
Revolution" through manual labor, the profits of
On 22 and 23
2011
the President
of the Institute
companies
willSeptember
be touched
astronomical
sums.
As
observedPhilippou
by scientists,
the growth
experienced
by our
Theodoros
attended
a meeting
of the Presidents
era is not based on creativity, but on large stocks of modern
knowledge. These organizations use highly trained
individuals with strong knowledge of the dynamics of
information
technology and computers, who manage
knowledge with great discretion. Additionally, the
professions that are based on low skills tend to deteriorate,
resulting
in fewer and ACTIVITIES
fewer people engaged in the
COMMITTEESʼ
production process in terms, for example, of natural
products
and theirSTANDARDS
distribution in the
market.
ACCOUNTING
COMMITTEE
As mentioned above, the profound changes came from the
entrepreneurial dynamism of the working groups. An
amendments
IAS1 relating
changesand
in the
the
effective
and instructured
way oftoworking
presentation of increased
financial statements
and IAS19
relating
brainstorming
the number
and size
of
mainly
to
the
abolition
of
the
‘corridor
method’.
businesses. The rapid evolution of technology has resulted
in leading companies to fixed and recurring product design
and
has reduced
production.
In addition,paper
new
It also
initiatedthea time
studyof of
FEE’s discussion
companies
emerged,
which
were
flexible
and
responded
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
promptly with a variety of innovations. Their
organizational structures have reduced them capable, fast,
and flexible, with accurate and timely communication and
efficient
low
cost production.
Particular
was
which was
published
in April 2011
is openemphasis
for comments
given
the distribution
of products, compliance
up to 30toSeptember
2011.
schedules, quality control, and accurate decisions by
entrepreneurs regarding the production stage and the
Marios Agathangelou
excellent communication with suppliers. They eliminated
Chairman
the
delays and used as their emblem, of credibility, ethics
and honesty in order to gain the greatest share of the
market.
COMMITTEE
According to the aforementioned, the conclusion is that
technology
provides
solutions
Thecarried
expertise
During the third
quarter
of 2011totheindustry.
Committee
out
gained
enhances
knowledge and this in turn enhances
the following
activities:
creative research and innovation. However, the rapid
progress
developments
experienced
by our
society
1. On 13and
April
2011 the committee
organised
a lunch
at
lead to permanent reduction of jobs with low qualification
requirements. Our times require skilled workers to manage
and take decisions on key companies and individuals who
are able to combine the practical vision of creation.
Hotel
in Larnaca
withand
a subject
Field
Audits
the
The
influx
of new data
knowledge
in our
timefrom
is vital.
Inland
Revenue. that want the efficient handling of
The
organizations
information should assign the decision making to the most
efficient
in the workplace. The manager and the
Panayiotapersons
Vayianou
employee
should
have access to information that will be
Chairwoman
needed at any time. In addition, familiarity and processing
of
large volumes
of information
and knowledge
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
management should be essential in taking meaningful
decisions. This is the main reason the employees to be
trained and educated by the company itself. It should also
During
quarterneed
ofto 2011
the Corporate
be
born inthe
mindthird
that people
share information
and
Governance,
Internal
Audit
and
Risk
Management
sources of knowledge between themselves, without being
committee
withinthe
thespiritual
scope ofgain
its terms
of reference,
required
to has,
calculate
that the
company
commenced
of or
its financial
action plan
andThe
has
will
have in the implementation
form of progress
gain.
effort
mustthe
be following:
collective so as to strengthen cooperation
dealt with
and initiative. The agencies should give the message of fun
and
creativeoncollaboration.
We ofmust
giveonpeople
the
ñ Worked
the development
a survey
Corporate
message
that
their
personal
contribution
to
business
objectives
is linked
to personal
and corporate
companies
in Cyprus.
Its results
will beambition.
sent to all
Knowledge is always the main source of success in terms
of staffing and the scope of the organism. Employees are
seeking and asserting more and more. The expansion and
development of knowledge is based on the world of
ñ Worked on
a white
papershould
describing
the be
role,
duties
and
information.
The
workforce
always
alert
to how
responsibilities
of the following
departments
an
to exploit
the information
provided
so as towithin
obtain
organisation:
remarkable achievements in his individual profit and the
profit of the company. ■
ñ Risk Management
11
49
Institute News
ñ Internal Audit
The statistical service of Cyprus
Dissemination policy of the
statistical service of Cyprus
INTRODUCTION
organisation.
The Statistical Service of
the European
Cyprus with
(CYSTAT)
is the
Union Affairs committee,competent
has designed
a seminar
on
authority
respon“Auditing EU Funded Projects”.
The
seminar,
in
sible for the compilation and
Committee,
is planned
dissemination
of most
of the
for September 2011.
official statistical data in
European
Council
Green
Cyprus.
CYSTAT
functions
and Ministry
submitted its
under the
of
Finance,
the
by the however,
paper.
Statistical
on Service
a studymaintains
of the
its autonomy
in technical
The objective
of the
matters
and
has
exclusive
By Costas
K. Diamantides
responsibility
for the choice
processes
best practices,
at the
methodology,
Senior
Statistics
Officer
same
time recognising
the of
local
practicalities technique,
and sizes.
definitions
and procedures
ñ The committee
has continued
to monitor
closely all
Statistical
Service of Cyprus
for
the
realization
proEuropean and International initiatives withinofitsthescope
grammes
statistical
activities,
as well as articles
for the dissemdomainof and
continued
to contribute
to the
ination
of
the
statistical
data
and
metadata
produced.
Over the last decade, the demand for Cyprus’s statistical
data has grown exponentially. This is mainly due to three
Chairman
important factors. The first factor is the increased demand
for data and metadata by EU institutions, mainly Eurostat
ECONOMIC
CRIME
AND
FORENSIC
and the European
Central
Bank,
due to the fact that Cyprus
ACCOUNTING
(ECFA)
COMMITTEE
joined the European Union in 2004 and adopted the Euro
in 2008. The second factor concerns the increased usage of
During
third quarter
of 2011,
subcommittee
official the
statistics
by several
groupsthe
of ECFA
users like
journalists,
on
organizing
seminars Finally,
had been
the
students
and enterprises.
thecollaborating
third factor iswith
the easy
education
committee
and the from
IT committee
access to the
official statistics
the websiteonof cothe
Statistical
Service
of
Cyprus.
Withbethe
widespread
proliferation
the Internet in the
will
offered
before the
end of theof
year.
1990s Statistical Services are all over the world recognizing the
revolution that
would 1bring
technology
The
ECFA-ebulletin
Volume
Issuethis
1 was
emailedtotostaall
tistical
information,
proceeded
to
direct
exploitation.
ECFA-SIG (special interest group) and members The
had
Statistical Service of Cyprus was not the exception. CYSprovided positive feedback on this initiative.
TAT has been one of the first government departments in
Cyprus with a website since 1997. Certainly the Internet
has revolutionized the field of information and specifically
the statistical information which in turn affected the way
aofficial
memberstatistics
of our committee
Leonidas The
Ieronymides
are disseminated.
Internet with
has
the
title
“Fraud:
The
auditor’s
responsibilities
under
become CYSTAT’s main tool for dissemination.
O’Shea
on thepublished
Bribery Act.
UK time
Bribery
will
In 2006,Eoin
CYSTAT
for The
the first
on Act
its webhave
serious
implications
thosePolicy.
doingSince
business
the
site the
Dissemination
and on
Pricing
then,inthere
2
50
Chairperson
have been three updates mainly reflecting changes on the
website.
The Policy
states
the principles
which
govern the
The
Financial
Services
Committee
monitors
developments
dissemination
of
official
statistics
by
CYSTAT
and
describe theon
procedures
applied
dissemination
of staoperations,
a domestic
level in
asthe
well
as on a European
tistical information, the dissemination tools, data access
procedures and the pricing policy for printed publications.
CYSTATʼS DISSEMINATION POLICY
According to provisions of the Statistics Law (2000) CYSorganized groups and associations (for example
TAT “shall see to the dissemination of the statistics proAssociation
Cyprus
Commercial
Insurance
duced by it”. of
In this
framework,
the aimBanks,
of CYSTAT
is the
Association
of
Cyprus
etc).
provision of timely and reliable statistical data (socio-economic, demographic and environmental data) to all govDuring
secondenterprises,
quarter ofresearchers,
the year the
Committee
ernmentthe
agencies,
analysts,
jourmonitored
the
economic
crisis
and
its
consequences
in
nalists, educational professionals and students.
abroad.
The responsibilities of CYSTAT on the dissemination of
statistical information are well defined within its
Dissemination
Dissemination
Policy of CYSBelow
are thePolicy.
main The
topics
that the Committee
has
TAT is based
on the
of both the Cyprus
concentrated
on over
the provisions
past three months:
Statistics Law of 2000 and the European Statistics Code of
Practice
byCovered
the Statistical
Programme Committee
ñ
Law (adopted
relating to
Bonds
in 2005), as follows:
STATISTICS
LAW Bank
OF 2000
issued
by the Central
of Cyprus and cited its opinions
3.(3) The Statistical Service shall see to the dissemination
of the statistics produced by it;
12.2 (b) … the Statistical Service is responsible for prerepresentatives of the Committee had numerous meetings
scribing the time and the manner of dissemination of the
results of its surveys or work in such a way that all users
have equal and simultaneous access thereto;
13.(3) The statistics compiled on the basis of the data
Central
whichbeaffect
directly
indirectly
resultingBank
fromofa Cyprus
survey shall
published
in or
such
a manmembers
of
our
Institute.
ner as to render impossible the direct and indirect disclosure of the identity of those who provide the data or of the
In
addition,
the report
to be
prepared by the regulator of
persons
to whom
the data
relate.
independence
the regulator.CODE
The Committee
has decided
EUROPEANofSTATISTICS
OF PRACTICE
‘Agreed
Procedures’
(‘AUP’). As such, the
Principle Upon
6: Impartiality
and objectivity
Statistical will
authorities
must
produce
disseminate
Committee
inform the
Central
Bankand
of Cyprus
of the
Europeantostatistics
scientific
independence
decision
circulaterespecting
an illustrative
example
of the reportand
to
in an
objective,
professional and transparent manner in
the
Institutes
members.
which all users are treated equitably.
1
Institute News
Principle 15: Accessibility and clarity
European statistics should be presented in a clear and
understandable form, disseminated in a suitable and convenient manner, available and accessible on an impartial
basis with supporting metadata and guidance.
Methodological techniques and procedures of statistical
processes are publicly available in order to keep transparency. The optimal international and EU statistical principles, methods and proceedings are applied by CYSTAT
in order to facilitate comparability at the cross-national
level.
Institute News
CYSTAT’s Dissemination Policy is guided, besides the
Statistics Law and the Code of Practice, by the following
COUNCILʼS
ACTIVITIES
nine
Principles:
Principle
Userquarter
orientation
During the1:third
of 2011 the Council of the Institute
The
userstimes
of CYSTAT
statistics
are the
force
for
met four
and considered
matters
of driving
interest to
ICPAC
the
production
of
statistical
outputs
and
their
disseminaand to the profession at large. Other issues dealt with were,
tion. CYSTAT endeavours to fit data dissemination to the
demand of users and to monitor the relevance and usefulness of existing statistics.
by the President,
Mr. Theodoros of
Parperis,
metinformawith the
Principle
2: Comprehensiveness
statistical
tion
The
same measures
set of statistics
may for
have
a variety
of users.
discussed
to be taken
facing
the problems
of
Therefore
there
is
a
need
to
respond
to
different
requirethe Cyprus economy.
ments. Statistics should be presented in a clear and understandable form which facilitates a proper interpretation and
meaningful comparisons. It is envisaged to disseminate
Officer oftothe
attended
Council
the
statistics
theInstitute,
general public
in the
such
a way meeting
that the of
users
Mediterranean
Federation
of
Accountants
in
Rome.
can both access and use the statistics for their own purposes.
Principle
indiscriminatory
and simultaneous
Offices of3:theEqual,
Institute
concering proposals
by ICPAC for
access to statistical information for all users
CYSTAT offers the same conditions to all users accessing
its website. Furthermore, the release calendar published
contains the dates of the press releases and announcements
OnCYSTAT
22 and 23
September
2011
the President
of the Institute
of
scheduled
to be
released
in the following
week
Mr.
Theodoros
Parperis
and
the
General
Manager
as well as in the next four months. Users without accessMr.
to
the
InternetPhilippou
may ask attended
for documents/data
Theodoros
a meeting of at
theCYSTAT’s
Presidents
premises
at the
of the release.
A list of users
who have
and CEOs
of time
the European
Federation
of Accountants
privileged
pre-released
access
is
available
in
the
dissemi(FEE) Member Bodies in Vienna and a Special Meeting
of
nation policy document.
Principle 4: Availability
CYSTAT’s website is the main source of statistical inforCOMMITTEESʼ ACTIVITIES
mation. The website is available to everyone with Internet
access, 24 hours/day, 7 days/week.
Principle 5: Independence
During the
last meeting
the committee
studied
the
CYSTAT
maintains
its professional
independence
from the
amendments
in orIAS1
relating departments
to changesand
in bodthe
policy,
regulatory
administrative
presentation
financial
statements
relating
ies
as well as of
from
the private
sector. and
It is IAS19
publishing
the
produced
according
the release
calendar indemainly tostatistics
the abolition
of the to
‘corridor
method’.
pendently of the current political and/or social situation.
Principle
Professionalism
and
of
‘Combined6:Financial
Statements’.
Thetransparency
discussion paper
methodology
2
Principle
Timeliness
which was7:published
in and
Aprilpunctuality
2011 is open for comments
CYSTAT
promotes
the
timely
collection
and publication of
statistics as soon as possible after the reference period.
Statistical information is provided according to the Release
Marios Agathangelou
Calendar and according to the Annual as well as the FiveChairman
Year Programme of work.
LARNACA
– FAMAGUSTA CO-ORDINATING
Principle
8: Regularity
COMMITTEE
CYSTAT
promotes establishing the production and regular
publication of good quality statistics. For a number of indiDuringCYSTAT
the third quarter
of 2011
Committee
carried
out
cators,
has set the
time the
period
that should
elapse
the
following
activities:
from the reference period to the publication date.
Principle
Confidentiality
1. On 13 9:
April
2011 the committee organised a lunch at
CYSTAT
safeguards
protection
statistical
informaZephyros Tavern in the
Larnaca
withofthe
new director
of
tion,
theRevenue
privacyofofLarnaca
data providers
(survey
respondents,
Inland
Mr Marios
Kourouniades.
administrative offices) and the use of statistical data solely
for
statistical
Statistical
areataccessible
2. On
4 May purposes.
2011 a seminar
was microdata
co-ordinated
Sun Hall
for
research
purposes
only
and
under
strict
provisions.
Statistical authority staff sign legal confidentiality comInland Revenue.
mitments on appointments. The penalties are prescribed
for any wilful breaches of statistical confidentiality as
Panayiota Vayianou
described in Statistics Law 2000.
Chairwoman
In addition to the principles described above, the following
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
procedures
are applied
in the dissemination
of statistical
AND
RISK
MANAGEMENT
COMMITTEE
information:
Procedure 1: News releases
News releases should be disseminated on the website at
12:00 o’clock.
Procedure 2: Future date releases
Future date releases for key statistical indicators should be
ñ Workedso
onthat
the the
development
Corporate
announced
timing of of
thea survey
release on
is not
influGovernance.
The The
survey
will Calendar
be sent tois the
listed
enced
by the results.
Release
available
companies
in
Cyprus.
Its
results
will
be
sent
to
all
every Friday. It includes the scheduled announcements for
members.
It
is
also
envisaged
that
the
results
the following week as well as for the next four months. be
presented
duringdissemination
Procedure
3: Timely
Dissemination of the results and publications should take
place
as soononasa possible.
ñ Worked
white paper describing the role, duties and
organisation:
Procedure
4: Notification of errors and changes
Users should be informed of any errors, delays or changes
ñ soon
RiskasManagement
as
they are known.
1
51
Institute News
ñ
Internal Audit
Procedure
5: No need of approval by government
CYSTAT does not need any approval of any governmental
body
before the and
publication
ñ
Organisation
Methodsof its statistics. CYSTAT has
the sole responsibility of deciding what, how and when to
publish.
The
Procedure 6:ofResponsibility
disseminated
statistics
interaction
these threeforfunctions
within
and
The
Director
of
CYSTAT
and
the
heads
of
the
divisions
organisation.
bear the responsibility for all statistics produced and disseminated.
Procedure 7: Increase of efficiency in production and
dissemination of statistics
Increase the productivity in the collection, processing and
for September 2011.
dissemination of statistical data by the use of the high techñ The committee studied the European Council Green
nology.
response8:toUse
the of
questions
posed by the paper.
Procedure
standards
ñ
The committee
has graphs
embarked
onfollow
a study
of the
Disseminated
tables and
should
the relevant
Institute’s
Governance
procedures.
The
objective
standards so that they can be easily understandable. of the
processes9:which
will incorporate
Procedure
Explanatory
notes best practices, at the
same
time
recognising
the
and sizes.
Disseminated data should be accompanied
by methodologñ
committee
hasboth
continued
to monitor closely
all
icalThe
explanatory
notes
in the publications
and on the
European
and International
its scope
website.
Explanatory
notes are initiatives
important within
information
for
domain
andto continued
to tocontribute
to and
the
users
in order
enable them
understandarticles
accuracy
comparability
of disseminated statistics.
Procedure
10: User feedback
Panicos
G. Papamichael
User
feedback
is very important in order to learn their furChairman
ther expectations so that to improve the users’ satisfaction
with the disseminated
ECONOMIC
CRIME statistics.
AND FORENSIC
Due to the wide range of different groups of users of official statistical data, CYSTAT aims at disseminating the
information in such a way as to avoid any misinterpretaon organizing seminars had been collaborating with the
tion of published statistics by the users. This is safeguarded
education
committee ofand
committee
under the provisions
thethe
firstITtwo
principleson
of cothe
organising
two
seminars.
One
on
fraud
detection
utilizing
Dissemination Policy as well as those of Procedures 8 and
IT
andpractice,
the other
fraud detection
and prevention.
Both
9. In
theon
statistical
data published
on the website
will
be offeredinbefore
end of
the year.
are available
tablesthe
(Excel
files)
in a standard format;
the announcements are kept simple and if they refer to the
The
ECFA-ebulletin
Volumethe
1 Issue
was emailed
to are
all
availability
of new statistics
most 1important
figures
ECFA-SIG
(special there
interestaregroup)
and links
members
had
briefly described;
always
between
announcements
related
tables/
publications; the
provided
positive and
feedback
on this
initiative.
methodological information is presented in a standard format; andthere
finally,
the publications
available
in both elecFinally,
are two
articles in this– issue
of “Accountancy
tronic
format
and
hard
copy
–
include
the
methodological
data,
a clear Ieronymides
description ofwith
the
ainformation,
member ofthe
ourstatistical
committee
Leonidas
results
and
all
the
necessary
explanations.
As stated in Procedure 10 the feedback from users is conO’Shea Eoin on the Bribery Act. The UK Bribery Act will
sidered to be of major significance in order to improve the
2
52
UK
or services.
even those
are doing
business
a UK
offered
Forwho
this reason,
CYSTAT
haswith
established
company
outside the
UK.
annual web-based
user
satisfaction surveys. These surveys
as well as other actions which are related to the communication Krambia-Kapardis
with the users are described in the following secMaria
tion.
Chairperson
COMMUNICATION
FINANCIAL
SERVICES COMMITTEE
There
is a wide
range of
groups ofmonitors
users of developments
official statisThe
Financial
Services
Committee
tical data such as government agencies, politicians,
researchers, students, businesses, media and the general
public. Although there is no defined communication pollevel. It also keeps contacts with the regulatory bodies,
icy, CYSTAT aims to promote overall knowledge and
awareness of official statistics among the different user
Securities
Exchange Commission (CySEC) and the
groups.
exchange
views with
regarding
the industry,
well as
other
Communication
the users
is mainly as
through
individorganized
groups Users
and may
associations
(for in
example
ual user questions.
contact CYSTAT
any of
Association
of
Cyprus
Commercial
Banks,
Insurance
the following ways: by filling in a form available on the
Association
of Cyprus
etc).fax, and by post. All the contact
website, e-mail,
telephone,
information of CYSTAT (e-mail, telephones, and fax) is
availablethe
on second
the website,
in all
andthe
electronic
pubDuring
quarter
ofprinted
the year
Committee
lications and
all correspondence.
It isconsequences
common, howmonitored
theineconomic
crisis and its
in
ever,
that
users
contact
directly
the
responsible
officers,
usually by phone, in order to obtain the information they
abroad.
want!
As the website has become the main dissemination tool,
CYSTAT produce a quarterly report with web-usage statistics. The report contains information on the number of
unique visitors, page views, most accessed webpages and
files, number of registered users, etc. It is produced only
The
Committee
studied the draft legislation and directive
for internal
purposes.
which
werefrom
discussed
the Central Bank
of Cyprus.
Feedback
users with
is systematically
collected
through
annual web-based user satisfaction surveys. The questionFollowing
the passing
the legislation
byofParliament,
naire is available
on the of
website
for a period
one month
representatives
of thepop-up
Committee
had numerous
meetings
and an information
window
appears when
first
entering
the website.
In Central
addition,
all ofregistered
users
with
representatives
of the
Bank
Cyprus, during
receive various
an email concerns
informing of
them
about were
the survey.
This
which
ICPAC
discussed
feedback
is
used
to
fine-tune
dissemination
activities.
Around 250
announcements
are published on the website
members
of our
Institute.
every year. CYSTAT aims at clarity and avoids unnecessary jargon in its announcements. All announcements are
bilingual, in Greek and English, and the content is identiCovered Bonds was discussed, as well as the issue of the
cal in both languages.
CYSTAT has been a member of the European Statistical
‘Agreed
Upon
Procedures’
(‘AUP’).
Data Service
(ESDS)
network since
2005. As
The such,
missionthe
of
Committee
will
inform
the
Central
Bank
of
Cyprus
of the
the network is to provide help and guidance to Internet
decision
circulatestatistical
an illustrative
of the
reportthe
to
users of to
European
data.example
Users may
contact
the
Institutes
members.
centre in Cyprus from Eurostat’s website, CYSTAT’s web-
3
Institute News
site, by e-mail and phone.
making concrete suggestions for improvement. The results
were encouraging and the participants expressed their positive comments on that initiative. CYSTAT aims at creating focus groups for other domains too.
Institute News
In order to improve the internal communication, CYSTAT
will install the web-enabled version of the Office
Automation System (eOAS) which has been recently introduced to a number of ministries and departments. The ultimate aim of eOAS is the electronic management and
administration of all documents of the civil service, as well
as the automation of the procedures and regulations that
rule their creation, archiving, security, confidentiality
During the
third quarter
of 2011
the Council
of the
Institute
grading,
distribution
and
disposal,
including
their
final
met four times
and term
considered
mattersfor
of future
interestaccessibilto ICPAC
destruction
or long
preservation
ity
and researchers.
andbytothe
thepublic
profession
at large. Other issues dealt with were,
IMPROVEMENTS
Although CYSTAT has a long history in the statistical data
by the President,
Mr. Theodoros
met with the
dissemination
through
the InternetParperis,
and a dissemination
new Minister
of has
Finance,
Mr. Kikismaking
Kazamias
policy
framework
been established
clear and
the
discussed measures
to be taken
forproducer
facing the
of
responsibilities
of CYSTAT
as the
of problems
the official
statistics
in Cyprus,
the Cyprus
economy.there is a need for upgrading the dissemination services it offers as well as the quantity and
quality
of the information
and disseminated.
On 7 September
2011 Mr. produced
Senior
Having recognised this need and in the framework of the
implementation of its strategy for the development of a
new integrated statistical information system, CYSTAT
has initiated several projects. Two important projects are
On development
13 Septemberof2011
a press
conference
was
held at the
the
online
databases
and the
provision
of
methodological
information
for as proposals
many statistical
themes
Offices of the Institute
concering
by ICPAC
for
as
using the
standard
Euro SDMX
thepossible
Cyprus by
economy.
The
press conference
wasMetadata
given by
Structure
(ESMS).
the President
of the Institute Mr. Theodoros Parperis.
Despite the positive comments of the users who particiOn 22 and 23 September 2011 the President of the Institute
pated in the annual user satisfaction surveys, CYSTAT
Mr. Theodoros
and the General
Manager culMr.
aims
at assisting Parperis
in the development
of a ‘statistical
Theodoros
Philippou
attended
a meeting
of the
Presidents
ture’
in Cyprus
by creating
a website
and/or
a CD
which
and explain
CEOs in
of simple
the European
will
terms andFederation
descriptionsofofAccountants
the various
statistical
concepts
in Greek.
It isand
envisaged
lessons
(FEE) Member
Bodies
in Vienna
a Specialthat
Meeting
of
will
be learned
from the experience of other countries and
the General
Assembly.
organisations that have developed similar websites/ CDs.
Another area of improvement in the communication of statistical
information to theACTIVITIES
users is the improvement of the
COMMITTEESʼ
contents of the announcements, the statistical storytelling.
In order to gain skills in the statistical storytelling and for
improving the writing of announcements, CYSTAT staff
participated in a related training course organised by a
local university.
presentation
of financial
statements
and IAS19
CYSTAT
has some
experience
in establishing
focus relating
groups
mainly
to
the
abolition
of
the
‘corridor
method’.
with users. Such a group was established few years ago
with the aim of discussing the contents of the website and
4
Although several other national statistical institutes have
explored the participation in the social media, CYSTAT
considers
this
field to be
a low
priority
mainly
due to the
which was
published
in of
April
2011
is open
for comments
lack
human
resources.
up toof30
September
2011.The priority is to produce reliable
and up-to-date statistical information! Similarly, another
option which was examined and finally rejected due to the
Marios Agathangelou
same reason, i.e. the lack of human resources and other priChairman
orities, was the appointment of a spokesperson.
LARNACA
– FAMAGUSTA
Last
but not least,
the objective CO-ORDINATING
of CYSTAT is to establish
COMMITTEE
a Communication Policy. CYSTAT recognises that active
communication with the different groups of users is an
During the
of 2011 theThis
Committee
carried
out
integral
partthird
of itsquarter
responsibilities.
policy should
state
the
following
activities:
with clarity the guiding principles of the communication
with the users.
CONCLUSIONS
CYSTAT
has2011
established
a clear
and well-defined
2. On 4 May
a seminar was
co-ordinated
at Sun Hall
Dissemination
Policy.
The
Policy
encompasses
the
responHotel in Larnaca with a subject Field Audits from
the
sibilities of CYSTAT as producer of official statistics in
Inland Revenue.
Cyprus. CYSTAT fully respects the principles defined in
the Policy and applies all procedures defined. Despite the
Panayiota Vayianou
positive comments of the users who participate in the satChairwoman
isfaction surveys, the quest for offering upgraded statistical information and services to the general public can
CORPORATE
GOVERNANCE,
AUDIT
never
end. CYSTAT
has identifiedINTERNAL
several areas
for
AND
RISK
MANAGEMENT
COMMITTEE
improving the dissemination activities and taking into consideration various constraints, such as limited human
During the
third quarter
2011 the those
Corporate
resources
and reduced
budgets, of
has prioritized
activGovernance, Internal Audit and Risk Management
ities.
The
communication
with users of
is its
an action
area which
needs
commenced
the implementation
plan and
has
improvement.
The establishment of a Communication
Policy will put the interaction with the users under a specific
framework
clearly defined
principles.
Many
ñ Worked
on thewith
development
of a survey
on Corporate
indicators
are usedThe
daily
for different
by the
students,
Governance.
survey
will bereasons
sent to
listed
journalists,
politicians,
and
other
groups.
How
canto we
companies in Cyprus. Its results will be sent
all
safeguard
that the
information
is cormembers.
It isstatistical
also envisaged
thatproduced
the results
be
rectly
used
and
not
abused?
The
answer
to
this
question
is
twofold. First, as producer of official statistical informaactivities planned for the celebration of ICPAC’s 50th
tion, CYSTAT should provide as much information as possible clearly, concisely and simply without neglecting
quality and second, to enable the development of the ‘staresponsibilities of the following departments within an
tistical culture’ in Cyprus. ■
organisation:
ñ Risk Management
1
53
Institute News
ñ Internal Audit
EU Audit Policy
EU Audit Policy: The next chapter in the debate
The white document will be Debate
circulated
members
of
on to
theall
future
of audit
ICPAC and will help clarify
the
boundaries
and
the
has gained new momentum
functions
and
in the
aftermathwithin
of the 2008
organisation.
financial crisis. In the UK,
scrutiny by parliamentary
committees
some
withhastheraised
European
important
issues
about
Union Affairs committee, has designed a seminar the
on
role of audit.
the US, the
TheInseminar,
in
PCAOB,
under
the
new
chairmanship of James Doty,
for September 2011.
hasEuropean
embarkedCouncil
upon work
to
Green
enhance the relevance,
credibility and transparency
of audits. But perhaps the
ñ Dr
The
committee
on a study of the
By
Martin
Manuzi has embarked
most visible and wideInstitute’s Governance procedures.
The objective
the
ranging discussion
hasofbeen
ICAEW Regional Director
develop governance
that launched
by the
best
practices, atwith
the
European
Commission
same
time
recognising
the
local
practicalities
and
sizes.
the publication of its green paper on audit policy a year
ñ
ago.The committee has continued to monitor closely all
domain
continued
to contribute
articles
to the
In the
run-upand
to the
publication
of legislative
proposals
by
the Institute’s
Commission,
expected in November, there has been
magazine.
ongoing interaction between the EU Institutions, member
states, the
and other stakeholders. All with the
Panicos
G. profession
Papamichael
aim of clarifying areas of consensus while considering
Chairman
different potential options to achieve a robust audit
environment. The recent European Parliament vote in
September on its non-legislative opinion confirms a
political willingness by MEPs to pursue reforms in this
area.
on
seminars
collaborating
with the
Theorganizing
coming months
willhad
alsobeen
be busy
ones. Building
on
education
committee and
the IT
on coour long-established
presence
in committee
Brussels, ICAEW
organising
seminars.
One on fraud detection
continues totwo
engage
with decision-makers
and theutilizing
broader
stakeholder
community
we await
Commission’s
IT
and the other
on fraudasdetection
andthe
prevention.
Both
publication
of
legislative
proposals,
accompanied
by a
detailed impact assessment, announced for November. It
will ECFA-ebulletin
then fall to member
states
and MEPs
negotiate
The
Volume
1 Issue
1 wastoemailed
to the
all
final shape of legislation – a process that will surely take
up much of 2012. The Cypriot Presidency, in the second
half of 2012, is therefore likely to play a key role in trying
to secure agreement.
Cyprus”
the ECFAthat
column.
Theto
first
one istoauthored
ICAEW in
recognises
audit has
evolve
continueby
to
ameet
member
of ourofcommittee
Leonidas
Ieronymides
with
the needs
markets and
society.
Our overriding
the
title “Fraud:
The auditor’s
responsibilities
objective,
as we liaise
with policy-makers
in theunder
UK,
across
Europe
and
beyond,
remains
that
of
encouraging
ISA240” and the second by a well-known UK lawyera
vibrant Eoin
and oncompetitive
audit
which
O’Shea
the Bribery Act.
Theenvironment
UK Bribery Act
will
stimulates
quality,
innovation
and
confidence.
2
54
Chairperson
EXPECTING MORE
FINANCIAL
SERVICES
COMMITTEE
It is evident that
more is expected
of auditors. The starting
point must be an awareness that audit is a service required
The
Financial
Services
monitors
by statute
to serve
theCommittee
public interest.
Wedevelopments
also need to
in
thethe
bank
industry,
and other
financial
learn
lessons
of theinvestment
financial crisis,
particularly
in
relation to on
systemically
financial
operations,
a domestic important
level as well
as on ainstitutions
European
(SIFIs).
didcontacts
not contribute
to regulatory
the severitybodies,
of the
level.
It Auditors
also keeps
with the
financial
crisis:
they
did
the
job
that
they
were
expected
to
do
–
provide
an
audit
opinion
on
banks’
financial
statements. Looking ahead, the challenge now is to
identify – with market participants and with feedback from
regulators – feasible measures that could be introduced at
European level to improve understanding of companies’
Association
Commercial
Insurance
risk, perhapsofviaCyprus
new areas
such as Banks,
the provision
of
Association
of Cyprus
etc).reporting.
assurance services
on risk
During
the year
the Committee
In Audittheof second
Banks: quarter
Lessonsof from
the Crisis,
a report
monitored
the
economic
crisis
and
its
consequences
in
produced by our Financial Services Faculty last year, we
made some
recommendations
the
regards
to all concrete
areas of economic
activitiestoin increase
Cyprus and
relevance and reliability of banks’ risk reporting, including
abroad.
suggested improvements to the way that banks present risk
information,
backed
additional
statements
Below
are the
mainbytopics
that assurance
the Committee
has
from
the
company
auditor.
We
are
also
strong
advocates
of
enhancing communication between auditors and
prudential supervisors and are pleased that, in the UK such
dialogue is now being put on a firmer footing. Our work
continues: we will be holding an investor-auditor forum
later this year as well as issuing good practice guidance for
issued
by the Central
Bank
of Cyprus
and cited its opinions
bank auditors
reporting
to audit
committees.
If there is one big lesson from the crisis for auditors, it may
Following
theneeds
passing
the tolegislation
Parliament,
be that more
to beofdone
explain thebyvalue
of audit
representatives
theaudit
Committee
to those outsideofthe
process.had
Wenumerous
therefore meetings
welcome
policy-makers’
interest
finding
ways
of improving
with
representatives
of theinCentral
Bank
of Cyprus,
during
transparency
of concerns
the audit process.
Providing
additional
which
various
of ICPAC
were discussed
information
stakeholders
on the
work carried
out the
by
regarding
thetoprovisions
of the
Directive
issued by
auditors
could
be
an
important
step
to
help
reduce
this
persisting expectation gap.
The completion of high quality audits ultimately depends
on the skills of individual auditors and their ability to
Covered
was discussed,
as well
as the issue
of the
exercise Bonds
professional
judgement.
Speaking
in June
in
independence
of
the
regulator.
The
Committee
has
decided
Brussels, James Doty noted that ‘scepticism is a state of
that
theobjectivity
report of athe
regulator
is toIt be
in the form
an
mind,
silent
success’.
is therefore
vitalofthat
‘Agreed
Procedures’
Asnotsuch,
the
the currentUpon
debates
on the future(‘AUP’).
of audit do
overlook
Committee
will inform
the Central
Bank and
of Cyprus
of the
the importance
of education,
training
professional
development.
We also
believe thatexample
ensuring
quality
decision
to circulate
an illustrative
of high
the report
to
audit
across the
EU would be helped by the adoption of
the
Institutes
members.
clarified International Standards on Auditing (ISAs) for all
1
Institute News
EU Audit Policy
statutory audits – this is also backed by MEPs in their
recent opinion.
PROMOTING INDEPENDENCE AND
OBJECTIVITY
Institute News
The potential for conflicts of interest in the audit sector
exists and should be addressed. Promoting independence
COUNCILʼS
ACTIVITIES
and
objectivity is vital,
although any measures that are
introduced must avoid unintended negative consequences.
An
outright
ban on
the provision
of non-audit
for
During
the third
quarter
of 2011 the
Council ofservices,
the Institute
instance,
could and
be problematic
for businesses
which
value
met four times
considered matters
of interest
to ICPAC
the
additional
services
auditors
can
provide.
There
are
more desirable ways to ensure auditors do not allow their
independence to be compromised, including rigorous and
proportionate implementation of the ethical standards and
On 5 September
2011 a delegation
of the Institute
independence
principles
and rules already
defined headed
in EU
legislation.
Applying
by the President,
Mr.safeguards
Theodorosregarding
Parperis,the
metmaximum
with the
level
fees a firm
can receive
a single
client and
new of
Minister
of Finance,
Mr.from
Kikis
Kazamias
and
requiring
full
disclosure
by
companies
with
regard
discussed measures to be taken for facing the problems to
of
auditor tenure and tendering practices would also be
the Cyprus economy.
beneficial.
On 7 September
2011
Mr.beChristos
Senior
Consideration
should
also
given toKyriakides,
strengthening
the
role
of ofaudit
committees
in appointing
auditorsofand
Officer
the Institute,
attended
the Council meeting
the
exercising
judgement
over of
non-audit
services,
particularly
Mediterranean
Federation
Accountants
in Rome.
in relation to SIFIs. Ensuring that audit committees have
the necessary expertise as well as operational and decisionOn 13 September 2011 a press conference was held at the
making independence from management must be a
Offices ofReflecting
the Institute
proposals
ICPAC for
priority.
the concering
crucial role
that auditbycommittees
the
Cyprus
economy.
The
press
conference
was
given by
play in the audit process, ICAEW is currently undertaking
the President
ofwhich
the Institute
Mr.will
Theodoros
Parperis. as
further
research
we hope
help policy-makers
they consider action in this area.
A robust system of public oversight is crucial to promote
quality and objectivity. Proposals to enhance coordination
Theodoros
Philippounational
attended authorities
a meeting ofare
the Presidents
among
European
therefore
and
CEOs
of
the
European
Federation
of
Accountants
welcome – although it is important that national bodies
(FEE)their
Member
Bodies
in Vienna and
Special
Meeting
of
retain
overall
responsibilities
as athey
are best
placed
to
thedeliver
Generaleffective
Assembly.oversight. Enhancing regulatory
consistency and coordination at European and global
levels will be equally critical.
STRENGTHENING THE AUDIT ENVIRONMENT
ICAEW acknowledges that policy-makers and regulators
have keen and legitimate concerns about audit market
During the last
the of
committee
studied the
concentration.
Themeeting
development
effective mechanisms
amendments
in
IAS1
relating
to
changes
the
to help more firms participate in the audit market forinlarge
presentationwould
of financial
statements
relating
companies
be beneficial.
This and
is anIAS19
issue ICAEW
mainly
the abolition
the ‘corridor
method’.
has
beentolooking
at for of
a number
of years.
In addition to
EU attention to this question, the UK Office of Fair
Trading
also deliberating
area. discussion paper
It also isinitiated
a study inofthis
FEE’s
Reducing audit concentration is complex: any measures
2
will need to be based on solid evidence and rigorous
testing of measures – and avoid damage to audit quality.
Our contribution to the debate calls for regulators to
assume responsibility for market structure, competition
and choice via the definition of national strategies which
are compatible across member states. More regular and
transparent tendering, if accompanied by reduced barriers
to market entry and more accountability in auditor
selection, could help reduce concentration without
damaging quality and confidence.
Marios
Agathangelou
In
addition
to the measures noted above, we favour the
promotion
Chairman of robust contingency planning on the part of
audit firms and regulators. In January 2010, the UK
Financial
Reporting
Council (FRC)
and ICAEW published
LARNACA
– FAMAGUSTA
CO-ORDINATING
the
Audit
Firm
Governance
Code,
which
applies to firms
COMMITTEE
auditing more than 20 UK listed companies. The Code is
designed to mitigate the risk of a significant audit firm
exiting the audit market, setting a benchmark for good
governance which could have wider application at the
European level.
We
are especially
of thewith
challenges
SMEs
Zephyros
Tavern mindful
in Larnaca
the newfacing
director
of
across
of the future
Inland Europe.
RevenueAn
of appropriate
Larnaca Mrconsideration
Marios Kourouniades.
of audit must involve broad discussion of a vision for
SMEs
the2011
evolution
of was
auditco-ordinated
exemption in
Europe,
2. On 4and
May
a seminar
at Sun
Hall
rather
than
just
a
piece-meal
approach
that
identifies
audit
as an area for achieving cost reductions. After all, a small
Inland Revenue.
company in one member state may be a more significantsized entity in another. Policy-makers should not overlook
Panayiota Vayianou
differences
between the SME sectors of different member
Chairwoman
states and the valuable benefits that the statutory audit
provides for various SME stakeholders. It may be
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
preferable
to agree
a common framework
for alternatives
AND
RISK
to
audit
andMANAGEMENT
allow member COMMITTEE
states to address audit
exemption according to their national environment.
THE
DEBATEInternal
COMESAudit
TO CYPRUS
Governance,
and Risk Management
Our work in Brussels will continue to focus on a number
of different EU initiatives of interest to the profession, not
dealtinwith
following:
just
thethe
audit
area but also on issues of corporate
governance, corporate finance and financial reporting,
ñ Worked
on the measures
development
of a survey
Corporate
including
overdue
to modernise
theonaccounting
Governance.
The
survey willto be
sent to tothe
listed
directives.
ICAEW
is committed
continuing
develop
in Cyprus.
Its results
will bewith
sentpolicyto all
ideascompanies
and to contribute
expertise,
engaging
makers
acrossIt isjurisdictions
to that
help the
establish
a
members.
also envisaged
results be
proportionate
regulatory
framework
that contributes
presented during
a press
conference,
within the
towards
a high
quality,
environment
for50th
our
activities
planned
forsustainable
the celebration
of ICPAC’s
profession.
In Cyprus, we are engaging with ICPAC on EU affairs, and
of the following
departments
an
planresponsibilities
to hold an ICPAC-ICAEW
roundtable
event within
later this
organisation:
year. No doubt the Cypriot Presidency will take place
during a time of significant change and debate within the
ñ Risk
EU!
■ Management
1
55
Institute News
ñ Internal Audit
Reducing exposure to borrowing
The illusion of prosperity
If there is one thing the
current crisis has shown is
that the prosperity enjoyed
organisation.
by most in the western world
it was only
an illusion.
It was
with
the European
based aonseminar
borrowed
Union Affairs committee,mainly
has designed
on
money without
any real
The seminar,
in
Committee,
substance.
The is planned
western
for September 2011.
world both at personal level
Council
Green
andEuropean
at state level
was having
and that
submitted
its
a great party
lasted for
many years on borrowed
By Frixos Kyprianou
funds.
Manager
MK KYPRIANOU LTD
Unfortunately
we at the
are
best practices,
being served
with
same time recognising the currently
and sizes.
the
bill
and
we
do
not
like
it
much.
Unfortunately
there
is
no way
out but
pay the bill. The
positive
side its
of things
European
andto International
initiatives
within
scope
domain
andbecontinued
to contribute
articles
to the
is that
we will
forced to become
wiser and
as President
Institute’s
magazine.
Obama said we must learn to live within our means. For
many years we were spending more money than we were
Panicos
Papamichael
actually G.
making
and we were covering the deficit by
Chairman
borrowing more. At some stage it was only natural that the
whole borrowing story would catch up with us.
What actually makes things worst is that the citizens of the
so called
world
will betheforced
only to pay
During
thedeveloped
third quarter
of 2011,
ECFAnot
subcommittee
theirorganizing
own bill but
also the
of their
mainly inefficient
on
seminars
hadbill
been
collaborating
with the
and
wasteful
governments.
The
end
result
will beonmany
education committee and the IT committee
coyears
of
slow
to
non-existent
growth,
high
unemployment
andand
a vast
the detection
number ofand
people
living below
IT
the increase
other on in
fraud
prevention.
Both
will
be offered
before
thefrom
end of
theon
year.
the poverty
line.
People
now
and at least for the
next ten years should expect difficult times ahead. It is also
The
ECFA-ebulletin
Issue 1 was
emailed
to all
highly
likely that theVolume
western1economies
may
be jumping
ECFA-SIG
(special
interest
group)
and
members
in and out of frequent recessions until some stabilityhad
is
provided
positive
feedback
on
this
initiative.
found.
Out of this crisis one more thing has become also obvious.
The project of European integration needs to pick up speed
and the leaders must look at greater political union more
seriously.and
At theleast
theyby must
improve UK
economic
ISA240”
second
a well-known
lawyer
governance
andAct.
lookThe
at greater
political
O’Shea
Eoinimmediately
on the Bribery
UK Bribery
Actunion
will
soon
after.
It
has
become
necessary
to
create
a
centralised
2
56
Chairperson
authority that will supervise fiscal policies of all EU
countries and especially the Euro-zone ones. It has also
become equally important to create a stricter regulatory
framework
forServices
the banking
industry
which
bears large
The
Financial
Committee
monitors
developments
responsibility
for
what
is
currently
happening.
The aim
should be toonensure
that crisis
will not
operations,
a domestic
level of
as this
wellmagnitude
as on a European
happenIt again.
It is acontacts
very positive
development
the
level.
also keeps
with the
regulatory that
bodies,
such
as the
Bank offor
Cyprus
the Cyprus
and
number
of Central
voices asking
better(CBC),
and more
centralised
Securities
Exchange
Commission
(CySEC)
and
the
governance is growing which means that something good
Commissioner
in order
to
may come out ofof
thisInsurance
crisis. It hascompanies
become crystal
clear that
exchange
views
regarding
the
industry,
as
well
as
other
politicians of all sorts are unable to properly manage their
organized
groups The
andpeople
associations
(for example
country’s finances.
of Europe would
be better
off if there was a central authority in place with strict fiscal
policy mandate that should be able to enforce on all
countries.
Here into Cyprus
politicalactivities
leaders inhave
shown
regards
all areas the
of economic
Cyprus
and
themselves to be unable to make the right and timely
abroad.
decisions to protect the people from reckless banks and big
economic
Additionally
has the
become
evident that
Below
arecrises.
the main
topics itthat
Committee
has
concentrated
over the past
threebanking
months:system is weak
the regulatoryonframework
of our
and as a result the banks have played a major part in the
ñ
Law relating
to Covered
problems
that currently
exist Bonds
with the Cyprus economy.
Prior to the 2008 financial crisis they were lending money
to anyone and anything contributing to a great extent to the
real estate bubble. Three years later the same bubble is
threatening, together with other problems, to bankrupt the
banking industry and with it the whole of Cyprus. They
have done the of
same
mistake in had
1999numerous
where they
were
representatives
the Committee
meetings
providing
unnecessary
to the
stock market
with
representatives
of theliquidity
Central Bank
of Cyprus,
during
creatingvarious
the stock
exchange
it appears
the
which
concerns
of bubble.
ICPACAswere
discussed
banks are the
unable
to learnoffrom
past mistakes.
is
regarding
provisions
the their
Directive
issued by Itthe
Central
Bank
of Cyprustowhich
affect directly
indirectly
therefore
necessary
put down
a strictorregulatory
members
of that
our Institute.
framework
will protect at the same time the people,
the banks from themselves and the economy as a whole.
Borrowing is a good thing as long as it is done with
restraint at both personal level and state level. As the
situation stands today all of us should try to reduce our
exposure to borrowing. Governments should try to move
towards surplus
budgets
for a goodexample
number of
of the
years
and to
at
decision
to circulate
an illustrative
report
the
same
time
reduce
their
exposure
to
foreign
debt
as
much as possible. ■
1
Catastrophic event management
Institute News
Responding to Institute
a black swan
News- principles for
responding to unexpected catastrophic events
The Black Swan concept,
back several
centuries, was based on the
the Council
of thethat
Institute
mistaken
notion
all
areofwhite.
in the
met four times and consideredswans
matters
interestBut
to ICPAC
and to the profession at large.late
Other17th
issuescentury,
dealt withblack
were,
swans
were
observed
in
Australia, revealing the
shortcomings
in
our
knowledge, imagination and
perspective.
for facing
the problems of
RARE
BIRDS
the
Cyprus
economy.
By Gabriel Onisiforou
which dates
Black Swan events evolve
from
or a combination
of factors,
unintended
On 7one
September
2011 Mr.
Christosincluding
Kyriakides,
Senior
human
error,
negligence,
malicious
actions,
or
acts
of
nature.
Regardless
of theirofcauses,
they are
alike in that
Mediterranean
Federation
Accountants
in Rome.
they:
ñ Occur unpredictably or unexpectedly
ñ Develop rapidly and continue for days, weeks, and
theeven
Cyprus
economy. The press conference was given by
months
theAre
President
of the Institute
Mr. broad
Theodoros
Parperis.
ñ
catastrophic
in scale and
in scope
ñ Present hazards beyond immediate financial risks,
Onjeopardizing
22 and 23 September
the President
of theand
Institute
lives, 2011
long-term
health,
the
Mr.environment
Theodoros Parperis and the General Manager Mr.
ñ
Involve significant
asset damage
or loss
Theodoros
Philippou attended
a meeting
of the Presidents
ñ
Often
require
significant
corporate
and/or
government
resources to effectively resolve
Black Swan sceptics retrospectively assert that
catastrophic events are predictable because post-event
investigations
identifyACTIVITIES
design flaws, inadequate
COMMITTEESʼ
maintenance, or other patterns that should have signalled
an
event’s likely occurrence.
ACCOUNTING
STANDARDS COMMITTEE
HOW TO RESPOND TO A BLACK SWAN EVENT
The catastrophic nature of a Black Swan event necessitates
a robust and flexible set of principles and protocols to
minimize its impact and enable a rapid recovery.
The principles and protocols presented in Ernst & Young’s
report released in August 2011 are based on lessons
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
learned from catastrophic events around the world and
provide a framework and guidelines that are readily
adaptable to changing circumstances so as to achieve an
effective response and the most favourable outcome. These
Marios Agathangelou
principles and protocols are designed to aid key
Chairman
managerial people within the organisation; this executivelevel involvement is necessary to provide a broad,
impartial perspective and to garner and coordinate the
COMMITTEE
deployment of necessary internal and external resources
for combating these significant events.
While any organization can face a Black Swan, those most
likely to be challenged include:
Zephyros
Tavern in Larnaca
the new director
of
ñ
State governments
and with
governmental
agencies,
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
including the military
ñ Nuclear power plants
2. On
May 2011 a seminar was co-ordinated at Sun Hall
ñ
Oil4refineries
Hotel
with a subject Field Audits from the
ñ
Oil in
andLarnaca
gas extractors
Inland
Revenue.
ñ Chemical plants
ñ Aerospace and defence companies
Panayiota Vayianou
Chairwoman
BLACK
SWAN RESPONSE PRINCIPLES
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
Underlying
effective
catastrophic-event
management
is a
AND
RISK
MANAGEMENT
COMMITTEE
set of broadly applicable principles. Applying these
throughout the event response will improve the overall
During These
the third
quarter
of 2011 the Corporate
outcome.
principles
include:
Governance,
Auditand
and communication
Risk Management
ñ
Definition, Internal
ownership
of
committee
has,
within
the
scope
of
its
terms
of
reference,
catastrophic-event response protocols: the time to
commenced
implementation
of its action management
plan and has
adopt andthetrain
on catastrophic-event
dealt
with theisfollowing:
protocols
before a Black Swan occurs. Doing so
enables organization leaders to calmly think through
ñ and
Worked
on the
development
of a survey
onresponse
Corporate
robustly
debate
the framework
for their
Governance.
The survey
will be sent toemergency
the listed
ñ Clearly
defined,
pre-established
companies ingoals
Cyprus.
Its results will be sent to all
management
and values
members. It is
also responders
envisaged to
that
results
be
ñ Empowerment
of local
takethe
action:
Local
presented experience
during a press
conference,
within
the
responders
an event
first hand and
in real
activities
planned
for
the
celebration
of
ICPAC’s
50th
time. These individuals often witness changes in
conditions that either warrant immediate action or
ñ provide
Worked on
white paper describing
the role,reduce
duties and
an aopportunity
to significantly
the
responsibilities
of theshould
following
departments
withinand
an
event’s
impact and
therefore
be enabled
organisation:to act
empowered
ñ Parallel planning and execution: Seldom does the first
ñ response
Risk Management
to a Black Swan terminate the event.
11
57
Institute News
ñ Internal
Audit backup plans are typically developed to
Consequently,
readdress accident conditions should the current
ñ Organisation
response fail.and Methods
ñ Inventories of financial, personnel, physical and
Theknowledge
white document
will be
circulated
to all
members
of
resources:
Effective
Black
Swan
response
typically
requires
significant
financial, and
human,
ICPAC
and will
help clarify
the boundaries
the
physical and
resources
interaction
of knowledge
these three
ñ Leverage of external perspective and experience: It is
organisation.
important for those responding to a Black Swan to be
receptive
to external
perspectiveswith
andtheprepared
to
ñ The
committee,
in collaboration
European
incorporate
these
into
the
event’s
management.
ñ “Auditing
Avoidance EU
of false
economy:
False
Funded
Projects”.
Theeconomy
seminar,is ina
primary
reason
organizations
don’t
plan
and
execute
coordination with the Education Committee,
is planned
response
options
in parallel. Developing and staging
for
September
2011.
multiple
responses
surelythe
elevates
costs.
But these
are
ñ The
committee
studied
European
Council
Green
often
pale
in
comparison
to
the
recovery
cost
for
an
accident that
expands
in duration
response
to the
questions
posed byand
thegeography
paper.
ñ The
Rejection
of
political
motivations:
All
organizations
committee has embarked on a study
of the
are political
to one
degree The
or objective
another ofand,
Institute’s
Governance
procedures.
the
unfortunately,
politics
can
influence
decisions
and
crisis response.
processes
which will incorporate best practices, at the
ñ same
Confrontation
of moral
ethical
dilemmas:
time recognising
theand
local
practicalities
and Moral
sizes.
and
ethical
dilemmas
require
decisions
to
be
based
on
well-grounded
values and initiatives
not on what
European
and International
withinisitslegally
scope
defensable
or
politically
expedient;
otherwise
organisation
runs the risk of damaging its reputation
Institute’s
magazine.
and adversely impacting its business operations for
periods
extending well beyond the disaster.
Panicos
G. Papamichael
ñ Consideration of contrarian challenges: To ensure a
Chairman
contrarian challenge, organizations should consider
appointingCRIME
a “devil’s
advocate”
who probes available
ECONOMIC
AND
FORENSIC
data
and
questions
the
consensus
response.
BLACKtheSWAN
RESPONSE
During
third quarter
of 2011,PROTOCOLS
the ECFA subcommittee
Black Swan response protocols provide a framework for
education committee and the IT committee on coaction that can be easily adapted to each unique situation.
Because Black Swans are unexpected, predefined
procedures are can often be of little value. Rather, what is
needed are protocols that guide response to these
catastrophic events. Key Black Swan response protocols
include the following:
ñ Event recognition: Effectively responding to a Black
Swan begins with the ability to quickly recognise and
report that one is occurring
ñ Organizational deployment: Rapid staffing of the
offsite event response organization is critical to early
the containment
title “Fraud:of The
under
eventauditor’s
conditionsresponsibilities
and minimization
of
ISA240”
and
the
second
by
a
well-known
UK
lawyer
adverse impacts. Also, the event response organization
O’Shea
on the Bribery
Act. The
UKeffective
Bribery Act will
mustEoin
be supported
logistically
to be
have
those doinga business
the
ñ Situation
assessment: on
Assembling
completein and
2
58
Catastrophic event management
UK accurate
or evensituation
those who
are doing
business
a UK
assessment
is never
easy. with
Emergency
company
outside
the
UK.
response managers must clearly understand the eventspecific issues faced and outcomes desired in order to
Maria
Krambia-Kapardis
effectively
select and execute appropriate actions.
Chairperson
ñ Alternative identification: Rarely does a single
decision option optimally address all issues of concern.
FINANCIAL
SERVICES
COMMITTEE
In the case
of Black Swans,
many initially selected
response actions fail. Consequently, response managers
Theshould
Financial
Services
Committee
monitors
developments
seek
to identify
a large
body of
alternatives
prioritized
for implementation
by their
in the
bank industry,
investment and
other estimated
financial
ability on
to ayield
a maximum
number
desired
operations,
domestic
level as well
as on aofEuropean
outcomes.
level.
It also keeps contacts with the regulatory bodies,
ñ Alternative
selection:
Faced
with(CBC),
credible
such
as the Central
Bank of
Cyprus
theoptions,
Cyprushigh
and
risks andExchange
limited resources,
the emergency
response
Securities
Commission
(CySEC) and
the
manager mustofcarefully
choose
the courseinof order
action to
to
Commissioner
Insurance
companies
be pursued.
Each response
alternative
should
be
exchange
views regarding
the industry,
as well
as other
evaluatedgroups
for its and
associated
risks and (for
consequences,
organized
associations
example
benefits, and
the organization’s
implementation
Association
of Cyprus
Commercial
Banks, Insurance
ñ Alternative
execution:
Effective and efficient
Association
of Cyprus
etc).
execution of the selected event response option is
critical
optimally
resolving
theyear
Blackthe
Swan.
During
thetosecond
quarter
of the
Committee
ñ Continuous
improvement:
Black Swan
monitored
the economic
crisisUnfortunately,
and its consequences
in
events
tend
to
continue
longer
than
desired,
and
the
consequences persist for days, weeks, or even months.
abroad.
Continuous improvement involves critical, ongoing
performance
assessment
of the
all Committee
levels of has
the
Below
are the main
topics that
organization
and
the
incorporation
of
lessons
learned
into decisions, procedures, and training and coaching
programs.
ñ Law
relating to Covered Bonds
The
Committee
studied the draft
legislation and directive
TRAITS
FOR EFFECTIVE
RESPONSE
which
discussed withofthe
of Cyprus.
Lastly,were
the characteristics
an Central
effectiveBank
response
include:
ñ Safety-conscious work environment
Following
the passing
of the legislation
by risks
Parliament,
ñ Appreciation
of the organization’s
unique
representatives
of
the
Committee
had
numerous
meetings
ñ Questioning attitude
with
representatives
of the Central
Bank
of Cyprus, during
ñ Willingness
to identify
and report
problems
which
various
concerns
of
ICPAC
were experience
discussed
ñ Openness to internal and external operating
regarding
the provisions of the Directive issued by the
and support
Central
Bank
of Cyprus
which affect
ñ Robust
technical
competence
at alldirectly
levels or indirectly
Black Swans will always be with us. They are unexpected
In
the report
to be prepared
by the regulator
of
andaddition,
sometimes
unavoidable
but sometimes
can also be
Covered
Bonds
discussed,
well as the
of the
predictable.
By was
applying
basicasprinciples
andissue
protocols,
independence
of the themselves
regulator. The
leaders can equip
to Committee
respond tohas
thedecided
Black
Swan.
while
actual
events ismay
never
exactly
that
theAnd
report
of the
regulator
to be
in the
form match
of an
what is developed
and practiced,
by undertaking
the
‘Agreed
Upon Procedures’
(‘AUP’).
As such, the
exercise, the
will be
better
equipped
to
Committee
willorganization
inform the Central
Bank
of Cyprus
of the
respond to
should
disaster
occur and
eliminate
orreport
at least
decision
circulate
an illustrative
example
of the
to
minimise
its impact;
or even eliminate the possibility of its
the
Institutes
members.
happening. ■
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
The maintenance of buildings
Institute News
An epidemic ofInstitute
badly maintained
buildings
News
It is common knowledge,
and an issue that has been
raised several times by our
Association; the appearance
andthe Council
condition
the
of theofInstitute
apartment
buildings
in
our
cities is dreadful.
Despite repeated efforts to
amend current legislation,
the
situation
of
the
maintenance and appearance
of our buildings is getting
By
George Mouskides
discussed
measures to be taken
for as
facing
problems
of
worse
timethe
goes
by.
Chairman,
Association
the Cyprus
economy.
for the Promotion of Property
This results in the loss of
Development Manager,
On
7
September
2011
Mr.
Christos
Senior
value
of Kyriakides,
the apartments
in
FOX Smart Estate Agency
Officer of the Institute, attended
Council
meeting
of the
the the
hands
of the
owners.
In
Mediterranean Federation of case
Accountants
Rome.to sell,
the ownerinwishes
the bad condition of the building will decrease its sales
price
if the2011
interior
the apartment
is atwell
On 13even
September
a pressofconference
was held
the
maintained
and
even
renovated.
It
also,
becomes
increasingly
difficult toThe
findpress
decent
tenants, was
if thegiven
owner
the Cyprus economy.
conference
by
wishes
to let the
their owners
to rent
the President
of apartment.
the InstituteThis
Mr.leads
Theodoros
Parperis.
at a much lower rate than the apartment is really worth.
What
are the most
common
in terms
of the
Mr. Theodoros
Parperis
and problems
the General
Manager
Mr.
maintenance of buildings?
In most apartment buildings, owners only pay communal
monthly charges for current expenses. Thus, they do not
create a fund for unexpected expenses. Therefore,
whenever an extraordinary expense arises there are not
enough funds to pay for it.
Such
expenses that
may be sizable
include the need to
ACCOUNTING
STANDARDS
COMMITTEE
insulate the roof, major repairs or replacing the elevator,
sorting
issues orthe
painting
the external
walls,
Duringout
thehumidity
last meeting
committee
studied
the
upgrading
the
lobby/entrance
area
etc.
When
required
expense
occurs, the
owners of the
mainlythe
to the
abolition
of the ‘corridor
method’.
building meet and after calculating the costs of the repair
work,
allocate
to each
one proportionately.
It also
initiated
a study
of FEE’s discussion paper
And
here
is
where
the
problems
begin.
if one of
the
‘Combined Financial Statements’.
TheEven
discussion
paper
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
tenants does not pay his share (not willing or not able),
then the repair is postponed and the operational problems
which
was published
in
the building
start. in April 2011 is open for comments
It is not exaggeration to state that the situation reaches the
Mariosthat
Agathangelou
point
certain apartment buildings have become
Chairman
dangerous to live in.
And this leads to a chain of effects. The building loses its
COMMITTEE
value and the rent for the apartments is reduced
considerably to attract tenants. Gradually less people are
willing to live in it and it slowly turns into a slum.
We cite one example to clarify the seriousness of the
problem. In an unmaintained apartment building with 2Zephyros Tavern in Larnaca with the new director of
bedroomed
apartments
in aMr
central
area
of Nicosia, the
Inland Revenue
of Larnaca
Marios
Kourouniades.
land value of each apartment is around €150.000 but each
apartment
has2011
a market
valuewas
of about
€100.000.
Thus
if
2. On 4 May
a seminar
co-ordinated
at Sun
Hall
the
owner
wants towith
sell the
apartment
he Audits
stands to
losethe
a
Hotel
in Larnaca
a subject
Field
from
considerable
amount of money. Ultimately, it pays the
Inland Revenue.
owners to demolish the building if it is not well
maintained.
Of course, this is usually impossible as one or
Panayiota Vayianou
more
owners object to demolition, thus everybody get
Chairwoman
stuck.
ANDAssociation
RISK MANAGEMENT
COMMITTEE
Our
has taken the initiative
to meet with all
relevant state and municipal authorities who have an
During inthe
third inquarter
2011thethe
Corporate
interest
the matter
order to of
improve
situation.
The
Governance,
Auditif and
Risk changing
Management
aim
is to findInternal
ways, even
it means
the
committee
has,
within
the
scope
of
its
terms
of
reference,
legislation, so that the state enforces the proper
commenced the
implementation of its action plan and has
maintenance
of buildings.
In addition, a process should be found by which owners
that deny payment of the communal charges are taken to
court and decisions issued very quickly. Also, ways must
be found to enable the Management Committee to impose
financial
penalties
on owners
whoconference,
fail to pay their
sharethe
of
presented
during
a press
within
the communal
maintenance
charges.
Ultimately,
matters
is for
solutions
to and
be
ñ Worked what
on a white
paper
describing
theand
role,ways
duties
found
to
end
the
unacceptable
state
of
the
buildings
responsibilities of the following departments within in
an
Cyprus
and especially the apartment buildings. For
organisation:
information please call 800 800 82. ■
ñ Risk Management
11
59
Institute News
ñ Internal Audit
The cost of living in Cyprus
Thieves and Thieves
within
and
Thefunctions
cost of living
in Cyprus
organisation.
is rated at a middle level
amongst the E.U. countries,
based with
on the
a European
common
Union Affairs committee,shopping
has designed
a
seminar
on
basket. Yet, the
The
seminar,
in
cost of living in Cyprus can
Committee,
is planned
be drastically
reduced
if one
for September 2011.
shops around. For those of us
who live here permanently, is
it easily said and done, but
for the visitors it is another
matter altogether, since they
do not know where to shop.
study isLoizou
By Antonis
In a recent visit at the
F.R.I.C.S. – Antonis Loizou & Paralimni area, a case of 6
Associates Ltd – Real Estate bottled water which costs in
Nicosia €2.20, at the local
Valuers & Estate Agents
kiosk it costs €2.70/6 bottles
we found out that from a local supermarket chain the cost
was €1.80/6 bottles!! This is just a start and if one
investigates the Paralimni (or other areas) market further,
more saving can be found and the food cost reduction can
Chairman
reach 10%-20% less from your ordinary shopping bill and
approximately 25% less from the high street kiosks
(periptero). In terms of drinks, prefer also the supermarkets
chains as opposed to liqueur stores, whereas wine shops
have a range of prices, but instead of having start up prices
of a good wine of say for €5/bottle, their minimum price is
€12.0/bottle. In terms of services, top of our thieving list
education committee and the IT committee on coare the taxis, followed by bar drinks which are charged
with a 200% mark up, whereas for the younger age and at
dingy places the quality of the alcohol is debatable. It is
advisable to check the price catalogue outside the
restaurants, but this is provided one is not harassed by the
waiter standing at the entrance (quite illegal). There is no
single place that one can shop for less all the items and this
makes life difficult. One supermarket chain, for a tin of
local beer had a price of less than 5% from another
supermarket chain, but it was more expensive for other
items. So, for those of us who live permanently here, it is
suggested to spend an initial investigating time and check
the prices of items that are used regularly, not only food
and drinks but cleaning chemicals, fruit (better
variety/quality from local fruit kiosks but more pricy) and
2
60
Chairperson
FINANCIAL
COMMITTEE
plan ahead so SERVICES
that you do not
shop from local kiosks. In the
Greek local press a comparative table is published from
The
Services Committee
developments
time,Financial
to time comparing
the variousmonitors
chain prices,
but these
in
the
bank
industry,
investment
and
other
tables are overall comparisons and not financial
itemized
necessarily. If one is to assume food/drink etc for a couple
living at home the cost is around €850/p.m., a saving of
€150/p.m.-€200/p.m. is not an amount to be ignored.
Using public services sparingly, such as electricity, is also
another source of saving. Use electricity at the spot where
it is needed and at the time that is needed. Using ceiling
fans instead of air condition is healthier and energy saving,
be it that there are times that heat and humidity needs the
A.C. to address it. Use your swimming pool pump during
the evening hours and garden lights where there are needed
etc etc.
During these difficult economic times that we are all
abroad.
experiencing, every bit of saving helps and we must
educate are
ourselves
to have
a programmed
list has
and
Below
the main
topics
that the shopping
Committee
behavior!! It will
takethe
youpast
2-3three
months
to know the “who is
concentrated
on over
months:
who” on prices and it can become even a sort of “game”
towards
goal. to Covered Bonds
ñ
Law arelating
Frozen
food should
not be
out right
since
The
Committee
studied
thediscounted
draft legislation
andalso,
directive
there are
savings
between
meatand
andcited
fish,itsmore
than
issued
by major
the Central
Bank
of Cyprus
opinions
50%
less
from
their
fresh
counterparts.
Continuingthe
ourpassing
living in
tips andbyfollowing
the
Following
of Cyprus
the legislation
Parliament,
summer holidayofspirit,
the following
was submitted
representatives
the Committee
hadrecipe
numerous
meetings
with
representatives
of the Central
Banktested
of Cyprus,
during
to this
column by a reader
and having
it, it can
be a
which
various light
concerns
of dinner.
ICPAC were discussed
most appetizing
lunch or
Central
which
indirectly
ñ GrillBank
slicesofofCyprus
halloumi
untilaffect
theydirectly
becomeorbrown
(one
ordinary
halloumi
makes 3 slices)
members
of our
Institute.
ñ Cut pitta bread in 4 pieces
ñ addition,
Cut tomatoes
in slices
In
the report
to be prepared by the regulator of
ñ Place Bonds
the cooked
halloumi inasthe
pittaastogether
the
Covered
was discussed,
well
the issuewith
of the
tomato
and
grill
the
pitta
until
it
becomes
crunchy
PreferablyUpon
done on
charcoal, but
it is more
expensive,
‘Agreed
Procedures’
(‘AUP’).
As such,
the
messy
and
time
consuming,
but
then
more
tasty.
Doofitthe
on
Committee will inform the Central Bank of Cyprus
your electric
grill if an
youillustrative
so wish. Cost
for 2ofpeople
(being
decision
to circulate
example
the report
to
on aInstitutes
cost saving
route) approximately €3.0 for both, plus a
the
members.
bottle of white/red wine or beer say €10/both!! ■
1
Institute News
Time management tips
Do you have theInstitute
time forNews
“time management
skills”? – Tips for better time management
for the busy professional
Do you feel stuck in projects,
overwhelmed by responsiand to the profession at large. Other issues dealt with were,
bilities, and being under
pressure by the lack of time
to do everything you want
to? If so, you're not alone. A
growing number of people
share the same feelings as
you do. They feel their life is
By
theDemetris
Cyprus Stylianides
economy.
out of control because there
DipLC, CTM, CL, FAIA,
aren't enough hours in the
FCCA,
On 7 CPA,
September 2011 Mr. Christos Kyriakides, Senior
Certified Trainer of NLP
day to get everything done.
More and more people are
saying, "I just don't have any time." Time is important! By
recognizing what it stands for in managing the clock as
well as your people, you will achieve success in practicing
your skills innovatively, within a working environment
that is efficient and cost effective.
After careful consideration, there are two obvious contraOn 22 and 23 September 2011 the President of the Institute
dictions. First, as long as we are alive, how can we say we
have no time? Life is time and if we are alive, we have
time so the problem is not the absence of time, but how we
choose to use it.
The second contradiction is while men and women complain about how little time they have, they simply waste it.
How
can we use time by wasting
it and later complain that
COMMITTEESʼ
ACTIVITIES
we have not achieved the level of success we had hoped
ACCOUNTING
COMMITTEE
for?
If we wish to STANDARDS
feel in control and
enjoy all the benefits
of life, we will have to change our attitude toward time.
amendments in OF
IAS1
relating
to MANAGEMENT
changes in the
ADVANTAGES
GOOD
TIME
SKILLS
If time management didn’t have any advantages you
wouldn’t do it. It would be wasting time and that is not
what you are trying to accomplish.
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
Marios Agathangelou
Chairman
COMMITTEE
Time management increases your motivation. That’s a big
Inland Revenue.
advantage. Why do you feel like you are going through the
motions
every
day? You don’t need motivation to live your
Panayiota
Vayianou
life
on auto-pilot. Once you see how your productivity
Chairwoman
increases, you are motivated to keep using time management
tools and share
them with everyone
you know.AUDIT
CORPORATE
GOVERNANCE,
INTERNAL
A happy family is another advantage. Are you sacrificing
organisation:
ñ Risk Management
11
61
Institute News
ñ
Internal
your
familyAudit
for your business? The two can co-exist peacefully. You can find the balance through time management.
ñ
Organisation
and
Methods
Your
business will
take
off in many ways. Now, you might
undertake one project a week depending on the nature of
your business. After implementing some time management
processes your productivity could double or even triple.
organisation.
Time management can be learned by anyone. All it takes is
a willingness
to get your
life in order. with
That isthehalf
the batñ
The committee,
in collaboration
European
tle Union
right there.
Once
you decide
your alife
needs on
to
Affairs
committee,
has that
designed
seminar
change
so thatEU
youFunded
can stopProjects”.
putting off
until
tomorrow
“Auditing
The
seminar,
in
what
you
didn’t
have
time
to
do
today,
the
benefits
to
your
for September 2011.
The second contradiction is while men
and women
complain
about
response
to the questions
posed
by the how
paper. little
time they have, they simply waste it. How
can we
use
timethebyInstitute
wasting
it andgovernance
later
study
is to
assist
develop
processes
practices,the
at the
complainwhich
thatwill
weincorporate
have notbest
achieved
levelcommittee
of success
we had hoped
for?closely
If we all
ñ The
has continued
to monitor
European
within
scope
wish to and
feelInternational
in controlinitiatives
and enjoy
allitsthe
benefits magazine.
of life, we will have to change our
Institute’s
attitude toward time.
Chairman
life will be amazing. You’ll wonder why you didn’t implement time management techniques sooner.
What follows is a list of things you can do, or avoid doing,
to align you with the true nature of time. We won't be able
to master
timeseminars
until we had
understand
it better, sowith
let's the
go
on
organizing
been collaborating
through thecommittee
list:
education
and the IT committee on coorganising two seminars. One on fraud detection utilizing
1. First
be other
honestonwith
to say
"I
IT
and the
fraudyourself.
detectionFor
andexample,
prevention.
Both
don't
have
the
time
to
do
that"
is
dishonest.
If
we
were
truthful, we would say, "I am unwilling to take the time
The
1 Issue
1 was emailed
to all
and ECFA-ebulletin
make the effort Volume
to do that."
Consider
the results
of
ECFA-SIG
(special
interest
group)
and
members
had
being honest or dishonest. When we say "I don't have the
provided
feedback
onadopt
this initiative.
time." wepositive
feel powerless
and
a victim mentality. We
end up avoiding responsibility and taking the easy way
out. This is the path that leads to failure. Yet, when we are
honest and say to ourselves, "I'm not willing to do that",
we place ourselves in a more powerful position because we
are reminding ourselves that we are using the power of
choice. We
O’Shea
Eoinare
onnot
thevictims,
Bribery but
Act.decision
The UKmakers.
BriberyAnd
Act "I'm
will
not
willing
to
do
that"
can
quickly
become
"I'm
not
willing
2
62
Chairperson
to do that yet", and it can later become, "Now that I have
considered the benefits, I'm willing to do that."
2. We alwaysoffind
the time
to do whatBanks,
we want.
But the
Association
Cyprus
Commercial
Insurance
problem is we
are tornetc).
between two wants, what we want
Association
of Cyprus
now and what we want in the future. The reason is because
our brainthe
is hardwired
to seekofoutthe
pleasure
and Committee
avoid pain.
During
second quarter
year the
monitored
the aeconomic
crisis to
andbeitstheconsequences
in
For example,
student wants
best in school
regards
allwill
areas
of to
economic
activities
in Cyprusthere
and
because to
that
lead
a successful
life. However,
abroad.
is a conflict between the desire to party with his friends
now (the pleasure part) and the desire to study hard, which
Below
are inthefuture
mainjoytopics
that the Committee
has
will result
and immediate
`pain' (the hard
work part). The first step in overcoming this dilemma is to
be aware of it. The second step in overcoming temptation
is to focus on the pleasure of our future success rather than
the present 'pain” and the third step is to take action,
because
we do Bank
so, weofwill
discover
that the
task was
issued
bywhen
the Central
Cyprus
and cited
its opinions
not as were
difficult
as we had
it would
which
discussed
withimagined
the Central
Bank be.
of Cyprus.
3. We cannot
time,
can saveby
it. One
way to
Following
thecreate
passing
of but
the we
legislation
Parliament,
do so is by doing
ourCommittee
job correctly
first time.
When
representatives
of the
hadthe
numerous
meetings
with
of the
Central
Bank ofthey
Cyprus,
during
somerepresentatives
people are faced
with
the mistakes
made,
they
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
give the excuse of “I didn't have the time to do it properly”.
If they don't have time to do their job properly, will they
ever find the time to correct their mistakes? As humans, we
will make mistakes, but we need to learn from them.
Repeatedly making the same mistakes is a waste of time.
ance. To get all there is out of living, we must use our time
wisely, never being in too much of a hurry to stop and
enjoy life, but never losing our sense of the enormous
value of a minute.
Institute News
4. Don't pretend you're going to live forever or that you
have an unlimited supply of time. You don't. Some people
say time flies, but it is not time but ourselves that fly! Here
today, gone tomorrow. Others don't mind killing time,
unaware that time is killing them. But because there's so
little time, like gold or diamonds, it is precious. Value it.
Cherish it. Wasted time is worthless whereas time that is
carefully used has the power to change, transform, and
develop our lives.
5. Focus your attention on one task at a time. When you try
to do too many things at once, nothing gets done.
the Cyprus economy.
After careful consideration, there are two
obvious
contradictions.
First,
as meeting
long asof the
Officer
of the Institute,
attended the
Council
Mediterranean
Federation
of Accountants
Rome.no
we are alive,
how can
we say weinhave
time? Life is time and if we are alive, we
have time so the problem is not the
absence of time, but how we choose to
it. of the Institute Mr. Theodoros Parperis.
theuse
President
6. Take advantage of spare moments to do the things you
love doing but never get the time for them.
7. Use time wisely. For instance, use it to become a better
person. Since time is an intangible object which we cannot
influence, neither speed up nor slow down, it is a valuable
gift. Each of us has a few minutes a day or a few hours a
week which we could volunteer to help for a good cause or
for
charitable purposes.
As an added
bonus, when we
ACCOUNTING
STANDARDS
COMMITTEE
spend time on improving ourselves, it is time not spent on
disapproving
others.
During the of
last
meeting the committee studied the
presentation
financial
statements
andpast.
IAS19
8.
Don't spendofyour
time worrying
for the
Not relating
only is
abolition
of the ‘corridor
amainly
waste to
of the
time,
but it prevents
us frommethod’.
acting in the present and thereby degrades our future.
‘Combined
discussion
9.
The key toFinancial
masteringStatements’.
time lies in The
finding
the rightpaper
bal-
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104 ñ SEPTEMBER 2011
ACCOUNTANCY
10. When we procrastinate, we make the mistake of believing that this moment is not particularly important because
we can always postpone our task to a later date. This way
of thinking is a waste of time. Does it make any sense to
postpone
life? Of course not. The master of time underMarios Agathangelou
stands
that this present moment is a critical one and to
Chairman
ignore it is to walk away from opportunity and life.
COMMITTEE
11.
Start early during the day. If you wake up at 6:00 and
go to the gym for an hour and then to work until 5:00, you
During
thethe
third
2011 the Committee
out
still
have
restquarter
of theofafternoon
and eveningcarried
for your
the
following
activities:
family and your hobbies. A little change can make a big
difference in life.
12. Don't waste time by trying to stretch time. Reading
book after book on time management is time better spent
on getting things done. Sometimes research on a cure for a
problem
really an
excuse
for procrastination
Hotel in isLarnaca
with
a subject
Field Audits that
fromonly
the
further
delays
the
cure.
Inland Revenue.
13.
Prioritize.
Do what is most important first. By not
Panayiota
Vayianou
doing
so is a waste of time.
Chairwoman
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
14.
We need to balance
work with play,
so take time
for
AND
RISK
MANAGEMENT
COMMITTEE
recreation. Any time you enjoy wasting is not wasted time.
People who cannot find time for recreation, sooner or later
During
the for
third
quarter of 2011 the Corporate
will
find time
illness.
CONCLUSION
dealt with
the following:
Time
management
is important for a well-balanced life.
Juggling family and work is a constant concern. But, both
ñ Worked
on the
of a survey
on Corporate
can
have their
timedevelopment
in the spotlight
with effective
time
Governance.
The
survey
will
be
sent
to
the
listed
management. Each day has 24 hours. You get no more and
no less. How you use that amount of time makes all the difmembers. It is also envisaged that the results be
ference to your life. You can create a happy family, a growpresented during a press conference, within the
ing business and realize personal goals during that time if
you really want to change your life. Time management
takes
time, though.
It may
be weeks,
months
ñ Worked
on a white
papernot
describing
thebut
role,
dutiesand
and
yearsresponsibilities
to get all of of
your
needs
and
wants
satisfied.
But,
the following departments within an
every
step of the way, there will be tangible benefits to
organisation:
show that you are progressing in the right direction. Pull
ñ that
Riskcalendar
Management
out
and get the ball rolling today! ■
31
63
Institute News
ñ Internal Audit
Auditing in Cloud Computing
Contemporary Auditing
in Cloud Computing Environments
Christina A. Nicolaou,
KPMG
Cyprus
interaction
of these
three
organisation.
George D. Nicolaou, Director, KPMG Cyprus
Chairperson
Andreas
I.
Nicolaou,
Owens-Illinois
Chaired
Professor,
Bowling
Green
State University,
USA
operations,
on a domestic
level as well as on a European
Editor-in-Chief, International Journal of Accounting Information Systems
for September 2011.
ñ
The
committee
studied
the
European
Council
Green
Commissioner
Insurance
companies
to
opportunities forofcloud
computing
users, theinuseorder
of such
CONTEMPORARY AUDITING IN CLOUD
Paper
on
Corporate
Governance
and
submitted
its
exchange
views
regarding
the
industry,
as
well
as
other
emergent technology also implies a number of significant
COMPUTING ENVIRONMENTS
organized
groupsveryandimportant
associations
(for example
risks that have
implications
for the
Association
of
Cyprus
Commercial
Banks,
Insurance
effectiveness of internal controls in user companies of
Advances in information technology (IT) have enabled
Association
of and
Cyprus
cloud services
mayetc).
thus significantly impact the nature
many companies to enter the digital data storage and
of an external auditor’s work. It is for these reasons that it
processing
withwill
almost
all business
processes at
being
processesera,
which
incorporate
best practices,
the
is so important for auditors to understand this technology
supported
by recognising
IT-enabled applications.
This is even
more
same time
the local practicalities
and sizes.
and take precautions in ensuring audit work under these
trueThe
with
the widespread
use ofto enterprise
resource
ñ
committee
has continued
monitor closely
all
European
and systems,
International
scope
conditions is still of a high quality. The following
planning
(ERP)
suchinitiatives
SAP and within
Oracle,itswhich,
abroad.
domain
and tocontinued
articles
the
discussion presents some of the most important control
while
unknown
most eventoa contribute
few years back,
theytohave
Institute’s
magazine.
issues and
that are
present
a cloud
computing
now become part of the standard vocabulary of almost
Below
are risks
the main
topics
thatinthe
Committee
has
every controller, operating officer, and auditor alike. With
such widespread use of IT in business organizations,
Chairman
typical business applications of the past can now be
environment and
discusses
advancements
in audit methods
concentrated
on over
the past
three months:
and standards as a response to these increased audit risks.
handled by emergent and more sophisticated technology
solutions. Many companies
now see a tremendous increase
ACCOUNTING
(ECFA) COMMITTEE
in their capital budgets for IT, which always raises
WHAT IS CLOUD COMPUTING
In the past few years, almost everyone using a Yahoo or
Gmail email account has in fact used cloud computing. It
questions
thequarter
return of
these investments
and to what
During
theon
third
of 2011,
the ECFA subcommittee
extent
emergingseminars
and innovative
solutions
can free with
up much
on
organizing
had been
collaborating
the
education
committee
the ITyears,
committee
on coneeded capital
resources.and
In recent
the introduction
organising
two seminars.
Onepossible
on fraudthe
detection
utilizing
of cloud computing
has made
use of shared
IT
IT
and
the
other
on
fraud
detection
and
prevention.
Both
services through the internet, without having to invest in a
will
offered before
end of the
year. and software,
largebeinfrastructure
ofthe
computing
hardware
thus providing a solution to the underutilization of
expensive IT resources.
This essay reviews the emerging technology of cloud
computing
in are
a non-technical
andofexamines
issues
Finally,
there
two articles inmanner
this issue
“Accountancy
that ariseinintheauditing
a company’s
cloud-based
systems.
Cyprus”
ECFA column.
The first
one is authored
by
Since
cloud
computing
applications
can
be
shared
and
usedtitle
on demand,
companies
to reduce
the
the
“Fraud: they
The enable
auditor’s
responsibilities
under
ISA240”
secondand
by processing,
a well-known
lawyer
costs of and
data the
storage
in UK
addition
to
O’Shea
onof
thethe
Bribery
The UK
Bribery
Act will
relievingEoin
them
need Act.
for large
capital
expenditures
have
serious
implications
doing business
in the
(Marston
2011).
While allonofthose
the above
present unique
2
64
is location-independent, web-based computing, utilizing
shared virtual servers,
on an as needed
basis. Users
pay for
representatives
of the Committee
had numerous
meetings
usagerepresentatives
and thus the of
cloud
computing
provides
for
with
the Central
Bankmodel
of Cyprus,
during
elasticityvarious
in services
and expandability
use. discussed
Since the
which
concerns
of ICPAC in
were
1960s, forethethinkers
of computing
models issued
predicted
regarding
provisions
of the Directive
by that
the
Central
Bankmay
of Cyprus
directly orasindirectly
computing
at somewhich
time affect
be organized
a public
members
of our
Institute. gas, water, and the telephone
utility, next
to electricity,
(Anthes, 2010). For instance, when a company or an
In
addition,needs
the report
to be prepared
regulator
of
individual
electricity,
they “paybyasthe
they
go.” This
Covered
Bonds
was
discussed,
as
well
as
the
issue
of
the
allows unlimited access to a seemingly unlimited amount
of the utility, while only paying for what is being used.
Recent estimates claim that a traditional standalone IT
system rarely uses more than 20%, and as little as 5% of its
processing
capabilities
at any particular
time
et
decision
to circulate
an illustrative
example
of(Armbrust
the report to
al.,
2010).
Cloud
computing
allows
service
providers
to
share their computing resources with many subscribers,
1
Institute News
improving utilization rates and reducing costs. Some
experts predict that as much as 90% of the world’s
computing and data storage will be done via the cloud in
five to ten years, while cloud computing applications are
predicted to experience a five-fold growth in the next five
years (Hawser 2009).
heavily dependent on cloud vendors, it seems crucial that
they review the service level agreements (SLAs) with
vendors. SLAs specify specific policies followed by a
vendor and the rights of the user. Some important aspects
that should be reviewed include the following:
- Performance measurement, including requirements for
availability of service (expected uptime), speed of
transaction response, and issue resolution times. These
are critical
issues, as non-availability of service might
Marios
Agathangelou
also involve data losses and disruption in data transfers.
Chairman
Institute News
Today, cloud computing offers three different service
models (Marston 2011), including: (a) Software as a
service (SaaS), where users share software applications on
the cloud and do not need to install and run applications on
local computers; e.g, personal applications such as Gmail
and enterprise applications such as the Salesforce.com
sales management application; (b) Platform as a Service
(PaaS) where users deploy applications they created or
acquired on a provider’s cloud infrastructure, using the
provider’s underlying data center, network, operating
systems and database management systems. Users have
the Cyprus economy.
control over their data and applications but do not need to
maintain the underlying platform (e.g., Google’s App
Engine and Amazon’s elastic compute cloud (EC2)
computing platform); and (c) Infrastructure as a Service
(IaaS) where sophisticated users have control not only over
their data and applications, but also the underlying systems
software and manage their own databases. This model can
best be used, for example, as shared commercial hot sites
for disaster recovery. Small and medium enterprises would
be expected to mostly utilize the SaaS service model,
which requires the least amount of in-house expertise, but
the same time, relinquishes the most control to the cloud
vendor. The audit of information that is based on these
systems, therefore, needs to consider these risks. The
following section presents these issues in some detail.
SECURITY RISKS ASSOCIATED WITH CLOUD
COMPUTING
In cloud environments, important risks relate to user
authentication,
data
breaches, and
data privacy (Raval
ACCOUNTING
STANDARDS
COMMITTEE
2010). Most importantly, a cloud provider should also
adopt
for the
key management
to encrypt
Duringadequate
the lastpolicies
meeting
committee studied
the
data
both duringintransmission
as welltoas during
storage
on
amendments
IAS1 relating
changes
in the
presentation
of financial
statements
andpolicies
IAS19 for
relating
the
cloud. Providers
should
also adopt
the
mainly
to the abolition
of the
‘corridor
strict
maintenance
of audit
trails,
so asmethod’.
to enable control
and privacy of a company’s data (Owens, 2010).
‘Combined
Financial
The discussion
paper
As
companies
adoptingStatements’.
a cloud environment
seem to
be
2
-LARNACA
Policies and
requirements CO-ORDINATING
for designing controls to
– FAMAGUSTA
COMMITTEE
protect the confidentiality, integrity and availability of
a company’s data stored on the cloud. This may include
During
the third quarter
of 2011 the assessments,
Committee carried
a requirement
for third-party
such out
as
thethose
following
activities:
performed in the context of an audit of
outsourcing functions to an independent provider (in
the USA, such audits are done under the umbrella of
Statement on Auditing Standards –SAS- No. 70).
- Policies and requirements as to how data should be
stored
and encrypted,
has access
to data,from
policies
Hotel
in Larnaca
with awho
subject
Field Audits
the
for
disaster
recovery,
data
retention
and
destruction.
Inland Revenue.
While
companies
might be eager to use cloud computing
Panayiota
Vayianou
to
reduce capital costs, eliminating the need for a complex
Chairwoman
computing infrastructure while enlarging computing
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
power
and capacity,
they should not
ignore these
very
AND
RISK
MANAGEMENT
COMMITTEE
significant risks regarding the integrity, confidentiality of
the data they store and process on the cloud.
INFLUENCE OF CLOUD COMPUTING ON THE
AUDIT PROFESSION
Since outsourcing IT functions to cloud providers poses
several
risks,onit the
alsodevelopment
creates difficulties
for auditors
who
ñ Worked
of a survey
on Corporate
are trying
to assess
thesurvey
controlswill
of abe
client
In a
Governance.
The
sentcompany.
to the listed
cloud
environment,
it is often
unknown
datato are
companies
in Cyprus.
Its results
willwhere
be sent
all
being
stored It(i.e.,
theirenvisaged
physical that
location),
which
members.
is also
the results
be
presented issues
during ofa legal
press jurisdiction
conference, within
the
complicates
over data
activities
planned
for
the
celebration
of
ICPAC’s
50th
protection and confidentiality. Even worse for auditors is
that professional organizations, such as the AICPA and
ISACA, still have not defined “cloud audit requirements,”
although progress is being made in this area (Rapp 2010).
organisation:
The
AICPA’s
Statement on auditing standards (SAS) No.
ñ Risk
Management
1
65
Institute News
ñ
70, Internal
specifiesAudit
the required audit steps when auditing service
organizations, or vendors who outsourced aspects of a
ñ
Organisation
MethodsSAS 70 provides a standard
client
company’sand
operations.
by which service organizations can demonstrate the
effectiveness of their internal controls without having
every client company perform an audit on their operations.
Under this standard, a certified independent service auditor
organisation.
(such as KPMG) performs an audit and issues a report that
is shared
with the audit
of the service
organization’s
ñ
The committee,
in teams
collaboration
with the
European
clients.
These
reports
provide
evidence
over
any
aspects
of
for September 2011.
In cloud environments, important risks
relateon to
user Governance
authentication,
data its
Paper
Corporate
and submitted
breaches, and data privacy
financial
processing
reporting
have atbeen
processes
which willand
incorporate
bestthat
practices,
the
outsourced.
Recently,
the
AICPA
has
modified
SAS
70,
same time recognising the local practicalities and
sizes.
andThe
created
the Statement
on Standards
for Attestation
ñ
committee
has continued
to monitor
closely all
Engagements
(SSAE)
No. 16, which
provides
guidance
for
European and
International
initiatives
within
its scope
domain on
and controls
continuedforto the
contribute
to the
reporting
partiesarticles
involved
in
Institute’s(Sherinsky
magazine. 2010), with an effective date after
outsourcing
the 15th of June, 2011.
Chairman
Under SSAE No. 16, external auditors are required to
assess both their client’s and the vendor’s effectiveness of
control implementation (Statement 2010). There are
currently two options for completing this evaluation. The
first is that the auditors can actually evaluate the controls
of the
vendor themselves
(Statement
2010). As previously
on
organizing
seminars had
been collaborating
with the
mentioned, committee
this optionand
maythe
be IT
rejected
by theoncloud
education
committee
coproviders
due
to
service
disruptions
and
privacy
concerns.
Theand
second
option
to have
the vendors
be audited Both
once
IT
the other
onisfraud
detection
and prevention.
and
then
reproduce
reports
that
are
distributed
to
the
external auditors of the companies using the provider’s
The
ECFA-ebulletin
VolumeIn1 addition,
Issue 1 was
all
services
(Statement 2010).
the emailed
auditors to
must
ECFA-SIG
(special
interest
group)
and
members
had
receive, from the vendor’s management, a written
provided
feedback
this initiative.of the control
statementpositive
representing
theoneffectiveness
system they use during the period being audited (Statement
2010).
Further, in response to the complexity of issues
specifically involved in cloud computing environments,
the AICPA
the “Service
Control
O’Shea
Eoinhas
oncreated
the Bribery
Act. TheOrganization
UK Bribery Act
will
Reports”
(SOC)
to
assist
auditors
in
examining
a
cloud
2
66
UK
or eveninternal
those who
are (Defelice,
doing business
a UK
provider’s
controls
2010).with
There
are
company
outside
the
UK.
three types of these review reports which offer guidelines
that independent assurance providers can use to assess the
effectiveness of a cloud service provider.
Chairperson
The first type of review report, AICPA SOC 1, evaluates
the effectiveness of the provider’s controls over financial
reporting
(Defelice,
2010).
This is monitors
specifically
intended to
The
Financial
Services
Committee
developments
meet
needs
of userinvestment
entities’ management
their
in
thethebank
industry,
and other and
financial
auditors, asonthey
evaluatelevel
the as
effect
at the
operations,
a domestic
wellof
as controls
on a European
serviceIt also
organization
on the
user
level.
keeps contacts
with
the entities’
regulatoryfinancial
bodies,
such
as theassertions.
Central Bank of Cyprus (CBC), the Cyprus and
statement
Commissioner
companies
in order
to
The AICPA SOCof2 Insurance
report (under
development)
provides
exchange
views
regarding
the
industry,
as
well
as
other
assurance over a cloud provider’s controls “relevant to
security, availability, processing integrity, confidentiality,
and privacy of data and systems” (Defelice, 2010). This
report is intended for users that have a thorough
understanding of the service organization and its internal
controls. These
reports cancrisis
formand
an important
part of the
monitored
the economic
its consequences
in
users’
oversight
of
the
service
organization;
vendor
management; and internal corporate governance and risk
abroad.
management.
concentrated
on AICPA
over theSOC
past3,three
months:
The last report,
provides
companies with a
more basic assessment of the cloud provider’s security,
ñ
Law relating
Covered
Bonds
privacy,
integrity,to and
confidentiality
(Defelice 2010).
These reports are designed to meet the needs of users who
demand assurance on the controls at a service organization
related to security, availability, processing integrity,
confidentiality, or privacy but do not need the level of
detail provided
in a SOC
2 Report.
These
reports are
Following
the passing
of the
legislation
by Parliament,
general use reports
andCommittee
can be freely
posted
representatives
of the
haddistributed
numerous or
meetings
on
a
website
as
a
seal
of
assurance
(similar
to
a
SysTrust
web assurance
which
variousseal).
concerns of ICPAC were discussed
Central
Bankaccountants
of Cyprus which
affect directly
or indirectly
Independent
and auditors
are therefore
poised
members
of
our
Institute.
to be key players in providing assurance over the controls
adopted by cloud service providers. As cloud computing
expands, many more user companies will require these
reports. Auditor responsibilities will thus expand at the
same time as there is a need to review the adequacy of
controls used
by cloud
computing
providers.AsWith
so many
‘Agreed
Upon
Procedures’
(‘AUP’).
such,
the
small and medium-sized
companies
expected
to adopt
Committee
will inform the
Central Bank
of Cyprus
of this
the
emerging
technology,
“auditing
in
the
cloud”
will
decision to circulate an illustrative example of the report be
to
ingrained
in the
vocabulary of every auditor in the not too
the
Institutes
members.
distant future. ■
3
Capitalize on the opportunity brought by a crisis
Institute News
Crisis =(Danger
Opportunity) /
Institute+News
Self knowledge: an homage to steve jobs
As this article
is written at
the end of summer with the
the Council
of pounded
the Institute
Cyprus
economy
by
met four times and considereda matters
of
interest
to
ICPAC
crisis brought on by
and to the profession at large.economic
Other issues
dealtand
witha were,
woes
vast
among others, the following:vacuum in political, business
and personal leadership,
there isofhope.
the Institute headed
character and
for
new Minister of Finance,The
Mr. Chinese
Kikis Kazamias
crisis,
as seen
the title
for facing
the in
problems
of
above,
is
the
combination
of
the Cyprus economy.
danger and opportunity.
By Marina Theodotou*
Surely, we’ve all seen and heard this several times. Seeing
the components of a crisis is not enough. An ingredient is
missing; we need an ingredient to instill hope, manage the
danger and capitalize on the opportunity. That ingredient is
self knowledge. As highlighted by our ancestor Socrates
thousands of years ago, self knowledge brings clarity of
the Cyprus
economy.
press
conference
wasability
given by
thought
which
in turn, The
brings
hope
through the
to
the President
of the Institute
Mr. Theodoros
Parperis. and
manage
and mitigate
the danger
while recognizing
capturing the opportunity to learn, to grow and rise above
On 22
and 23InSeptember
2011expanded
the President
of the Institute
the
danger.
our simple,
equation,
as the
Mr.
Theodoros
Parperis
and
the
General
Manager
Mr.
denominator of self knowledge increases, crisis decreases.
Theodoros
Philippou
a meeting of the
Self
knowledge
can attended
lead to professional
and Presidents
personal
leadership.
Speaking
of professional
the General
Assembly. leadership, one way to measure it
is by market value. On Aug. 26, 2011, Apple Inc. (AAPL)
became the most valuable publicly traded company in the
COMMITTEESʼ
ACTIVITIES
world,
with a market value
of $355.61 billion, surpassing
Exxon Mobil, the number 2 most valuable company with a
ACCOUNTING
STANDARDS
COMMITTEE
market
value of $353.18
billion. Not
bad for a company
started in 1975 by two guys in a home garage.
amendments
in inIAS1
relating
to changes
the
One
of those guys
that garage
was someone
by theinname
presentation
relating
of
Steve Jobs.of
Onfinancial
Aug. 24, statements
2011, Steveand
JobsIAS19
resigned
from
mainly
to
the
abolition
of
the
‘corridor
method’.
his CEO post at Apple Inc. Today, Steve Jobs perhaps
personifies how self knowledge can indeed manage the
It also capitalize
initiated on
a the
study
of FEE’sbrought
discussion
paper
danger,
opportunity
by a crisis,
‘Combined
Financial
Statements’.
The professional
discussion paper
rise
above and
lead with
innovative
and
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
personal leadership along with a capable team, to
transform our lives and our perception of information,
music, and the world through the i-macs, i-pods, i-phones
Marios Agathangelou
and i-pads in our possession.
Chairman
But
how can we
get to self knowledge?
LARNACA
– FAMAGUSTA
CO-ORDINATING
COMMITTEE
In honor of perhaps one of the greatest innovators and
leaders
time,
I would
like the
to simply
sharecarried
with you,
During of
theour
third
quarter
of 2011
Committee
out
atheblueprint
self-knowledge, and without additional
followingforactivities:
comment, the text of the memorable Commencement
Address
Jobs2011
gavethe
at Stanford
University
1. On 13Mr.
April
committee
organisedona June
lunch12,
at
2005
(also
available
live
on
www.ted.com
and
on
www.Stanford.edu).
“I
am4 May
honored
be with
you today at at
2. On
2011 atoseminar
was co-ordinated
Sunyour
Hall
Hotel in Larnaca
with
subject
Fielduniversities
Audits from
the
commencement
from
onea of
the finest
in the
Inland IRevenue.
world.
never graduated from college. Truth be told, this
is the closest I’ve ever gotten to a college graduation.
Panayiota
Vayianou
Today
I want
to tell you three stories from my life. That’s
Chairwoman
it.
No big deal. Just three stories.
CORPORATE
GOVERNANCE,
INTERNAL AUDIT
THE
FIRST STORY
IS ABOUT CONNECTING
THE
AND
RISK
MANAGEMENT
COMMITTEE
DOTS.
of 2011
Corporate
IDuring
dropped the
out ofthird
Reed quarter
College after
the firstthe
6 months,
but
Governance,
Internal
Audit
and
Risk
Management
then stayed around as a drop-in for another 18 months or
so before I really quit. So why did I drop out?
It started before I was born. My biological mother was a
young, unwed college graduate student, and she decided to
put me up for adoption. She felt very strongly that I should
be adopted by college graduates, so everything was all set
for me
to be adopted
at birth
by a lawyer
andresults
his wife.
members.
It is also
envisaged
that the
be
Except
that
when
I
popped
out
they
decided
at
the
last
minute
that they
reallyfor
wanted
a girl. So of
myICPAC’s
parents, 50th
who
activities
planned
the celebration
were on a waiting list, got a call in the middle of the night
asking:
“Weon
have
an unexpected
baby the
boy;role,
do duties
you want
ñ Worked
a white
paper describing
and
him?”
They
said:
“Of
course.”
My
biological
mother
later
found
out that my mother had never graduated from
organisation:
college and that my father had never graduated from high
ñ RiskShe
Management
school.
refused to sign the final adoption papers. She
11
67
Institute News
ñ
Audit
onlyInternal
relented
a few months later when my parents
promised that I would someday go to college.
And 17 years later I did go to college. But I naively chose
The
whitethat
document
will as
beexpensive
circulatedastoStanford,
all members
of
a college
was almost
and all
ICPAC
and
will
help
clarify
the
boundaries
and
the
of my working-class parents’ savings were being spent on
interaction
of these
functions
withinsee and
my college tuition.
Afterthree
six months,
I couldn’t
the
organisation.
value in it. I had no idea what I wanted to do with my life
and no idea how college was going to help me figure it out.
ñ
in collaboration
withmy
theparents
European
AndThe
herecommittee,
I was spending
all of the money
had
saved their entire life. So I decided to drop out and trust
that it would all work out OK. It was pretty scary at the
time, but looking back it was one of the best decisions I
for September 2011.
ever made. The minute I dropped out I could stop taking
the required classes that didn’t interest me, and begin
dropping in on the ones that looked interesting.
It wasn’t
all romantic.
I didn’t
have a dorm
room, so Iofslept
Institute’s
Governance
procedures.
The objective
the
on study
the floor
in
friends’
rooms,
I
returned
coke
bottles
for
the processes
5¢ deposits
to
buy
food
with,
and
I
would
walk
the
which will incorporate best practices, at the7
miles
across
every the
Sunday
night to get and
one sizes.
good
same
time town
recognising
meal
a
week
at
the
Hare
Krishna
temple.
I
loved
it.
ñ The committee has continued to monitor closelyAnd
all
much
of whatand
I stumbled
into initiatives
by following
my its
curiosity
European
International
within
scope
anddomain
intuitionand
turned
out to to
be contribute
priceless later
on. Let
me
continued
articles
to the
giveInstitute’s
you one example:
magazine.
Panicos
G. Papamichael
Reed College
at that time offered perhaps the best
Chairman
calligraphy instruction in the country. Throughout the
campus every poster, every label on every drawer, was
ECONOMIC
CRIME
AND FORENSIC
beautifully hand
calligraphed.
Because I had dropped out
ACCOUNTING
(ECFA)
COMMITTEE
and didn’t have to
take the
normal classes, I decided to
take a calligraphy class to learn how to do this. I learned
During
the third
of 2011,
the ECFA
about serif
and quarter
san serif
typefaces,
aboutsubcommittee
varying the
on
organizing
seminars
haddifferent
been collaborating
with the
amount
of space
between
letter combinations,
education
committee
and
the
IT
committee
on coabout what makes great typography great. It was beautiful,
organising
two seminars.
Oneinona fraud
utilizing
historical, artistically
subtle
way detection
that science
can’t
IT
and
the
other
on
fraud
detection
and
prevention.
Both
capture, and I found it fascinating.
None of this had even a hope of any practical application
The
ECFA-ebulletin
Volume
Issuewe
1 was
to the
all
in my
life. But ten years
later,1when
wereemailed
designing
ECFA-SIG
(special
interest
group)
and
members
had
first Macintosh computer, it all came back to me. And we
provided
designed positive
it all intofeedback
the Mac.on
It this
was initiative.
the first computer with
beautiful typography. If I had never dropped in on that
single course in college, the Mac would have never had
multiple typefaces or proportionally spaced fonts. And
since Windows just copied the Mac, its likely that no
personal computer would have them. If I had never
dropped out, I would have never dropped in on this
calligraphy class, and personal computers might not have
2
68
UK
or even those
who are
with it
a was
UK
the wonderful
typography
thatdoing
they business
do. Of course
company
outside
the
UK.
impossible to connect the dots looking forward when I was
in college. But it was very, very clear looking backwards
Maria
Krambia-Kapardis
ten years
later.
Chairperson
Again, you can’t connect the dots looking forward; you
FINANCIAL
SERVICES
COMMITTEE
can only connect
them looking
backwards. So you have to
trust that the dots will somehow connect in your future.
The
Services
Committee
You Financial
have to trust
in something
—monitors
your gut,developments
destiny, life,
in
the
bank
industry,
investment
financial
karma, whatever. This approach has and
neverother
let me
down,
operations,
on
a
domestic
level
as
well
as
on
a
European
and it has made all the difference in my life.
MY SECOND STORY IS ABOUT LOVE AND LOSS.
I was lucky — I found what I loved to do early in life. Woz
and I started Apple in my parents garage when I was 20.
We worked hard, and in 10 years Apple had grown from
just the two of us in a garage into a $2 billion company
with over 4000 employees. We had just released our finest
creation — the Macintosh — a year earlier, and I had just
turned 30. And then I got fired. How can you get fired from
a company you started? Well, as Apple grew we hired
someone who I thought was very talented to run the
abroad.
company with me, and for the first year or so things went
well. But then our visions of the future began to diverge
and eventually
falling
When we did, our
concentrated
on we
overhad
the apast
threeout.
months:
Board of Directors sided with him. So at 30 I was out. And
veryLaw
publicly
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had been
ñ
relating
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Bondsthe focus of my entire
adult life was gone, and it was devastating.
I reallyby
didn’t
know what
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felt that
issued
the Central
Banktoofdo
Cyprus
andmonths.
cited its Iopinions
I had let
thediscussed
previous with
generation
of entrepreneurs
down –
which
were
the Central
Bank of Cyprus.
that I had dropped the baton as it was being passed to me.
I met withthe
David
Packard
andlegislation
Bob Noyce
tried to
Following
passing
of the
by and
Parliament,
apologize for screwing
up so badly.
was a very
public
representatives
of the Committee
had Inumerous
meetings
failure,
and
I
even
thought
about
running
away
from
the
valley. But
something
slowly
to dawn
me — I
which
various
concerns
of began
ICPAC
were ondiscussed
still
loved
what
I
did.
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turn
of
events
at
Apple
not
regarding the provisions of the Directive issued had
by the
changedBank
that one
bit. I had
beenaffect
rejected,
but or
I was
still in
Central
of Cyprus
which
directly
indirectly
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members
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Apple was
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me. The heaviness
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was replaced
by the
that
the report
of the aregulator
to be inless
the sure
form of
an
lightness
of being
beginneris again,
about
‘Agreed
Procedures’
such,
the
everything.Upon
It freed
me to enter(‘AUP’).
one of theAsmost
creative
Committee
will
inform
the
Central
Bank
of
Cyprus
of
the
periods of my life.
the
Institutes
members.
During
the next
five years, I started a company named
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
NeXT, another company named Pixar, and fell in love with
an amazing woman who would become my wife. Pixar
went on to create the worlds first computer animated
feature film, Toy Story, and is now the most successful
animation studio in the world. In a remarkable turn of
events, Apple bought NeXT, I returned to Apple, and the
technology we developed at NeXT is at the heart of
COUNCILʼS
ACTIVITIES
Apple’s
current renaissance.
And Laurene and I have a
wonderful family together.
Institute News
at 7:30 in the morning, and it clearly showed a tumor on
my pancreas. I didn’t even know what a pancreas was. The
doctors told me this was almost certainly a type of cancer
that is incurable, and that I should expect to live no longer
than three to six months. My doctor advised me to go home
and get my affairs in order, which is doctor’s code for
prepare to die. It means to try to tell your kids everything
which
was published
in April
2011
opentofor
you
thought
you’d have
the next
10isyears
tellcomments
them in
up
to
30
September
2011.
just a few months. It means to make sure everything is
buttoned up so that it will be as easy as possible for your
Marios ItAgathangelou
family.
means to say your goodbyes.
Chairman
Institute News
I’m
sureand
none
of this matters
would have
happened
if I
met pretty
four times
considered
of interest
to ICPAC
hadn’t
been
fired from
Apple.
was dealt
awful
tasting
and to the
profession
at large.
OtherItissues
with
were,
medicine,
but
I
guess
the
patient
needed
it.
Sometimes
life
hits you in the head with a brick. Don’t lose faith. I’m
convinced
that the2011
onlyathing
that kept
meInstitute
going was
that
On 5 September
delegation
of the
headed
I loved what I did. You’ve got to find what you love. And
that is as true for your work as it is for your lovers. Your
work is going to fill a large part of your life, and the only
way to be truly satisfied is to do what you believe is great
the Cyprus economy.
work. And the only way to do great work is to love what
you do. If you haven’t found it yet, keep looking. Don’t
settle. As with all matters of the heart, you’ll know when
Officer
Institute,
attended
Council meeting
the
you
findofit.theAnd,
like any
greatthe
relationship,
it justofgets
Mediterranean
Federation
of
Accountants
in
Rome.
better and better as the years roll on. So keep looking until
you find it. Don’t settle.
Offices
of the
Institute
MY
THIRD
STORY
ISconcering
ABOUT proposals
DEATH. by ICPAC for
the President
ofI the
Parperis.
When
I was 17,
readInstitute
a quote Mr.
thatTheodoros
went something
like: “If
you live each day as if it was your last, someday you’ll
most
be right.” It2011
made
impression
on me,
and
On 22certainly
and 23 September
theanPresident
of the
Institute
since
then, for the
past 33
I have looked
in the
Mr. Theodoros
Parperis
andyears,
the General
Manager
Mr.
mirror
everyPhilippou
morning and
askedamyself:
were the
Theodoros
attended
meeting“Ifoftoday
the Presidents
last
day
of
my
life,
would
I
want
to
do
what
I
am
about to
do
today?”
And Bodies
whenever
the answer
beenMeeting
“No” for
(FEE)
Member
in Vienna
and a has
Special
of
too
many
days
in
a
row,
I
know
I
need
to
change
something.
Remembering
that I’ll beACTIVITIES
dead soon is the most important
COMMITTEESʼ
tool I’ve ever encountered to help me make the big choices
in
life. BecauseSTANDARDS
almost everything
— all external
ACCOUNTING
COMMITTEE
expectations, all pride, all fear of embarrassment or failure
–During
these things
just meeting
fall away the
in the
face of death,
leaving
the last
committee
studied
the
only
what is truly
Remembering
that you
amendments
in important.
IAS1 relating
to changes
in are
the
going
to die isofthe
best way
I know to
avoid
the relating
trap of
presentation
financial
statements
and
IAS19
thinking
have something
to lose.method’.
You are already
mainly toyou
the abolition
of the ‘corridor
naked. There is no reason not to follow your heart.
‘Combined
The
discussion
About
a yearFinancial
ago I was Statements’.
diagnosed with
cancer.
I had apaper
scan
ACCOUNTANCY CYPRUS
104103
ñ SEPTEMBER
2011
ACCOUNTANCY
CYPRUSññVOLUME
VOLUME
ñ JUNE 2011
I lived with that diagnosis all day. Later that evening I had
a biopsy, where they stuck an endoscope down my throat,
COMMITTEE
through my stomach and into my intestines, put a needle
into my pancreas and got a few cells from the tumor. I was
sedated, but my wife, who was there, told me that when
they viewed the cells under a microscope the doctors
started crying because it turned out to be a very rare form
of pancreatic cancer that is curable with surgery. I had the
surgery and I’m fine now.
This was the closest I’ve been to facing death, and I hope
its the closest I get for a few more decades. Having lived
through it, I can now say this to you with a bit more
Inland Revenue.
certainty than when death was a useful but purely
intellectual
concept:
Panayiota Vayianou
Chairwoman
No one wants to die. Even people who want to go to
heaven
don’t wantGOVERNANCE,
to die to get there.INTERNAL
And yet deathAUDIT
is the
CORPORATE
destination
we
all
share.
No
one
has
ever
escaped
it.
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that is as it should be, because Death is very likely the
single
invention
Life. Itofis Life’s
agent. It
Duringbestthe
third of
quarter
2011 change
the Corporate
clears
out
the
old
to
make
way
for
the
new.
Right
now the
new
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but someday
too long
you will
committee
within thenot
scope
of itsfrom
termsnow,
of reference,
gradually
become
the
old
and
be
cleared
away.
Sorry
to has
be
commenced the implementation of its action plan and
so
dramatic,
butfollowing:
it is quite true.
dealt
with the
Your time is limited, so don’t waste it living someone
else’s
life. Don’t
bedevelopment
trapped by dogma
— which
is living
ñ Worked
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of a survey
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survey
willthinking.
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other
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the
companies
Cyprus.
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will
beinner
sent voice.
to all
noise
of others’ in
opinions
drown
out your
own
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also the
envisaged
thatfollow
the your
results
be
Andmembers.
most important,
courage to
heart
during
a press
conference,
within
the
and presented
intuition. They
somehow
already
know what
you truly
activities
planned
for
the
celebration
of
ICPAC’s
50th
want to become. Everything else is secondary.
ñ Worked
a whitethere
paperwas
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duties and
When
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responsibilities
of the Catalog,
followingwhich
departments
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an
called
The Whole Earth
was one
of the
organisation:
bibles of my generation. It was created by a fellow named
Stewart Brand not far from here in Menlo Park, and he
ñ Risk Management
31
69
Institute News
ñ
Internal
brought
it toAudit
life with his poetic touch. This was in the late
1960′s, before personal computers and desktop publishing,
ñ
and
Methods
so itOrganisation
was all made
with
typewriters, scissors, and polaroid
cameras. It was sort of like Google in paperback form, 35
The
document
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to all
membersand
of
yearswhite
before
Google will
came
it was
idealistic,
ICPAC
and
will
help
clarify
the
boundaries
and
the
overflowing with neat tools and great notions.
organisation.
Stewart and his team put out several issues of The Whole
Earth Catalog, and then when it had run its course, they put
ñ
committee,
in the
collaboration
out The
a final
issue. It was
mid-1970s, with
and I the
wasEuropean
your age.
On the back cover of their final issue was a photograph of
an early morning country road, the kind you might find
yourself hitchhiking on if you were so adventurous.
for September 2011.
Beneath it were the words: “Stay Hungry. Stay Foolish.” It
was their farewell message as they signed off. Stay
Hungry. Stay Foolish. And I have always wished that for
myself. And now, as you graduate to begin anew, I wish
thatInstitute’s
for you. Governance procedures. The objective of the
Stayprocesses
Hungry. which
Stay Foolish.
Thank youbest
all practices,
very much.”
will incorporate
at the
Chairman
UK
or even
those who
doing and
business
a first
UK
* Marina
Theodotou
is theare
founder
curatorwith
of the
company
outside
the
UK.
TEDx
talk
in
Cyprus,
TEDxNicosia
(www.TEDxNicosia.com). She is an Economist (BA
Maria
Krambia-Kapardis
Honors,
MA) and a Six Sigma Black Belt with over 18
Chairperson
years of professional experience. She is the founder of
Curveball Ltd (www.curveballlimited.com) a strategic
FINANCIAL
COMMITTEE
consultancy SERVICES
and new market
development services
provider focusing on emerging markets in the MENA and
The
Financial
Services
Committee
Caucasus
regions.
Previous
rolesmonitors
includedevelopments
Director of
in
the
bank
industry,
investment
and
Business Development and Operations other
at thefinancial
Cyprus
operations,
on
a
domestic
level
as
well
as
on
a
European
Investment Promotion Agency, Country Director of the
level.
It also
keeps contacts
withCorps
the regulatory
Financial
Services
Volunteer
Amman, bodies,
Jordan
(www.fsvc,org) and Vice President in Strategic
Benchmarking/Quality & Productivity at Bank of America
(www.bankofamerica.com). In 2009 she was voted 23 of
the 100+ most powerful women in Business in Cyprus. In
2010 she was selected as one of the 10 Women
Entrepreneurial Ambassadors by the European
Commission. She has travelled in over 42 countries and
lived and worked in four countries in four continents. She
is a Rotarian and a Certified Climate Change Expert from
CSE-IEMA. ■
abroad.
Cloud computing
Cloud computing defined
on organizing seminars had DEFINITION
been collaborating with the
education committee and the IT committee on coorganising two seminars. One “Cloud
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regarding
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report from
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The
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scale
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regulator.
Committee
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you go. You can increase or decrease your use of cloud
computing as you need to without having to think about
changes to hardware or infrastructure or even where you’re
going to put an extra computer. And all charges are on a
usage basis. So as you scale your consumption of cloud
computing, your costs scale accordingly. You just use as
much or as little as you need, for as long as you need.
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Cloud computing
Finally, in terms of understanding what cloud computing
actually is, the good news is that you’re probably already
using some form of cloud computing in your day to day
lives. Web-based email like Hotmail, Gmail, and Yahoo
are all examples of a cloud based email service. You access
it online, you can access it from any device and you only
use as much of it as you need. From a business perspective,
the
applications most
often replaced by cloud computing
COUNCILʼS
ACTIVITIES
are those run by servers.
Institute News
TYPES OF CLOUD
and to the
at large. Other
issuesComputing.
dealt with were,
There
are profession
3 main “flavors”
of Cloud
(1)
among others,asthe
following:
Infrastructure
a Service
(IaaS), (2) Platform as a Service
(PaaS) and (3) Software as a Service (SaaS). SaaS is an
application
running
in the
cloud. Typical
On 5 September
2011
a delegation
of theexamples
Instituteinclude
headed
Email,
and CRM
applications.
PaaS can
be with
thought
by thePortals
President,
Mr. Theodoros
Parperis,
met
the
of
as
a
platform
that
a
developer
deploys
applications
without
caring
abouttothebeunderlying
infrastructure
like OS
discussed
measures
taken for facing
the problems
of
or Servers. IaaS basically provides servers in the cloud that
the Cyprus economy.
your operators have to manage. In short, SaaS you
consume, PaaS you build on and IaaS you migrate to.
Another differentiation that is made in cloud computing is
based
on access, management
and location. Depending on
COMMITTEESʼ
ACTIVITIES
these characteristics we refer to one of these 3 types of
cloud:
(1) Public, STANDARDS
(2) Community COMMITTEE
and (3) Private clouds.
ACCOUNTING
In the Public cloud, the cloud infrastructure is made
available
to the
public
a large industry
group
During the
lastgeneral
meeting
theorcommittee
studied
the
and
is
owned
by
an
organization
selling
cloud
services.
It
ispresentation
located off-premises.
of financial statements and IAS19 relating
With the Community cloud, the cloud infrastructure is
shared by several organizations and supports a specific
community that has shared concerns (e.g., mission,
security requirements, policy, and compliance
ACCOUNTANCY CYPRUS
104103
ñ SEPTEMBER
2011
ACCOUNTANCY
CYPRUSññVOLUME
VOLUME
ñ JUNE 2011
Marios Agathangelou
Chairman
considerations).
It may be managed
by the organizations
CO-ORDINATING
themselves
or a third party and may exist on-premises or
COMMITTEE
off-premises.
The Private cloud infrastructure is operated solely for an
organization. It may be managed by the organization or a
third party, and it may exist on-premises or off-premises.
BENEFITS
One of the benefits of cloud computing is anywhere access
to your work. Previously if you wanted to offer anywhere
access to your email, you had to have set up your own
Inlandservers
Revenue.
email
and customized them so that your employees
could access their email remotely. This required time,
Panayiota
money
andVayianou
expertise. Now you can log on to a cloud
Chairwoman
providers website, subscribe to an email service and in
minutes you’re ready to set up your account.
ANDother
RISK
MANAGEMENT
The
way
cloud computingCOMMITTEE
is making these type of
services more accessible is by making them cheaper. In the
During
third
quarter toofbuy2011
the Corporate
same
waythe
that it
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from
and and
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its try
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has
software
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Furthermore,
benefit of
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fact onthat
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business
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results
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members.
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presented
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subscribing to a service is an operating expense.
Additionally,
all theofsoftware
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responsibilities
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departments
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an
applied
without anyone in your business having to worry
organisation:
about them. For some businesses, this alone is a huge
benefit
freeing up whole teams to work on more
ñ Riskby
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51
71
Institute News
ñ
Internalmore
Auditstrategic projects for the business.
important,
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Organisation
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Finally,
Cloud computing
provides for business continuity
during disasters. The provider of the solution is
responsible
for backups
solution
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white document
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so as to and
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if a boundaries
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AUDITORS
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As “Auditing
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seminar,
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forthe
September
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mitigation
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following
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ñ
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non
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organization’s business and require specific safeguards.
Specifically
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Panicos
G. Papamichael
keeping
customer
data off-premises requiring
Chairman
customers to first opt in before a company can store
their data in the cloud.
ñ Examining the cloud vendor’s policy on vulnerability
management. Since most of the vendors understand
that one of the primary concerns is security they
usually have detailed explanation of the measures they
education committee and the IT committee on cohave in place to safeguard service and data. It is highly
recommended that an expert security consultant
reviews these measures and identify if they are in line
willwith
be offered
before the requirements.
end of the year.
your company’s
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provided
positive
feedback
on this
initiative.
understand
what
happens
if these
SLAs are broken.
Typically two schools of thought exist. The first one
Finally,
two
articles incloud
this issue
of “Accountancy
givesthere
youare
free
additional
service
time if SLAs
Cyprus”
in
the
ECFA
column.
The
first
one
is
authored
are not met. Other vendors take this to the next
level by
by
a member
of financial
our committee
Leonidas
Ieronymides
providing
damages
(predefined)
if SLAswith
are
the not
titlemet“Fraud: The auditor’s responsibilities under
O’Shea
Eoin on the
Bribery Act.
UK Bribery
Actcloud
will
ñ Independent
assurance
aboutThe
controls
at the
26
72
Cloud computing
UK service
or evenprovider—The
those who are
business with
a UK
de doing
facto independent
auditor’s
company
outside
the
UK.
reports are Statement on Auditing Standards (SAS) 70.
SAS 70 provides guidance to service auditors when
Maria
Krambia-Kapardis
assessing
the internal controls of a service organization
Chairperson
and issuing a service auditor’s report. SAS 70 also
provides guidance to auditors of financial statements of
an entity that
uses one COMMITTEE
or more service organizations.
FINANCIAL
SERVICES
Service organizations are typically entities that provide
services
that monitors
impact developments
the control
Theoutsourcing
Financial Services
Committee
environment
of their customers.
twofinancial
types of
in the
bank industry,
investment There
and are
other
service
auditor
reports.
A
Type
I
service
auditor’s
report
includes
service
auditor's
opinion bodies,
on the
level.
It also
keeps the
contacts
with
the regulatory
fairness
of
the
presentation
of
the
service
organization's
description
of controls
that had
been placed
in
Securities
Exchange
Commission
(CySEC)
and the
operation and
suitability
of the design
of the
Commissioner
of the
Insurance
companies
in order
to
controls
to
achieve
the
specified
control
objectives.
A
Type II service
report includes(for
Type example
I service
organized
groupsauditor’s
and associations
auditor's report and also includes the service auditor's
opinion on whether the specific controls were
operating effectively during the period under review.
RISKS
abroad.
If you ask business owners and CIOs about their biggest
concern around cloud computing you’ll probably find
security near the top of the list. Who specifically will have
concentrated
ondata,
over can
the past
months: company with
access to your
you three
trust another
your data? In reality, the majority of individual businesses
ñ
are Law
not inrelating
positiontotoCovered
match theBonds
security infrastructure of a
high end cloud provider. The real issue here is the control
The
Committee
studied
the draft legislation and directive
of data
rather than
security.
which
were
discussedand
withrealistic
the Central
of Cyprus.
A more
important
riskBank
to assess
is the
reliability of a cloud service provider. If you are going to
Following
of the
Parliament,
move data the
andpassing
processes
to legislation
the cloud, by
where
another
representatives
of
the
Committee
had
numerous
meetings
business is responsible for running part of your business’s
with
representatives
of the
Central
of Cyprus,
during
infrastructure,
then you
need
to feelBank
confident
that they
and
which
various
were discussed
their services
willconcerns
be aroundof
for ICPAC
the foreseeable
future.
There’s Bank
a lot to
and while
benefits
outweigh
Central
of consider
Cyprus which
affectthe
directly
or indirectly
the risks, moving
to the cloud is a decision that needs to be
members
of our Institute.
carefully considered and a journey that needs detailed
planning.
The
journey
needsby
a strong
IT partner.
In
addition,
thecloud
report
to be also
prepared
the regulator
of
Without doubt
Computing
a revolutionary
Covered
Bonds Cloud
was discussed,
as is
well
as the issue oftrend
the
that will change
theregulator.
way thatThe
IT companies
and
independence
of the
Committee provide
has decided
customers
consume
today.
is
that
the report
of thetechnology
regulator is
to beCloud
in thecomputing
form of an
usually
referred
to
as
a
self-fulfilling
prophecy.
A
prophecy
promising competitive
thoseofwho
understand
Committee
will inform advantage
the CentraltoBank
Cyprus
of the
and
adopt
it
early
and
possible
extinction
to
those
that
decision to circulate an illustrative example of the reportwill
to
ignore
it. ■ members.
the
Institutes
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
The EU VAT reform
Shaping-up of Institute
an improved
NewsEU VAT system
An increasing
number of
countries around the world
arethe
currently
or
Council ofadopting
the Institute
met four times and consideredreforming
matters oftheir
interest
VATtoorICPAC
GST
and to the profession at large.(Goods
Other issues
with were,
and dealt
Services
Tax)
among others, the following:systems in line with the
demands of a rapidly
of the
Institute
headed
changing
global
economy.
Parperis, trend
met with
the
The observed
is that
new Minister of Finance,direct
Mr. forms
Kikis of
Kazamias
taxation and
are
for facing giving
the problems
of
increasingly
way to
the Cyprus economy.
indirect taxes. This trend has
By Varnavas Nicolaou
been further emphasised by
Senior
On 7 Manager
September 2011 Mr. the
Christos
Kyriakides,
Senior
expressed
intention
of
Indirect
Tax
Services
the Council
meeting
of the
China
and India
to move
PwC Cyprus
Mediterranean Federation of towards
Accountants
in
Rome.
a uniform VAT
system to replace their current regimes. In addition, the
On 13 September
press conference
was held
the
countries
of the 2011
Gulf a Cooperation
Council
are atalso
Offices of
the Institute
concering proposals
ICPAC for
working
towards
the establishment
of a VAT by
system.
the President of
Institute
Theodoros Parperis.
Nevertheless,
thethe
reform
andMr.
implementation
of indirect
tax systems cannot happen without challenges. Such
On 22 and 23
September
2011 the President
of thehowever,
Institute
challenges
may
be successfully
overcome,
Mr.
Theodoros
Parperis
and
the
General
Manager
through support from some significant programmes Mr.
of
Theodoros
Philippou
attended
a
meeting
of
the
Presidents
reform that were set up in response to these obstacles.
and CEOs
Notably,
the of
EUthe
hasEuropean
embarkedFederation
on a “onceofinAccountants
a lifetime”
(FEE)
Member
Bodies
in
Vienna
and
a
Special
of
consultation on reform of the VAT system, inMeeting
order to
the
General
Assembly.
develop recommendations for a simpler and easier to
administer VAT system within the current 27 EU Member
States. The aim of this programme is to address key issues
relevant to all countries which look to create efficient,
balanced
and effective
indirect taxCOMMITTEE
systems.
ACCOUNTING
STANDARDS
THE
FINANCIAL
CRISIS ACTING
AS A CATALYST
During
the last meeting
the committee
studied the
presentation
financial
statements
relating
One
of the of
gravest
symptoms
facedandbyIAS19
governments
mainly
to
the
abolition
of
the
‘corridor
method’.
around the world as a result of the current difficult
economic environment is the soaring budget deficits.
It alsohave
initiated
FEE’s particularly
discussion so
paper
These
exerteda astudy
lot of of
pressure,
on
European governments who in turn need to ensure they can
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
whichways
was published
in April 2011
is openConsequently,
for comments
find
to raise additional
revenues.
up to 30 September
2011.of improving their tax receipts,
realising
the importance
they are turning their attention to indirect taxes as the
Marios Agathangelou
solution. It follows through that for indirect taxes to
Chairman
successfully provide such a solution it is high time that
major
reforms–toFAMAGUSTA
the current systems
are contemplated.
LARNACA
CO-ORDINATING
COMMITTEE
WHERE IS THE DIFFICULTY IN REFORMING VAT?
the following
activities:
Europe’s
challenge
in reforming VAT largely stems from
the fact that the basis of the system in place today was
1. On 13
April
thea committee
organised
a lunch of
at
created
in the
late2011
1960s,
time when the
EU comprised
Zephyros
Tavern States
in Larnaca
with
the the
newexplosion
director of
of
only
six Member
and well
before
global trade was witnessed.
Other factors also come into play:
Inland Revenue.
ñ Today’s economies are increasingly oriented to
servicesVayianou
rather than simply trade in goods
Panayiota
Chairwoman
ñ The use of the Internet as a means for carrying out vast
CORPORATE
GOVERNANCE, INTERNAL AUDIT
volumes of transactions
ñ The current VAT system is administered separately in
the 27 EU Member States and there are numerous
exemptions and multiple rates applied (driven by
national priorities)
ñ
Interpretations
of the legislation in individual Member
dealt
with the following:
States can be subject to costly and lengthy legal
rendering
it difficult
for taxpayers
to
ñ challenges,
Worked on the
development
of a survey
on Corporate
Governance.
The and
survey
be sent
to European
the listed
achieve
certainty
havewill
access
to the
companies
in
Cyprus.
Its
results
will
be
sent
to all
Court of Justice (“ECJ”)
The above situation can only lead to additional burden on
taxpayers in terms of abiding with VAT compliance laws
and regulations and it embeds inefficiencies in the
collection
and administration
of taxes.
It should, hence,
responsibilities
of the following
departments
within be
an
an expected
consequence that the VAT Gap (i.e. the
organisation:
theoretical revenues from VAT on the assumption of full
ñ Risk Management
compliance
by the tax payers compared to actual revenues
11
73
Institute News
ñ
Audit are able to collect) has become
thatInternal
governments
substantial.
THE GREEN PAPER AS A STEP FORWARD
The consultation on VAT reform (the “Green Paper”) was
launched in December 2010 and was completed at the end
organisation.
of May 2011. It asked questions in four key dimensions
around
whole range
of issues associated
withEuropean
VAT:
ñ
The the
committee,
in collaboration
with the
Union Affairs
committee,
hasVAT
designed a seminar on
1. Technical
development
of the
“Auditing
EU
Funded
Projects”.
seminar, in
2. Cost of compliance (reduction of the The
“red tape”)
3. Efficiency of collection models and improvement of
for September 2011.
auditing methodologies
4. Related legal process and system
The
EU committee
must make has
use of
the opinions
forward
by
ñ The
embarked
on aput
study
of the
Institute’s Governance
The in
objective
of the
stakeholders
through theprocedures.
Green Paper
a long-term
study plan
is towhich
assistwill
thehave
Institute
governance
strategic
as aimdevelop
a best practice
EU
processes
which
will
incorporate
best
practices,
at
the
VAT system and which will use as benchmark the current
VAT system. In developing its strategic plan, the EU
should take into consideration best practice VAT or GST
systems
currently
operatingtoincontribute
non-EU jurisdictions
as
domain
and continued
articles to the
wellInstitute’s
as good practices
adopted
by
EU
governments
leading
magazine.
to efficient tax administration.
Chairman
CHARACTERISTICS OF A MODERN EU VAT
SYSTEM
A number of elements typical of a modern and more
efficient EU VAT system have been suggested. The main
ideas
are the following:
on
organizing
seminars had been collaborating with the
education committee and the IT committee on coñ Operatetwo
within
the framework
of a single
legalutilizing
system
organising
seminars.
One on fraud
detection
that the
willother
provide
direct detection
access to and
the ECJ
for taxpayers
IT and
on fraud
prevention.
Both
will
be offeredabefore
the end
of the
year.
ñ Introduce
European
VAT
Registration,
one set of
compliance rules and a single EU VAT return
ñ Establish a single EU VAT Administration with a single
audit methodology, making use of e-audit techniques
which will entail the assessment of business controls
and systems
Cyprus”
in the ECFA column. The first one is authored by
ñ Introduce
automation
on the simpler
proceduresunder
so as
the
title “Fraud:
The auditor’s
responsibilities
ISA240”
by a well-known
lawyer
to shiftand
the the
focussecond
on processes
for designingUK
more
riskO’Shea
Eoin
on
the
Bribery
Act.
The
UK
Bribery
Act
will
based approaches to audit and compliance and, thus,
havefacilitate
serious the
implications
those
doing
reduction on
of the
VAT
Gap.business in the
2
74
The EU VAT reform
UK
even those
who are doing
business with a UK
THEorMORE
CONTENTIOUS
CHANGES
Improvements in the administration processes dimension
of the VAT system are perhaps the easier to bring about. In
Chairperson
order to develop a best practice VAT, however, certain
more “controversial”
changes
may need to be made. The
FINANCIAL
SERVICES
COMMITTEE
first of these is the broadening of the taxable base, that is,
aim Financial
to tax a bigger
of final
consumption
at the
The
Servicesamount
Committee
monitors
developments
in
the bank
industry,
other
financial
standard
rate. In
order to investment
achieve this itand
would
be necessary
operations,
on a domestic
level
as well
as on
a European
to firstly abolish
exemptions
which
would,
in turn,
enable
level.
It
also
keeps
contacts
with
the
regulatory
bodies,
governments to lower the applicable standard rate with a
such
the of
Central
BankVAT
of Cyprus
(CBC), the Cyprus
and
singleasrate
European
and, simultaneously,
increase
collections.
Nevertheless, concerns do exist that widening of the tax
base will takeofnoCyprus
account Commercial
of the consumers’
ability
to pay
Association
Banks,
Insurance
and may, thus,
be seen etc).
as unfair by taxpayers. One way to
Association
of Cyprus
overcome this potential obstacle, however, is to
During
the second
quarter
of other
the year
the means
Committee
compensate
its impact
through
targeted
such
monitored
the
economic
crisis
and
its
consequences
in
as via the claiming of allowances on the personal income
regards
to all and
areastheoflaunching
economic of
activities
in Cyprus
and
tax schedule
other social
measures
abroad.
(e.g. access to education, healthcare, etc.). Such
arrangements have already been successfully implemented
in New Zealand and Singapore.
ITʼS
ALL
IN THE
ñ
Law
relating
to BALANCE
Covered Bonds
The
Committee
studied
and directive
In working
towards
the enhancement
of the harmonisation
issued
by
the
Central
Bank
of
Cyprus
and
cited
its opinions
and simplicity of an EU VAT system it is important
to
which
were
discussed
with
the
Central
Bank
of
Cyprus.
assess the macro-economic impacts of any envisaged
major change to ensure that Member States can see the
benefits - be it national, social or economic - that would
arise both at a domestic level and an EU level. Failing this,
the onlyvarious
way seemingly
available
today towere
governments
to
which
concerns
of ICPAC
discussed
raise their the
revenues
in the of
absence
of a major
VAT by
reform
regarding
provisions
the Directive
issued
the
is to continue
raise their
rates,
which
is evidently
not
Central
Bank oftoCyprus
which
affect
directly
or indirectly
sustainable
theInstitute.
long term.
members
of in
our
In
thethe
report
to for
be prepared
theefficient
regulator
of
In addition,
developing
vision
a modernbyand
VAT
Covered
Bonds
was
discussed,
as
well
as
the
issue
of
the
system for the future it is important to bear in mind that no
system can be perfect, However, there are clear examples
emerging around the world that demonstrate that it is
indeed possible to move forward towards securing a “winCommittee will inform the Central Bank of Cyprus of the
win” model
for all stakeholders,
and
it is to those
decision
to circulate
an illustrative
example
of theexamples
report to
thatInstitutes
the EU should
turn for inspiration in moving forward
the
members.
with the VAT reforms. ■
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Investment Funds
Institute News
The EU framework
onNews
investment funds
Institute
and the challenges arising for Cyprus
The current
financial crisis
together with the tragic event
in Mari
has demonstrated
the
the Council
of the Institute
for of
Cyprus
met four times and consideredneed
matters
interesttotoidentify
ICPAC
new
areas
of
development
in
its financial services sector
with the provision of new
services
and
financial
products in order to help the
Parperis,
met with the
the
country
to overcome
new Minister of Finance,financial
Mr. Kikis
and
crisisKazamias
and establish
for facing
problems
of
Cyprus
as athestrong
and
reliable financial services
the Cyprus economy.
center.
By Costas A. Kalias,
Board
KPMG
Ltd, Mr. Christos Kyriakides, Senior
On 7Member,
September
2011
Onethe
area
that can
be jointly
Vice
Chairman
of
the
Council
meeting
of the
European Union Committee developed by the Private and
the Public Sector is the
of ICPAC
establishment of Cyprus as
OnInvestment
13 September
a press conference was held at the
an
Fund2011
jurisdiction.
the Cyprus
economy.
Thesuch
press
wasand
given
by
Other
EU Member
States
asconference
Luxembourg
Malta
the President
of the Institute
have
taken advantage
of Mr.
the Theodoros
EU legalParperis.
framework
instituting and regulating the single market of financial
services
(in23particular
the2011
investment
fundsofsector),
and
On 22 and
September
the President
the Institute
have
established
themselves
as
investment
funds
centers
creating thousands of jobs and growth to the local
economy. Quick transposition of the relevant EU Acts,
fully equipped infrastructure on the service provider level,
highly-skilled competent authorities ensuring flexible but
the General
Assembly.
prudent
application
of relevant legislation, low up to
minimal taxation as well as the continuous marketing of
these jurisdictions as investment fund destinations
COMMITTEESʼ
ACTIVITIES
throughout
the world, are
the main reasons for their
success. One might say that now the framework has been
ACCOUNTING
STANDARDS
COMMITTEE
fostered
and that new
players will be
faced with barriers of
entry to the investment funds domiciliation market in the
During
last ofmeeting
the have
committee
the
EU.
Suchthe
a point
view could
been thestudied
case some
amendments
in
IAS1
relating
to
changes
in
the
years ago but recently the EU legal framework governing
presentationfunds
of financial
statements
and IAS19
investment
has undergone
changes,
which relating
permit
mainly
the abolitiontoofrise
theand
‘corridor
method’.
new
EUtojurisdictions
enter the
EU investment
funds market, while as a result of these changes investment
It also
initiated
a jurisdictions
study of FEE’s
discussion
paper
funds
from
off-shore
are expected
to relocate
in
the EU. Just
to mention
that within
EU therepaper
are
‘Combined
Financial
Statements’.
The the
discussion
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
which was
published
2011non-UCITS
is open foras
comments
36.110
UCITS
funds in
andApril
16.497
at June
up
to
30
September
2011.
2010 with assets under management (AUM) of €7.494
billion (7,4 Trillion). The AUM worldwide is estimated at
Mariosbillion
Agathangelou
16.000
(16 Trillion) as at June 2010!
Chairman
THE FRAMEWORK GOVERNING EU
CO-ORDINATING
INVESTMENT
FUNDS
COMMITTEE
Investment funds in the EU can be divided into two
During the 1)
third
quarter
of 2011and
the regulated
Committee
out
categories:
those
introduced
bycarried
EU Law,
the
following
activities:
i.e. EU harmonized investment funds or otherwise called
“Undertakings for Collective Investment Schemes in
1. On 13 April
2011 the(UCITS)
committee
a lunch at
Transferable
Securities”andorganised
2) those introduced
Zephyros
Tavern
in Larnaca
withinitiatives
the new ofdirector
of
and
regulated
by virtue
of national
each EU
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
Member State also known as non-UCITS.
2. ABOUT
On 4 MayUCITS
2011 aAND
seminar
was co-ordinated
at Sun Hall
1.
THEIR
MANAGEMENT
Inland Revenue.
UCITS
constitute a 100% EU product. They must be
authorised in an EU Member State, whereas their main
Panayiota
Vayianou
service
providers
(management company and depositary)
Chairwoman
must
also be EU authorised and located. Once being
authorised as a UCITS, this investment fund may start
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
marketing
its units
or shares throughout
the EU
by
AND RISK
COMMITTEE
observing
anMANAGEMENT
electronic notification
procedure without
requiring approval from the competent authorities of the
During EU
theMember
third quarter
of 2011
Corporate
targeted
States. UCITS
have the
evolved
into a
Governance,
Audit
andwhich
Risk also
Management
brand
name forInternal
investment
funds,
facilitates
committeemarketing
has, within
the scope
of its country
terms ofregulators.
reference,
extra-EU
approval
by third
commenced
of itshas
action
plan and the
has
In
addition, the
theimplementation
UCITS product
influenced
institution
UCITS-like products in off-shore
dealt with theoffollowing:
jurisdictions as evidenced by the BVI registered public
fund.
companies
in Cyprus.
Its results
will be
sent to all
UCITS,
although
sponsored
by and
marketed
to
members.
It
is
also
envisaged
that
the
results
be
institutional investors are subject to a series of
presented common
during ato press
conference,
within
the
requirements,
all UCITS
in the EU,
tailored
activities
planned
celebration
of ICPAC’s
50th
mostly
to the
needsforoftheretail
investors:
Restrictions
regarding leverage apply, lending, guaranteeing and short
ñ Worked
a white paper
describing
the role, duties
and
selling
are on
prohibited,
eligible
investments
comprise
responsibilities
of the following
departments
within an
transferable
securities,
liquid financial
instruments,
organisation:
derivatives
and replicating of indices whereas fund of
funds and master-feeder structures must comply with a
ñ Risk
series
of Management
restrictions and regulatory requirements. Certain
11
75
Institute News
ñ
Internal Audit
jurisdictions
impose further requirements by requiring a
reputable and financially sound credit or financial
ñ
Organisation
Methodsof the UCITS.
institution
to act and
as promoter
Cyprus
willdocument
be givenwill
the be
possibility
the UCITS
The
white
circulatedtotoenter
all members
of
market and
through
company passport”
ICPAC
will the
help“management
clarify the boundaries
and the
provided for by
UCITS
IV Directive.
According
the
interaction
of the
these
three
functions
within toand
“management company passport”, the management
organisation.
company of the UCITS is no longer required to be
established
in the same
Member Statewith
as thethe
UCITS.
The
ñ
The committee,
in collaboration
European
management
company
is
not
bound
to
exercise
any
of
its
tasks
in the Member
State ofProjects”.
authorisation
the UCITS
“Auditing
EU Funded
Theofseminar,
in
either.
For
reasons
relating
to
the
UCITS’
tax
residency
andfor
effective
supervision
September
2011. certain administrative functions
willThe
nevertheless
to be
the Member
ñ
committeehave
studied
theperformed
European in
Council
Green
State
of
the
UCITS
by
local
professionals.
Cyprus
could
Paper on Corporate Governance and submitted
its
act response
as a domiciliation
jurisdiction
forthe
UCITS
to the questions
posed by
paper.due to its
favourable
tax provisions,
its cost-effectiveness
ñ
The committee
has embarked
on a studyregarding
of the
provisions
of
administrative
tasks
such
as fund
accounting,
Institute’s Governance procedures. The
objective
of the
auditing,
and
nominee
services,
as
well
as
due
to its
commercial
relationships
with
non-EU
countries,
which
would
interested
in the
entering
the EU market
for
samebe
time
recognising
and sizes.
fundraising
or
investing
purposes
through
Cyprus.
2. NON-UCITS
All other investment funds authorised in the EU, which
have notG. been
set-up in accordance with the UCITS
Panicos
Papamichael
provisions
but
in
accordance with the legal framework
Chairman
introduced by an EU Member State on its own initiative
qualify as non-UCITS. The generic denomination nonECONOMIC CRIME AND FORENSIC
UCITS is used because each Member State has its own
national investment platform or even platforms. For
instance Luxembourg legislation provides for Specialist
Investment Funds (SIFs) targeting professional and
institutional investors. In Cyprus the non-UCITS product
education committee and the IT committee on coinstituted by virtue of national initiative are the
International Collective Investment Schemes (ICIS),
which can be currently marketed only by means of private
will
offered
before
the year.without recurring
offer,bei.e.
offered
to upthe
to end
100of
investors
to means of publicity. ICIS are not subject to borrowing,
The
ECFA-ebulletineligible
Volumeassets
1 Issue
was emailed
to all
risk diversification,
and1lending
restrictions.
ECFA-SIG
(special
interest
group)
and
members
What is criticised as their main handicap is the lackhad
of
provided
feedback
on thisof
initiative.
provisionspositive
enabling
the set-up
ICIS with multiple
compartments, segregation of assets and liabilities and
Finally,
two articles
in this issue
of “Accountancy
separatethere
Net are
Asset
Value (NAV)
calculation
for each
Cyprus”
in
the
ECFA
column.
The
first
one
is
authored
compartment, so that various investment policies by
be
apursued
member
of our
LeonidastheIeronymides
within
the committee
same ICIS without
investors of with
each
the
title “Fraud:
The auditor’s
under
compartment
be exposed
to claimsresponsibilities
arising from creditors
ISA240”
and from
the second
by a well-known
UK lawyer
and investors
other compartments
(Umbrella
ICIS).
O’Shea
the Bribery
Act. The UKatBribery
Act will
Yet, a Eoin
new on
legislative
development
EU level,
the
have
serious
implications
on those
doing Fund
business
in the
recently
adopted
Alternative
Investment
Managers
2
76
Investment Funds
UK
or even
those who
are doing
business
with UCITS
a UK
Directive
(AIFMD),
is a further
factor,
apart from
company
outside
the
UK.
IV, through which can be exploited to help in the
development of the fund Industry in Cyprus.
Chairperson
ABOUT THE AIFMD
Although it SERVICES
is an EU COMMITTEE
Directive harmonising the
FINANCIAL
authorisation and supervision of EU based alternative
(non-UCITS)
investment
fund managers
and
claiming to
The
Financial Services
Committee
monitors
developments
leave
the alternative
(non-UCITS)
in
the the
bankregulation
industry, ofinvestment
and other
financial
investment
funds
in
each
Member
State
unaffected,
the
AIFMD
will keeps
have an
impactwith
alsothe
upon
EU alternative
level.
It also
contacts
regulatory
bodies,
(non-UCITS)
investment
funds.
This
is
because
the
AIFMD
contains
a
number
of
provisions
regulating
the
appointment of the
such funds, in
the order
valuation
Commissioner
of depositary
Insuranceofcompanies
to
function,
determination
and
reporting
of
leverage,
transparencygroups
and offering
document (for
requirements,
organized
and associations
example
delegation and disclosure (the latter mainly in respect of
private equity investment funds). It is thus expected that
administration costs for alternative investment fund
managers will rise and that a cost-effective EU jurisdiction
will have to be sought for domiciling the investment fund,
since the manager is not obliged to be established in the
same EU Member State as the investment fund. At the
abroad.
same time compliance with the requirements imposed by
the AIMFD will lead to reshaping and modernising the
current ICIS framework, so that Cyprus will appear as a
concentrated
over the pastfor
threedomiciling
months:
competitive onjurisdiction
alternative
investment funds and for performing administration tasks.
ñ
relatingfor
to regulation,
Covered Bonds
As Law
an exchange
EU Alternative investment
fund managers will be allowed to market their EU
The
Committee
studied the
drafttolegislation
and investors
directive
alternative
investment
funds
professional
issued
by
the
Central
Bank
of
Cyprus
and
cited
its
opinions
throughout the EU by observing an electronic notification
which
wereOn
discussed
with the
Centraloutside
Bank ofthe
Cyprus.
procedure.
the contrary
managers
scope of
the AIFMD as well as non-EU managers and EU managers
Following
the passing
of the legislation
Parliament,
managing non-EU
alternative
investment by
funds
will be
representatives
of
the
Committee
had
numerous
meetings
subject to approval in each targeted Member State, while
with
of thewith
Central
Bankofofthe
Cyprus,
during
they representatives
will have to comply
certain
requirements
which
concerns
of ICPAC
were discussed
imposedvarious
by the AIFMD.
In addition
the enhanced
demand
regarding
the will
provisions
of the Directive
issued
by the
for regulation
be of advantage
to managers
subject
to
the AIFMD
It which
is thusaffect
expected
thatorinvestment
Central
Bank regime.
of Cyprus
directly
indirectly
funds and
investment
members
of our
Institute.fund managers from off-shore
jurisdictions will relocate in the EU, seeking for a costeffective
jurisdiction
domicile
and
their
In
addition,
the report to be
prepared
by administer
the regulator
of
investment
funds.
The
question as
that
arises
is how
Covered
Bonds
was
discussed,
well
as the
issuefast
of the
local actors are
to move
transposing
the
independence
of willing
the regulator.
Thetowards
Committee
has decided
AIFMD
into Cyprus
Law, evenis before
thethe
expiry
that
the report
of the regulator
to be in
form of
of the
an
implementation
date
in
2013.
CONCLUSION
decision
to circulate an illustrative example of the report to
The current developments in the EU legal framework
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Investment Funds
governing investment funds together with Cyprus’ unique
combination of the lowest tax jurisdiction in the EU, its
highly educated professionals, its strong IT and
communication infrastructure and its well established
business and tax network, offer the challenge for Cyprus to
become a favourable fund jurisdiction. However to do so,
the public sector (in coordination and cooperation with the
private
sector), must
ensure that the relevant EU
COUNCILʼS
ACTIVITIES
legislation is quickly transposed, the national rules become
more accurate and attractive and be ready to adopt changes
quickly to meet EU regulations and clients’ needs. ■
Institute News
IFRS 11
Note: The views and opinions expressed herein are those
of the author and do not necessarily represent the views
and opinions of KPMG International Cooperative
(“KPMG
International”)
or KPMG
which was
published in April
2011member
is open firms.
for comments
Marios Agathangelou
Chairman
COMMITTEE
IASB issues new standard
on joint arrangements
OVERVIEW OF IFRS 11
the Cyprus economy.
IFRS Kyriakides,
11 classifiesSenior
joint
On 7 September 2011 Mr. ñ
Christos
arrangements as either joint
operations (combining the
Mediterranean Federation of existing
Accountants
in Rome.
concepts
of jointly
controlled assets and jointly
controlled
or
On 13 September 2011 a press
conferenceoperations)
was held at the
joint
ventures
(equivalent
to
the
existing
concept
of
the Cyprus economy. The press conference was given bya
jointly controlled entity).
1. OnNEW
13 April
THE
STANDARD
On
12Revenue
May 2011,
the IASB
issued
IFRS 11 Joint
Inland
of Larnaca
Mr Marios
Kourouniades.
Arrangements which supersedes IAS 31 Interests in Joint
Ventures
and 2011
SIC-13
Jointlywas
Controlled
Entities
– Non2. On 4 May
a seminar
co-ordinated
at Sun
Hall
Monetary Contributions by Venturers. Concurrent with the
issuance of IFRS 11, the IASB also issued:
Inland Revenue.
ñ IFRS 10 Consolidated Financial Statements;
Panayiota Vayianou
Chairwoman
ñ
IFRS 12 Disclosure of Involvement with Other Entities;
− Joint operation is a joint
On 22 and 23 September 2011arrangement
the President of
the Institute
whereby
the
By
Leonidou
that haveManager
joint control
Mr.Yiannis
Theodoros
Parperis andparties
the General
Mr.
rights to
and
Deloitte
Theodoros Philippou attendedhave
a meeting
of the
the assets
Presidents
obligations for the liabilities.
− Joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the
the assets
General
net
of Assembly.
the arrangement.
CORPORATE
GOVERNANCE,
INTERNAL
ñ
IAS 27 Separate
Financial Statements
(revisedAUDIT
2011),
hasRISK
been MANAGEMENT
amended for the COMMITTEE
issuance of IFRS 10 but
AND
retains the current guidance for separate financial
statements;
and quarter of 2011 the Corporate
During
the third
IFRS 11 requires the use of the equity method of
COMMITTEESʼ
ACTIVITIES
accounting
for interests
in joint ventures thereby
eliminating the proportionate consolidation method.
ñ The determination of as to whether a joint arrangement
is a joint
or a joint
venture is based
on the
During
the operation
last meeting
the committee
studied
the
parties’ rights and obligations under the arrangement,
with the existence of a separate legal vehicle no longer
being the key factor.
mainly
to the abolition
of thevary
‘corridor
method’.
ñ
Transitional
provisions
depending
on how an
interest is classified under IAS 31.
It The
also effective
initiateddate
a study
of 11FEE’s
discussion
ñ
of IFRS
is 1 January
2013,paper
with
‘Combined
Financialpermitted
Statements’.
The circumstances.
discussion paper
early application
in certain
Each of the standards in the ‘package of five’ has an
ñ Worked
onfor
theannual
development
a survey on
effective
date
periodsofbeginning
on Corporate
or after 1
Governance.
The
survey
will bepermitted
sent to the
listed
January
2013, with
earlier
application
so long
as
Cyprus. in
Itsthe
results
will ofbefive’
sentaretoalso
all
eachcompanies
of the otherinstandards
‘package
early
applied.It However,
entities that
are the
permitted
to
members.
is also envisaged
results be
incorporate
anyduring
of the disclosure
requirements within
in IFRSthe
12
presented
a press conference,
intoactivities
their financial
statements
without early
adopting 50th
IFRS
planned
for the celebration
of ICPAC’s
12 (and thereby the standards in the ‘package of five’).
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
ñ IAS 28 Investments in Associates and Joint Ventures
(revised 2011), has been amended for conforming
changes based on the issuance of IFRS 10 and IFRS 11.
JOINT
CONTROLof the following departments within an
responsibilities
organisation:
IFRS 11 defines a joint arrangement as an “arrangement of
which two or more parties have joint control” and makes
ñ Risk Management
31
77
Institute News
ñ
Internal
Audit
clear
that joint
control exists only when “decisions about
the relevant activities require the unanimous consent of the
parties
that control
arrangement collectively.”
ñ
Organisation
andthe
Methods
OBSERVATION
The
interaction
of joint
these
three
functions
within
and
The concept of
control
includes
control by
more than
two parties, but not when decisions may be reached by
organisation.
more than one combination of those parties. IFRS 11
provides
the following
to illustrate
this European
point:
ñ
The committee,
in example
collaboration
with the
Assume
an arrangement
hasProjects”.
three parties:
has 50 per
“Auditing
EU Funded
The Aseminar,
in
cent of the voting rights in the arrangement and B and C
each have 25 per cent. The contractual arrangement
for September 2011.
between A, B and C specifies that at least 75 per cent of the
voting rights are required to make decisions about the
Paperactivities
on Corporate
Governance Even
and submitted
its
relevant
of the arrangement.
though A can
response
to
the
questions
posed
by
the
paper.
block any decision, it does not control the arrangement
ñ
The committee
embarked
on a Bstudy
the
because
it needs the has
agreement
of either
or C. of
In this
Institute’s
Governance
procedures.
The
objective
of
the
example, A, B and C collectively control the arrangement.
study isthere
to assist
Institute
develop governance
However,
is morethethan
one combination
of parties
will
bestvoting
practices,
the
thatprocesses
can agreewhich
to reach
75incorporate
percent of the
rightsat(i.e.,
either
A and
or A and C).the
In local
such apracticalities
situation, toand
be asizes.
joint
same
timeBrecognising
arrangement
the contractual
arrangement
ñ
The committee
has continued
to monitorbetween
closely the
all
parties
wouldand
need
to specify initiatives
which combination
the
European
International
within its of
scope
parties
is required
to agree unanimously
to decisions
domain
and continued
to contribute
articles toabout
the
the Institute’s
relevant activities
of
the
arrangement.
magazine.
JOINT OPERATIONS AND JOINT VENTURES
Chairman
The new Standard establishes two types of joint
arrangements: joint operations and joint ventures. The two
ECONOMIC
CRIME ANDare
FORENSIC
types of joint arrangements
distinguished by the rights
ACCOUNTING
COMMITTEE
and obligations of(ECFA)
those parties
to the joint arrangement. In
a joint operation, the parties to the joint arrangement
(referredthetothird
as “joint
operators”)
haveECFA
rightssubcommittee
to the assets
During
quarter
of 2011, the
and
obligations
for
the
liabilities
of
the
arrangement.
By
contrast,
in
a
joint
venture,
the
parties
to
the
arrangement
education committee and the IT committee on co(referred totwo
as seminars.
“joint venturers”)
havedetection
rights toutilizing
the net
organising
One on fraud
assets of the arrangement.
IFRS 11 requires that a joint operator recognise its share of
the assets, liabilities, revenues and expenses in accordance
The
Volume
1 Issue
1 was
emailedwould
to all
withECFA-ebulletin
applicable IFRSs
while
a joint
venturer
ECFA-SIG
(special
interest
group)
and
members
account for its interest using the equity methodhad
of
provided
positive
on this initiative.
accounting
under feedback
IAS 28 (revised
2011) Investments in
Associates and Joint Ventures. The option of proportional
consolidation
included
in IASin31
has
not of
been
retained.
Finally,
there are
two articles
this
issue
“Accountancy
aOBSERVATION
member of our committee Leonidas Ieronymides with
The mechanics of equity accounting, as detailed in IAS 28,
have not changed and the accounting for joint operations is
consistent with the current treatment of jointly controlled
have
serious
implications
on those
doing business in the
operations
and
jointly controlled
assets.
24
78
IFRS 11
UK
those
are that
doing
business
with
UK
IFRSor11even
applies
to allwho
parties
have
an interest
in a joint
company
outside
UK.
arrangement,
notthe
just
to those that have joint control.
Therefore, all parties that have an interest in a joint
operation
should recognise their share of assets, liabilities,
Maria
Krambia-Kapardis
revenues
and
Chairperson expenses arising from that interest. However,
the accounting for an interest in a joint venture will depend
on whether the party has joint control. A party that has joint
control or significant influence over a joint venture will
account for its interest using the equity method of
The
FinancialaServices
Committee
monitors
developments
accounting,
party that
does not
will apply
IFRS 9
in
the
bank
industry,
investment
and
other
financial
Financial Instruments (or IAS 39 Financial Instruments:
operations,
a domestic
level as as
well
as on a European
Recognitiononand
Measurement,
applicable).
Hence,
level.
It
also
keeps
contacts
with
the
regulatory
bodies,
adoption of IFRS 11 requires that all parties to joint
such
as the Central
Bankwhether
of Cyprus
the Cyprus
arrangements
evaluate
the (CBC),
arrangement
meetsand
the
definition ofExchange
a joint operation
or a joint(CySEC)
venture. and the
Securities
Commission
DISTINCTION
BETWEEN
JOINT as
OPERATIONS
exchange
views regarding
the industry,
well as other
AND
JOINT
VENTURES
The existence of a separate vehicle is a necessary, but not
sufficient, condition for a joint arrangement to be
considered a joint venture.
monitored
the ofeconomic
andIFRS
its consequences
in
In the absence
a separatecrisis
vehicle,
11 makes it clear
regards
all areas
ofjoint
economic
activities
in direct
Cyprusrights
and
that the to
parties
to the
arrangement
have
and obligations to the assets and liabilities of the
abroad.
arrangement and hence the arrangement will be classified
as a joint
an arrangement
with a separate
Below
areoperation.
the mainIntopics
that the Committee
has
vehicle,
that
may
or
may
not
be
the
case,
all
relevant
facts
and circumstances should be considered in determining
whether the parties to the arrangement have rights to the
net assets of the arrangement.
The
Committee studied the draft legislation and directive
OBSERVATION
which
discussedchange
with the
Central
Bank of Cyprus.
This iswere
a significant
from
the requirements
of IAS
31, which treats the establishment of a separate legal
vehicle as the
factorofinthe
determining
of a
Following
the key
passing
legislationthebyexistence
Parliament,
jointly controlled
representatives
of entity.
the Committee had numerous meetings
The Standard
guidance
on factors
to consider
in
which
variousprovides
concerns
of ICPAC
were
discussed
the identification of a joint venture.
LEGAL FORM OF THE SEPARATE VEHICLE
A joint arrangement that is conducted through a separate
In
addition,
report
be prepared
the regulator
of
vehicle
maytheoffer
theto investors
no by
limitation
on the
Covered
Bonds
was
discussed,
as
well
as
the
issue
of
the
liability of the parties to that arrangement. This indicates
independence
of the regulator.
decideda
that the joint arrangement
is a The
jointCommittee
operation. has
However,
jointthe
arrangement
thatregulator
limits the
of form
the parties
that
report of the
is toliability
be in the
of an
would
not
necessarily
indicate
that
the
arrangement
‘Agreed Upon Procedures’ (‘AUP’). As such, is
thea
joint
venture
because
the
terms
of
the
contractual
arrangement
or otheranfacts
and circumstances
may
affect
decision
to circulate
illustrative
example of the
report
to
whether the parties have limited liability.
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
IFRS 11
TERMS OF THE CONTRACTUAL ARRANGEMENT
that the arrangement is a joint operation. However, if the
joint arrangement was able to sell output to third parties
because the joint arrangement would assume demand,
inventory and credit risks, this would indicate the joint
arrangement is a joint venture.
Institute News
Contractual arrangements between the parties to the joint
arrangement may counteract the legal form of the vehicle.
For example, parties may have direct rights to the assets
and obligations for the liabilities of the arrangement
despite the fact that the legal form of the vehicle would
normally shelter the investors from having a direct
COUNCILʼS
ACTIVITIES
obligation
for its liabilities.
This would be the case if the
contractual arrangement between the parties establishes
that
all the
parties
the arrangement
are directly
liable
for
During
thirdtoquarter
of 2011 the Council
of the
Institute
third
partytimes
claims
establishesmatters
a sharing
of revenues
and
met four
andorconsidered
of interest
to ICPAC
expenses based on the relative performance of the parties.
among others,
theAND
following:
OTHER
FACTS
CIRCUMSTANCES
On 5 September
a delegation
of thetheInstitute
When
a separate2011
vehicle
is used and
terms headed
of the
contractual
arrangement
do not indicate
by the President,
Mr. Theodoros
Parperis,that
met the
withjoint
the
arrangement
is
a
joint
operation,
the
parties
should
consider any other relevant facts and circumstances in
determining the type of arrangement. For example, if a
the Cyprus
economy.
separate
vehicle
is formed to hold the assets and liabilities
of the joint arrangement and the parties to the joint
On 7 September
2011 Mr.to Christos
Senior
arrangement
are committed
purchase Kyriakides,
the entire output
of
the
arrangement,
this
indicates
that
the
arrangement
is
a
joint
operation
because
the
parties
have
rights
to
all
of
the
economic benefits generated by the assets of the
arrangement. Additionally, the parties are required to fund
On settlement
13 September
2011liabilities
a press conference
held at the
the
of the
of the jointwas
arrangement
Offices of
Institute concering
proposals
by ICPAC
for
because
thethe
arrangement
is exclusively
dependent
on the
parties
for the
generation
of press
cash flows.
This also
the Cyprus
economy.
The
conference
was indicates
given by
On
22 and 23 September 2011 the President of
the Institute
Before
Αfter
IAS 31 Philippou attended a meeting of the
IFRS
11
Theodoros
Presidents
Jointly controlled entity
Joint venture
accounted for using proportionate
(FEE)
consolidation
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
OBSERVATION
It is possible that an investment that previously met the
up to 30 September
definition
of a jointly2011.
controlled entity under IAS 31 will
be a joint operation under IFRS 11. Additionally, an
Marios Agathangelou
investor
that previously accounted for an interest in a joint
Chairman
operation under IFRS 9 (or IAS 39 as applicable) because
it did not have joint control would be affected upon
adoption
of IFRS
11 since theCO-ORDINATING
investor would have to
LARNACA
– FAMAGUSTA
recognise
directly
its
share
of
assets,
liabilities, revenues
COMMITTEE
and expenses relating to the joint operation.
SEPARATE FINANCIAL STATEMENTS
Joint operations are accounted for in the same manner in
1. On
13 April
2011 the
committee
a lunch at
the
separate
financial
statements
as organised
in the consolidated
Zephyrosstatements
Tavern in(i.e.,
Larnaca
with the
new director
of
financial
the investor
recognises
directly
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
its shares of assets, liabilities, revenues and expenses
related to the joint operations).
Joint
investments
in associates
and the
in
Hotel ventures,
in Larnacalike
with
a subject Field
Audits from
subsidiaries,
are accounted for in the separate financial
Inland Revenue.
statements of the venturer either at cost or under IFRS 9
(or IAS 39, as applicable) as permitted by IAS 27.
Panayiota Vayianou
Chairwoman
Accounting as at the beginning of
the earliest period Presented
derecognise
the equity
During the third ñ
quarter
of 2011
the method
Corporate
investment;
ñ recognise assets (goodwill if
any) and liabilities arising from
of its action plan and has
the joint operation;
ñ if the amount of net assets
recognised exceeds the carrying
amount of ofthe
equityonmethod
ñ Worked on the development
a survey
Corporate
investment
derecognised,
Governance. The survey will be sent to the the
listed
excess reduces goodwill to the
extent
members. It is also
envisaged
the results be
it exists,
with anythat
remaining
presented duringexcess
a press
conference,
recognised
againstwithin the
activities planned retained
for the celebration
of ICPAC’s 50th
earnings; and
ñ if the amount of net assets
is less
than
theand
ñ Worked on a whiterecognised
paper describing
the role,
duties
carrying
amount
of
the
equity
method investment derecognised,
organisation:
the difference is recognised
against retained earnings.
ñ Risk Management
51
79
Institute News
IFRS 11
ñ
Internal Audit
DISCLOSURES
TheOrganisation
disclosure requirements
ñ
and Methods for entities involved with
joint arrangements are established in IFRS 12.
UK
who 12,
are IAS
doing27business
withIAS
a UK
long oras even
IFRSthose
10, IFRS
(2011) and
28
company
theatUK.
(2011) areoutside
adopted
the same time). When adoption of
IFRS 11 requires a change in accounting, the impact of the
changeKrambia-Kapardis
is calculated as at the beginning of the earliest
Maria
period
presented
and the comparative periods are restated.
Chairperson
EFFECTIVE DATE AND TRANSITION
Adoption of IFRS 11 will require adjustments to the
organisation.
financial statements in two circumstances:
IFRS 11 is effective for annual periods beginning on or
after 1 January 2013, with early application permitted (so
Accounting as at the beginning of
Before
“Auditing EU Funded Projects”. The Αfter
seminar, in
level. It also keeps the
contacts
with
the regulatory
earliest
period
Presented bodies,
IAS
31
IFRS 11
derecognise assets
(including
for September
2011.
Securities ExchangeñCommission
(CySEC)
and the
Jointly controlled entity
Joint venture
goodwill
if
any)
and
liabilities;
accounted for using proportionate
ñ recognise equity method
Paper
on
Corporate
Governance
and
submitted
its
the industry,
as wellamount
as other
consolidation
investment
at the carrying
organized groups of
andtheassociations
(for example
net assets derecognised;
and Commercial Banks, Insurance
perform an impairment test and
Association of Cyprusñetc).
recognise
the impairment loss, if
any,
as
an
adjustment of retained
earnings.
ThisEuropean
publication
contains general
information
and is not intended to be comprehensive nor to provide specific
and International
initiatives
within only
its scope
abroad.
accounting, business, financial, investment, legal, tax or other professional
advice or services. This publication is not a
domain
and
continued
to
contribute
articles
to
the
substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any
Institute’s
magazine.
decision
or action
that may affect you or your business. Before making
or taking
anythat
action
may affect you
Belowany
aredecision
the main
topics
thethatCommittee
has
or your business, you should consult a qualified professional advisor. Whilst every effort has been made to ensure the
concentrated
on over and
the past
three months:
accuracyG.ofPapamichael
the information contained in this publication, this cannot
be guaranteed,
the author
of this article will not
Panicos
have any liability to any person.
Chairman
education committee and the IT committee on coorganising two seminars. One on fraud detection utilizing
will be offered before the endIn
of general,
the year. the word “complaint” is used to describe all
dissatisThe ECFA-ebulletin Volume 1kinds
Issueof1employees΄
was emailed
to all
the fieldshad
of
ECFA-SIG (special interest faction.
group) But,
and in
members
provided positive feedback onindustrial
this initiative.
relations and
human resources manageFinally, there are two articles in
this issue
of “Accountancy
ment,
it is important
to disCyprus” in the ECFA column.tinguish
The firstbetween
one is authored
by
the various
a member of our committee stages
Leonidas
Ieronymides with
of discontent:
By Demetris Ergatoudes*
Industrial Relations
DISSATISFACTION
Anything related to work, that creates unrest in the mind of
the employees, irrespective o whether or not they make
their
unrest known.
In
addition,
the report to be prepared by the regulator of
Employees’ complaints
26
80
COMPLAINTof the regulator. The Committee has decided
independence
‘Agreed
Procedures’
(‘AUP’).
A verbal orUpon
written
dissatisfaction
brought As
to thesuch,
noticethe
of
Committee
will inform
theunion/staff
Central Bank
of Cyprus
of the
the management
or trade
association
represendecision
tative. to circulate an illustrative example of the report to
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Industrial Relations
GRIEVANCES
Improvements can be brought about in handling human
relations problems, but in order to identify the manager or
supervisors who need help, the human resources manager
will need to know from where the complaints are coming,
together with the number and rate of such complaints.
From the records that the H.R. manager would keep, a
large number of complaints regularly flowing from certain
departments may indicate that the quality of supervision in
those departments is less than satisfactory, or that the
working conditions are out of line with the rest of the
Marios Agathangelou
organisation.
Chairman
Institute News
If a complaint is ignored, quashed or, in the opinion of the
employee, unfairly rejected, the complaint becomes a
grievance.
A grievance always carries a sense of injustice. The
COUNCILʼS
employee
feels that ACTIVITIES
a wrong has been done against him.
After a complaint has been formally or informally brought
During
the thirdof
quarter
of 2011management
the Council representative
of the Institute
to
the attention
the proper
met
four
times
and
considered
matters
of
interest
to ICPAC
and no action has been taken or satisfactory explanation
and to itthe
profession
at large. Other
dealt with were,
given,
becomes
a grievance
againstissues
management.
TYPES OF COMPLAINTS
In
to take appropriate
action Parperis,
on a complaint,
manbyorder
the President,
Mr. Theodoros
met with
the
agement
will
need
to
establish
and
evaluate
the
surroundnew Minister of Finance, Mr. Kikis Kazamias and
ing
circumstances.
complaint
is it?
A careful
discussed
measuresWhat
to bekind
takeno for
facing the
problems
of
examination
of the content of complaints shows that they
the Cyprus economy.
can be separated into three categories:
ñ
Complaints
related attended
to tangible
objects that
could
be
Officer
of the Institute,
the Council
meeting
of the
physically verified and tested (e.g. defective items)
ñ Complaints partially based on sensory experience but
chiefly on subjective reactions (e.g. heavy work)
ñ A mixture of fact and sentiment bound up with the
hopes and fears of the employees concerned (e.g. the
best jobs are given to the supervisor΄s favourites).
The least number of complaints are usually of the first catOn 22 and 23 September 2011 the President of the Institute
egory and the greatest number of the third.
and CEOs
of OF
the European
Federation of Accountants
THE
VALUE
THE INVESTIGATION
OF COM(FEE)
Member
Bodies
in
Vienna
and
a
Special
Meeting of
PLAINTS
A careful examination of each complaint enables the management to understand how employees are feeling. It also
gives top management insights into the quality of the lower
management and the ability of line supervisors to deal with
staff. Finally, an analysis of complaints contributes to the
important task of matching the intentions embodied in the
policies and procedures with what is actually happening.
This leads to a dynamic attitude towards dealing with situmainly to the abolition of the ‘corridor method’.
ations, i.e. allowing the organization to adapt to changes as
opposed
to maintaining
rigid
attitude
that remains
It also initiated
a studya of
FEE’s
discussion
paper
changeless
in
the
face
of
changing
circumstances.
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
An investigation may reveal, however, that the manager or
supervisors and employees concerned, have mutual confiCOMMITTEE
dence and understanding, such that dissatisfactions are
freely
theofsupervisor
in the knowledge
Duringdiscussed
the third with
quarter
2011 the Committee
carriedthat
out
justifiable
complaints
will
be
referred
to
seniors.
Conversely, investigation into departments from which
complaints
are received
may reveal
a situa1. On 13 April
2011 thespasmodically
committee organised
a lunch
at
tion
where
the
manager
is
behaving
in
an
autocratic
manZephyros Tavern in Larnaca with the new director of
ner
andRevenue
blockingof
communications
between
the employees
Inland
Larnaca Mr Marios
Kourouniades.
and higher management. Only perhaps when feelings
amongst
employees
reached
a dangerous at
pitch
2. On 4 May
2011 a have
seminar
was co-ordinated
Sundoes
Hall
the
supervisor
referwith
the situation
moreAudits
senior from
manageHotel
in Larnaca
a subjecttoField
the
ment.
example underlines first, the importance of the
InlandThis
Revenue.
H.R. manager’s keeping full, accurate and up-to-date staPanayiota
tistics
of allVayianou
the various kinds of complaints (absence, lateChairwoman
ness,
labour turnover) and secondly that these indices
should be used to cross-check each other if they are to be
CORPORATE
fully
effective. GOVERNANCE, INTERNAL AUDIT
Investigations may reveal the need to amend certain existDuring
the third
quarteror to
of create
2011 them
the where
Corporate
ing
procedures
and policies
they
Governance,
Internal
Audit
and
Risk
Management
do not already exist. In this sense, these statistics properly
committee has,
within(and
the itscope
of of
its the
terms
of managers
reference,
understood
and used
is one
H.R.
and industrial relations specialists functions to interpret
these statistics to top management) act as a control mechanism on management action. Similarly, they are a control
mechanism on the work of the H.R. Department - revealGovernance. The survey will be sent to the listed
ing deficiencies - recruitment, selection, or placement, the
need for different kinds of employee and management
training
and so during
on.
presented
In a forthcoming article I shall consider grievance procedures.
■
ñ Worked
on a white paper describing the role, duties and
organisation:
* Demetris
Ergatoudes is a retired (2006) Senior Manager of Popular
Bank and fellow to the Chartered Institute of Bankers, London.
ñ Risk Management
71
81
Institute News
ñ Internal Audit
Cyprus financing companies
Cyprus financing companies A step in the right direction
functions
As the
pressurewithin
is risingand
on
organisation.
corporations of varying sizes
to cut costs and emerge from
withdownturn
the European
the financial
in as
a shape asa possible,
Union Affairs committee,solid
has designed
seminar the
on
question of
efficient
The tax
seminar,
in
financing
once
again
comes
to the forefront. Whether
for September 2011.
companies
looking
to
European are
Council
Green
centralise
their
treasury
operations
or simply to
by the paper.
structure a single financing
transaction in a way that
minimises their tax cost,
study isPilides
By Natasha
Cyprus offers a number of
Manager
interesting alternatives.
same
time
recognising
the
local practicalities and sizes.
Tax Services
monitor closely
all
Since to becoming
a full
PwC Cyprus
initiatives
within
its
scope
member of the EU in 2004,
domain
continueditsto position
contributeasarticles
to the
Cyprus
hasandenhanced
a reputable
Institute’s
magazine.
international financial centre and has been on the “white
list” of all relevant international organisations, including
Panicos
Papamichael
the list G.
published
by the Organisation for Economic
Cooperation
and
Development
(OECD) following the
Chairman
April 2009 G20 Summit (a list from which most other
mainstream EU
jurisdictions
absent). Cyprus boasts a
ECONOMIC
CRIME
AND were
FORENSIC
plentiful
supply
of
highly
qualified
professionals and
extensive experience in providing tax, accounting,
administrative and consulting services to investors from all
over the world. Combined with its flexible legal system
and numerous tax advantages, these factors have
education committee and the IT committee on cocontributed to the popularity of Cyprus as a jurisdiction
organising
two financing
seminars. structures
One on fraud
detection utilizing
through which
are routed.
will
be offered
before
the endstructure
of the year.
Perhaps
the most
common
chosen by investors
involving Cypriot financing companies is the use of a
The
ECFA-ebulletin
1 Issue
1 was emailed
to all
Cypriot
company in Volume
back-to-back
financing,
as illustrated
below.
ECFA-SIG
(special interest group) and members had
BACK-TO-BACK STRUCTURE
In this back-to-back
structure,
non-EU
Cyprus”
in the ECFA financing
column. The
first oneanisEU/
authored
by
parent company establishes a Cypriot company which it
finances by means of a loan. The Cypriot company then
on-lends to its EU/ non-EU operating subsidiary. The
structure provides access to a number of tax benefits
O’Shea
Eoin
the Bribery Act. The UK Bribery Act will
including
the on
following:
2
82
Chairperson
FINANCIAL
ñ Low or noSERVICES
withholding COMMITTEE
tax on interest payments due to
the applicability of a favourable Cyprus double tax
Thetreaty
Financial
Services
Committee
network
or EU
directivesmonitors developments
operations,
a domestic level
well asexpense
on a European
ñ Potentialon deductibility
of as
interest
in the
borrowing
company
level.
It also keeps
abroad.
ñ No withholding tax on interest payments from Cyprus
at all times
which
discussed
with the Central
Bank of Cyprus.
THIN were
INTEREST
SPREADS
ON RELATED
PARTY
FINANCING
representatives
Committee
had
numerous
meetings
Now adding to of
thethe
benefits
already
available
in Cyprus
in
with
representatives
of the Central
Bank of
during
relation
to back-to-back
financing
is Cyprus,
the recently
publicized
positive
outcomeofofICPAC
the ongoing
which
various
concerns
were discussions
discussed
between
ICPAC
and
the
Commissioner
of
Income
on
regarding the provisions of the Directive issued Tax
by the
the matter.
Following
such
discussions,
the Commissioner
Central
Bank
of Cyprus
which
affect directly
or indirectly
has
formally
announced
specific
minimum
spreads on
related party financing transactions.
The newly formalised minimum acceptable spreads
provide additional comfort to the rather generic “arm’s
length” article of the legislation, which simply states that
that
the report
of the related
regulator
is to should
be in the
of out
an
transactions
between
parties
be form
carried
‘Agreed
Upon
Procedures’
(‘AUP’).
Ashave
such,
the
under terms
no different
to those
that would
applied
Committee
will
inform
the
Central
Bank
of
Cyprus
of
the
between unrelated parties.
the
Institutes
members. regarding the tax authorities’
Recent
developments
1
Institute News
Cyprus financing companies
YEARS 2008 ONWARDS
The minimum acceptable spreads are calculated after the
deduction of expenses directly or indirectly attributable to
the relevant financing transactions, i.e. they represent net
spreads.
Institute News
Interest-bearing loans
Loan amount
Spread
€ mln
%
< 50 ACTIVITIES
COUNCILʼS
0,35
50 - 200
0,25
> 200
0,125
and to theonprofession
at large.
Other
dealt to
withfurther
were,
position
back-to-back
loans
areissues
expected
enhance
the
competitiveness
of
Cypriot
financing
companies by providing certainty regarding related party
loans.
The minimum spreads accepted by the Commissioner of
new Minister
Finance, Mr. Kikis Kazamias and
income
tax are asoffollows:
Non
interest-bearing
the Cyprus
economy.loans going forward
For
interest-bearing
loans,
the minimum
acceptable
On non
7 September
2011 Mr.
Christos
Kyriakides,
Senior
spread is 0,35% irrespective of the amount of the loan.
Mediterranean
Federation
of Accountants
in Rome. loan
Based
on these spreads,
effective
tax on back-to-back
transactions entered into by Cypriot companies could be as
On 13
September 2011 a press conference was held at the
low
as 0,0125%.
Additionally,
any foreign
exchange
differences
(either
the Cyprus economy.
The press
conference
was given
by
realised or unrealised) should neither increase nor decrease
the taxable result.
On 22 and
23 September
YEARS
2003
TO 2007 2011 the President of the Institute
Final
tax liabilities
tax years
that have
already
been
Theodoros
Philippouforattended
a meeting
of the
Presidents
subject
to
examination
by
the
tax
authorities
will
remain
as
they
are.
In
cases
where
the
tax
examination
is
still
pending, the minimum spread acceptable on back-to-back
loans is 0,3%, irrespective of the size of the loans and
whether or not they bear interest. Again, any foreign
exchange differences should not affect the aforementioned
spread.
ACCOUNTING
STANDARDS COMMITTEE
EASILY
MET CONDITIONS
REGARDING THE
ABOVE SPREADS
The
spreads outlined
aboverelating
apply in cases
where a Cypriot
amendments
in IAS1
to changes
in the
company
borrows
from
a
related
party
and,
within
a
period
of
six
months,
uses
the
funds
to
finance
a
loan
to
another
related party. Funds borrowed and lent may be interestbearing
interest-free.
It also orinitiated
a study of FEE’s discussion paper
2
Companies drawing one loan to finance a number of loans
receivable, as well as companies drawing a number of
loans in order to finance a single loan receivable, may also
apply the minimum spreads to such transactions.
Nevertheless, each loan or financing transaction entered
into by a Cypriot company should be viewed separately for
Marios
Agathangelou
the
application
of the relevant spreads. Therefore, any
Chairman
companies entering into multiple back-to-back loans may
not view such loans in aggregate for the purpose of
LARNACAthe
– FAMAGUSTA
CO-ORDINATING
determining
minimum acceptable
spread.
COMMITTEE
The spreads specified above are also applicable in the case
where
Cypriot
company
obtains
a loan from
a bank
Duringathe
third quarter
of 2011
the Committee
carried
out
(provided
suchactivities:
a loan is guaranteed by other companies
the following
within the same group), and uses funds obtained to finance
loans
1. Onto13related
April parties.
The minimum acceptable spreads may also apply in cases
where credit instruments other than loans are used (subject
to pre-approval – see below).
Hotel in Larnaca
with a subject
Field RULINGS
Audits from the
CERTAINTY
OBTAINED
THROUGH
Inland Revenue.
One of the most positive developments regarding the tax
Panayiota Vayianou
authorities’
position on back-to-back financing is the
possibility
Chairwomanof obtaining advance rulings from the
Commissioner of Income Tax regarding minimum
acceptable
spreads.
CORPORATE
GOVERNANCE, INTERNAL AUDIT
Rulings provide an excellent tool to companies wishing to
obtain certainty regarding the spreads applicable to any
back-to-back financing transactions entered into
(especially in cases involving sizeable transactions or grey
areas, such as the use of financial instruments other than
loans).
OPPORTUNITIES ARISING
Governance.
The not
survey
be the
sentopportunity
to the listed
Recent
developments
onlywill
offer
to
companies
in Cyprus. structuring
Its results will
sent to all
investors
for additional
of be
back-to-back
transactions
through
but they also
possible
members.
It is Cyprus,
also envisaged
thatmake
the itresults
be
for presented
existing Cypriot
to further enhance
duringcompanies
a press conference,
within the
the
efficiency
of planned
any back-to-back
transactions
already
in
activities
for the celebration
of ICPAC’s
50th
place. By reviewing their current financing arrangements
and
identifying
possibilities
for improvement
of their
ñ Worked
on aany
white
paper describing
the role, duties
and
Cypriot
tax
position,
taxpayers
may
make
full
use
of
responsibilities of the following departments withinthe
an
benefits
available to them regarding related party
organisation:
financing. ■
ñ Risk Management
1
83
Institute News
ñ Internal Audit
Lease Accounting
IAS 17 Leases - changes in the making
Leasing as an alternative
organisation.
form of financing experienced unprecedented
growth
with the European
over
the
last
three
decades,
especially The
in asset
driven
seminar,
in
industries
like
that
of
aircoordination with the Education Committee, is planned
lines, real estate and shipfor September 2011.
ping.
European Council Green
Lease by
accounting,
the paper. as stipulated by on
IASa17study
today,of
is subñ The committee has embarked
the
objectivechange
of the
ject to The
significant
governance
after develop
the
International
By Marios
Demetriades,
processes
best Standards
practices, Board
at the
Accounting
Director,
same time recognising the (IASB)
and
sizes.
and the Financial
Kanaris,
Demetriades
&
to monitor
closely
all
Accounting
Standards
Board
AssociatesStatistical
initiatives
within
its
scope
(FASB) released an exposure
Service
of Cyprus
domain
and continued todraft
contribute
articles
to the
on 17 August
2010.
Even though implementation of the new standard is not
Panicos
Papamichael
expectedG.before
2014 and may change further by that date,
Chairman
this article aims to bring a heads up regarding the main
proposed changes in IAS 17.
ACCOUNTING
(ECFA)ofCOMMITTEE
The overriding objective
the Boards (IASB and FASB)
is to bring the rights and obligations of a lease on the balDuring
the in
third
ECFA
subcommittee
ance sheet
an quarter
attempt of
to 2011,
satisfythe
their
conceptual
frameon
organizing
seminars
had been This
collaborating
with
the
works
and increase
transparency.
effectively
means
education
committee
and
the
IT
committee
on
cothat the classification between finance and operating leases
organising
two seminars. One on fraud detection utilizing
will be abolished.
will
be offered before the end of the year.
SCOPE
The
1 Issue
was emailed
to all
The ECFA-ebulletin
Boards propose Volume
to include
in the1scope
of the leasing
ECFA-SIG
(special
interest
group)
and
members
standard leases of property, plant and equipment and had
not
provided
feedback
thisboards
initiative.
leases of positive
intangible
assets.onThe
also propose to
exclude the following:
Cyprus”
ECFAfor
column.
first one
is authored
ñ Leasesintothe
explore
or useThe
natural
resources
(such by
as
a member
Leonidas Ieronymides with
minerals,ofoilour
andcommittee
natural gas)
ISA240”
the second
by a well-known UK lawyer
ñ Leases and
of biological
assets
have
serious
on thosemeasured
doing business
the
ñ Leases
of implications
investment property
at fair invalue
2
84
Chairperson
under IAS 40 – Investment property
Forthe
leases
be immaterial
the financial
financial
in
bankdetermined
industry, toinvestment
and to
other
statements
in
the
aggregate,
management
may
consider
developing
policy contacts
similar towith
those
for
level.
It alsoa keeps
thecommonly
regulatoryused
bodies,
property,
plant
and
equipment
where
only
expenditure
over a certain
amount isCommission
considered for(CySEC)
capitalisation.
Securities
Exchange
and the
Despite theviews
cost of
applyingthe
the industry,
model, theasBoards
propose
exchange
regarding
well as
other
not
to
exclude
short-term
leases
or
leases
of
non-core
assets, as these
give Commercial
rise to materialBanks,
assets and
liabilAssociation
of may
Cyprus
Insurance
ities
and
their
exclusion
would
counter
the
objective
of
bringing the rights and obligations on the balance sheet.
Nonetheless,
a simplified
accounting
method
proposed
During
the second
quarter
of the year
the is
Committee
whereby forthe
leases
of less crisis
than 12
months
(with extension
monitored
economic
and
its consequences
in
options)
lessees
recognise
a
lease
asset
and
liability
equal
to the gross payments remaining on each lease. Lessors
abroad.
would not recognise any lease asset or liabilities but would
continueare
to recognise
underlying
Both lessees
Below
the main the
topics
that theasset.
Committee
has
and
lessors
would
recognise
payments
for
the
lease
in
the
income statement over the lease term.
LESSEE ACCOUNTING
The Boards
right-of-use
(ROU)
model
lessee
issued
by thepropose
Central aBank
of Cyprus
and cited
itsfor
opinions
accounting.
This
model
requires
the
lessee
to
recognise
which were discussed with the Central Bank of Cyprus. an
asset representing its right to use the leased item for the
lease term and
a corresponding
liability forbytheParliament,
obligation
Following
the passing
of the legislation
to pay rentals atofthe
of the lease.
All
representatives
thecommencement
Committee haddate
numerous
meetings
leases
would
be
accounted
for
in
a
similar
manner
under
this approach;
classifications
of finance
anddiscussed
operating
which
varioustheconcerns
of ICPAC
were
leases
used
today
would
be
eliminated.
At initial of
measurement,
members
our Institute.lessees would measure the rightof-use of the asset and the obligation to pay rentals at
“cost”.
Costthe
is defined
presentby
value
of the lease
In
addition,
report toasbethe
prepared
the regulator
of
payments,Bonds
plus, was
in thediscussed,
case of the
initial
Covered
as right-of-use
well as the asset,
issue of
the
direct costs incurred
by the lessee
e.g. commissions,
legal
independence
of the regulator.
The Committee
has decided
fees,the
closing
etc.isPresent
would
be
that
reportthe
of transaction
the regulator
to be invalues
the form
of an
determined
using
the
lessee’s
incremental
borrowing
rate
as the discount
at the
of inception
the lease.
If
Committee
will rate
inform
thedate
Central
Bank of of
Cyprus
of the
the
rate
the
lessor
is
charging
implicit
in
the
lease
is
readdecision to circulate an illustrative example of the report to
ily determinable,
this rate can be used in lieu of the increthe
Institutes members.
mental borrowing rate.
1
Institute News
Lease Accounting
For subsequent measurement the Boards propose that the
right-of-use asset should be measured at amortised cost.
The expense would therefore be presented as amortisation
expense rather than rent expense. The lessee’s obligation to
pay rentals would also be subsequently measured at amortised cost using the effective interest method. A lessee may
measure its right-of-use assets at fair value it if it revalues
all
of its owned assets
in the same class of property, plant
COUNCILʼS
ACTIVITIES
and equipment.
unconditional right to use it over the lease term. The lessor
therefore recognises a receivable, representing the right to
receive rental payments from the lessee, and records revenue. In addition, a portion of the carrying value of the
leased asset is viewed as having transferred to the lessee
and is derecognised and recorded as cost of sales.
Subsequent measurement of the lessor's receivable would
which
was published
in April
is open
for comments
be
at amortised
cost using
the2011
effective
interest
method,
up
to
30
September
2011.
resulting in interest income. The performance obligation
would decrease as the lessor permits the lessee to use the
Mariositem
Agathangelou
leased
over the lease term. Under the derecognition
Chairman
approach, the lessor would not remeasure the residual asset
except for impairment. The residual asset would not grow
LARNACA
over
time. – FAMAGUSTA CO-ORDINATING
COMMITTEE
Institute News
Regarding
the and
leaseconsidered
term, lessees
would
be required
to
met four times
matters
of interest
to ICPAC
estimate
the
ultimate
expected
lease
term
and
periodically
reassess
that estimate
with the definition of the lease term
among others,
the following:
being the longest possible term more likely than not to
occur.
Further to the above, the Boards propose that purchase
options are only recognised upon exercise and that contindiscussed measures to be taken for facing the problems of
gent cashflows are measured on an expected outcome techthe Cyprus economy.
nique.
On 7 September
2011 Mr. Christos Kyriakides, Senior
LESSOR
ACCOUNTING
Mediterranean
Federation
Accountants
in Rome.
The
Boards propose
a dualofmodel
for lessor
accounting.
Depending on the economic characteristics of the lease, a
On 13 September
2011either
a pressa conference
was obligation
held at the
lessor
would apply
performance
Offices oforthe
Institute concering
proposals
by ICPAC
for
approach
a derecognition
approach.
The approach
used
isthe
notCyprus
a choice
for the lessor
but depends
on whether
or not
economy.
The press
conference
was given
by
exposure
to significant
risks and
of the
leased item
the President
of the Institute
Mr.benefits
Theodoros
Parperis.
is retained.
The
obligation
wouldManager
be used Mr.
for
Mr. performance
Theodoros Parperis
andapproach
the General
leases
wherePhilippou
the lessorattended
has retained
exposure
to significant
Theodoros
a meeting
of the
Presidents
risks or benefits associated with the leased asset, either
during the term or subsequent to the term of the contract,
by having the ability or expectation to generate significant
returns from or re-leasing or selling the asset.
Under the performance obligation approach, the underlyCOMMITTEESʼ ACTIVITIES
ing leased asset continues to be accounted for as an economic
resource ofSTANDARDS
the lessor and COMMITTEE
remains on the lessor's
ACCOUNTING
balance sheet. The lessor recognises a lease receivable,
representing
to receive
payments
from the
During the the
lastright
meeting
the rental
committee
studied
the
lessee,
with
a
corresponding
performance
obligation,
amendments in IAS1 relating to changes in repthe
resenting
the of
obligation
permit theand
lessee
to use
the
presentation
financialtostatements
IAS19
relating
leased
asset.
The
performance
obligation
is
satisfied
(and
revenue recognised) over the lease term.
The
derecognition
approach
assumes
thatdiscussion
the lessorpaper
has
‘Combined
Financial
Statements’.
The
performed by delivering the leased asset and provided an
2
The Boards propose that accounting by lessors for optional
renewal periods would generally be symmetrical with the
accounting by lessees for those options. Same principles to
those in place for lessees apply for contingent cash flows
as well.
TRANSITION AND EFFECTIVE DATE
Following initial exposure draft issued in August 2010, the
Boards expect to issue a second exposure draft by the end
Inland Revenue.
of 2011. The target date for issuing the revised IFRS is
expected in 2012 and the effective date not earlier than
Panayiota Vayianou
2014.
Chairwoman
CONCLUSION
The present article is by no means a detailed account of the
proposed
changes
for quarter
IAS 17 but
brief summary
of the
During the
third
of a 2011
the Corporate
key
proposals. Internal
Details over
sale and
Governance,
Audittransactions
and Risk like
Management
leaseback
and
sub-leasing
have
been
left
out
for
the sake
of
being concise
and to the point.of its action plan and has
commenced
the implementation
Even though draft, the revised IAS 17, will have a significant
impact on
statement
the Balance
sheet
ñ Worked
onthe
theIncome
development
of aand
survey
on Corporate
of affected
entities.
therefore
need
to
Governance.
TheManagement
survey will will
be sent
to the
listed
assess
in advance
impactIts
onresults
covenants,
companies
in the
Cyprus.
will financial
be sent ratios
to all
and members.
performance
measures
so as to that
plan the
financing
It is
also envisaged
resultsand
be
otherpresented
needs accordingly.
during a■ press conference, within the
organisation:
For those interested, more details are available at
ñ Risk Management
www.ifrs.org
1
85
Institute News
ñ Internal Audit
Expropriation of property
The rights of the citizens are violated
in the cases of expropriation of property
organisation.
The Cyprus Land and
Property Owners Association
(KSIA ) has been receiving
serious complaints from
property owners whose
for September 2011.
property
has
been
expropriated
by
the
Government.
More specifically property
owners of small , medium
and large properties have
contacted the Secretary of
By Anna Nicolaou Soteriadou KSIA
at theclosely
Cyprus
ñ The committee has continued to monitor
all
Vice President KSIA
Chamber
of
Commerce
and
expressed
domain and continued toIndustry
contributeand
articles
to the
complaints
because
their
land has been expropriated for “public interest” but in the
meantime
reasonable compensation has been offered in
Panicos
G.no
Papamichael
due time. Compensation payment is delayed and the
Chairman
property owner has no choice but to wait for an unfair
system to move
on withAND
the necessary
procedures.
ECONOMIC
CRIME
FORENSIC
The situation is critical as the number of such cases had
risen dramatically
and the
amount
compensation
for
During
the third quarter
of 2011,
the of
ECFA
subcommittee
damages
whichseminars
the Government
owns to thewith
owners
on
organizing
had beennow
collaborating
the
has
reached
millions
of
Euros.
The
payments
are
education committee and the IT committee onbeing
copostponed two
and the
affected
property
owners
are facing
an
organising
seminars.
One
on fraud
detection
utilizing
unfair
situation.
Relevant to the issue is the fact that the estimated value
proposed
by the valuers
the 1Land
Registry
as
The
ECFA-ebulletin
Volume 1atIssue
was emailed
to all
compensation
for
expropriated
property
is
always
very
low
and does not
represent
the true
value of the land. As
provided
positive
feedback
on market
this initiative.
Recently
Human
Finally,
there arethe
twoEuropean
articles in thisCourt
issue ofof“Accountancy
Cyprus”
in the
ECFA column.
The first
is authored
Rights
(ECHR)
ruled that
the one
Republic
of by
Cyprus has violated the rights of its
ISA240”
and theinsecond
a well-known
UK lawyer
citizens
the bycase
of Michael
Theodosiou Ltd.
2
86
Chairperson
a result to this almost all cases end up in court. This fact
has been pointed out by the auditor General that a very big
number of disputes between land owners and the State are
being decided by the courts.
Furthermore, the property owners are stressing the fact that
The situation
critical
as the number
of
organized
groups is
and
associations
(for example
Association
of Cyprus
Banks, Insurance
such cases
had Commercial
risen dramatically
and
the amount of compensation for damages
During
the the
second
quarter of the
year
the Committee
which
Government
now
owns
to the
owners has reached millions of Euros.
The payments are being postponed and
abroad.
the affected property owners are facing
an unfair
concentrated
on situation.
over the past three months:
the valuers at the Land Registry who are given the
responsibility to prepare the valuations are not qualified to
make these valuations. It is a conclusion drawn upon due
to the rulings of the courts in all those cases that have been
already decided, in which the ruling in almost all of them,
accepts the valuation offered by the property owner’s
valuer and not that of the Land Registry.
Recently the European Court of Human Rights (ECHR)
ruled that the Republic of Cyprus has violated the rights of
its citizens in the case of Michael Theodosiou Ltd. This
decision indicates that the Government needs to act in
order to alleviate the unfairness that the current condition
creates for the property owners. The Cyprus Land and
Property Owners Association (KSIA) welcomes the
decision and asks for measures to be taken without further
delay to prevent such violations of the rights of the
citizens. Additionally KSIA believes that the establishment
of a court for expropriated property – as done in other
countries – seems to be the only way to solve this unjust
situation. We are ready to offer our views on the matter to
Government officials. ■
1
Institute News
The Cyprus and International Economy
Economic
Institute Bulletin
News
THE BANK OF CYPRUS GROUP ECONOMIC RESEARCH DIVISION PUBLICATION
Edited by Elena Triantafyllou
WORLD ECONOMY
According to the International Monetary Fund’s latest
Global Update (June 2011), the global economy expanded
at an annualized rate of 4,3% in the first quarter of 2011.
among others,
the seems
following:
Economic
activity
to be slowing down temporarily,
and downside risks have elevated again. Overall, the
global
expansion 2011
remains
unbalanced.
On 5 September
a delegation
of the Institute headed
Growth
in mostof emerging
economies
new Minister
Finance, and
Mr. developing
Kikis Kazamias
and
continues to be strong. However, greater than expected
weakness exhibited in U.S. economic activity, and
the Cyprus economy.
renewed financial volatility from concerns about the fiscal
woes in the euro area periphery, pose greater downside
On 7Risks
September
2011to Mr.
Christos
Senior
risks.
also seem
prevail
due toKyriakides,
increased signs
of
overheating
are becoming
increasingly
apparent
in
Officer of thethat
Institute,
attended the
Council meeting
of the
many
emerging Federation
and developing
economies.in Rome.
Mediterranean
of Accountants
Mr.
Theodoros
Parperis and the General Manager Mr.
World
economy
Theodoros
Philippou attended a meeting of the Presidents
USA
and
CEOs
Euro
Areaof the European Federation of Accountants
(FEE)Germany
the General
France Assembly.
up to 30 September
2011. was underpinned by many
Additionally,
the outturn
unanticipated offsetting factors, with key among the
Marios Agathangelou
negative
surprises being the devastating effect of the
earthquake
Chairman and subsequent tsunami on the Japanese
economy. The natural disaster led to supply chain
disruptions,
heavily onCO-ORDINATING
industrial production and
LARNACAweighing
– FAMAGUSTA
consequently
on
exports
from
Japan
to the U.S. and other
COMMITTEE
countries.
In contrast, growth surprised positively in the euro area,
mainly supported by upbeat investment in Germany and
France.
Zephyros
Tavern
in Larnaca
with the new
director
of
For
the whole
of 2011,
the International
Monetary
Fund
Inland
Revenue
of
Larnaca
Mr
Marios
Kourouniades.
projects that the world economy is to expand at a rate of
4,3%, while for 2012 the relevant projection points to an
2. On 4 May
seminar‘World
was co-ordinated
at SunJune
Hall
expansion
of 2011
4,5%a (IMF:
Global Update’,
2011).
Inland Revenue.
GDP (%)
Panayiota Vayianou
Chairwoman
Consumer
Price Index
(%)1
Unemployment(%)2
2011
2012 GOVERNANCE,
2011
2012 INTERNAL
2011 AUDIT
2012
CORPORATE
4,3
4,5
During
the
of 1,62011 the
2,5
2,7third quarter
2,2
8,5 Corporate
7,8
Governance,
Internal
Audit
and
Risk
Management
2,0
1,7
2,3
1,7
9,9
9,6
committee
has,
the scope of
of reference,
3,2
2,0 within 2,2
1,5its terms6,6
6,5
2,1
1,9
2,1
1,7
9,5
9,1
Italy
1,0
1,3
2,0
2,1
8,6
8,3
Spain
0,8
1,6
2,6
1,5
19,4
18,2
United Kingdom
1,5
2,3
4,2
2,0
7,8
7,7
Russia
4,8
4,5in Cyprus.
9,3 Its results
8,0 will be
7,3 sent to7,1all
companies
China
9,6
5,0 envisaged
2,5 that the
4,0 results4,0be
members.9,5It is also
India the last meeting the committee studied the
8,2
7,8during 7,5
6,9
-within the
presented
a press conference,
During
activities
planned
for
the
celebration
of
ICPAC’s
50th
Australia
3,0
3,5
3,0
3,0
5,0
4,8
Greece
-3,5
1,1
2,5
0,5
14,8
15,0
presentation
of financial statements and IAS19 relating
ñ
Worked
on
a
white
paper
describing
the
role,
duties
and
Cyprus
0,0
3,4
2,3
6,3
5,6
mainly
to the abolition of the ‘corridor method’.
1 Movements in consumer prices are shown as the year-over-year changes in annual averages.
organisation:
2ItNational
of unemployment
alsodefinitions
initiated
a study may
of vary.
FEE’s discussion paper
‘Combined
Financial
Statements’.
TheJunediscussion
paper
Sources:
International
Monetary Fund
– Global Update,
2011 and World
Economic Outlook, April 2011, European Commission: European Economic Forecast Spring
ñ Risk Management
2011.
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
11
87
Institute News
ñ
Internal ECONOMY
Audit
CYPRUS
TheOrganisation
Cyprus economy
exhibited GDP growth at a rate of
ñ
and Methods
1,8% over the first quarter of 2011, compared to the
corresponding
quarterwill
of 2010.
The secondary
sector of the
The
white document
be circulated
to all members
of
economyand(construction,
manufacturing),
ICPAC
will help clarify
the boundariescontinued
and the
registering a of
negative
over the within
said quarter,
interaction
theseperformance
three functions
and
contrary
to
the
positive
growth
exhibited
by
the trade
organisation.
sector, the tourist sector, the banking and services sectors.
Even though the performance of the Cypriot economy over
the second quarter of 2011 has not yet been released, it is
expected to have also been in positive ground.
coordination
withthe
thetragic
Education
Committee,
is planned
However,
following
explosion
which took
place
for
September
2011.
on 11 July 2011, at the Naval Base in Mari Village, and the
ñ
The committee
studied
theonEuropean
Councilarea
Green
devastating
effects that
it had
the surrounding
and
Paper on
Governance
andmodern
submitted
its
especially
the Corporate
island’s biggest
and most
Electric
response
to
the
questions
posed
by
the
paper.
Power Station at Vassiliko, the Cypriot economy was dealt
ñ
The major
committee
has embarked
on a study
ofofthe
another
blow. Having
lost approximately
60%
its
Institute’s
The objective
of the
electric
powerGovernance
productionprocedures.
capacity (losses
amounting
to
€1,5billion),
the
Electricity
Authority
of
Cyprus
(EAC)
hadprocesses
no choice
butwill
to incorporate
effect periodic
power cuts
on
which
best practices,
at the
households
businesses
over
Cyprus, on
daily
same timeand
recognising
theall
local
practicalities
anda sizes.
basis
few exceptions,
as for
instance closely
hospitals).
ñ
The(with
committee
has continued
to monitor
all
These
power
cuts
are
expected
to
lead
to
chain-reaction
negative
on the whole
economy,
restraining
domaineffects
and continued
to contribute
articles
to the
production
and
productivity,
while
potential
negative
effects on tourism due to last minute cancellations, are not
yet known. Consequently, while previous projections
regarding the Cypriot economy and its course within the
Chairman
current year pointed towards GDP growth of +1,5%,
following the aforementioned tragic event, it is expected
ECONOMIC
that economicCRIME
activityAND
may FORENSIC
well drop at zero levels, or
ACCOUNTING
(ECFA)
COMMITTEE
even turn negative.
During
quarter of 2011,
the ECFAfull
subcommittee
Taking the
intothird
consideration
that regaining
productive
capacity
by
the
EAC
so
as
to
be
able
to
provide
on organizing seminars had been collaborating with
the
uninterrupted
power supply
notIT
expected
to be attained
education
committee
and isthe
committee
on coprior to year
end,
combined
the fact
that theutilizing
Cypriot
organising
two
seminars.
Onewith
on fraud
detection
government
has
a
huge
financial
burden
in
order
to
IT and the other on fraud detection and prevention. repair
Both
the
large-scale
destruction
caused,
the
Cypriot
economy
is
not expected to be in a position to return to positive growth
in 2012.
The main macro-economic indicators of the Cyprus
provided
on thisand/or
initiative.
economy positive
over thefeedback
first quarter
half of 2011, are
analyzed below.
Cyprus”
in the ECFA
column.
The firstPrices
one isregistered
authored by
The Harmonized
Index
of Consumer
an
aincrease
memberofof3,6%
our committee
Leonidas
Ieronymides
with
for the period
January
to June 2011,
compared
to the corresponding
six-month
period of under
2010.
the
title “Fraud:
The auditor’s
responsibilities
For the same
period
2011 the Consumer
Price
ISA240”
andsix-month
the second
by of
a well-known
UK lawyer
Index
registered
an
increase
by
3,3%,
compared
to
the
corresponding
period of 2010.
have
on those doing business in the
2
88
UK
even of
those
who are
doing business
a UK
The or
number
registered
unemployed
personswith
at the
end
company
outside
of June 2011
rosethetoUK.
27.102. Compared to June 2010 an
increase by 4.642 persons was registered, or 20,7%, which
is mainly
attributed to the trade and construction sectors,
Maria
Krambia-Kapardis
the
restaurants
Chairperson sector, the transport and storage sector, the
manufacturing sector, the education sector, as well as to
new entrants to
the labor force,
where an increase by 863
FINANCIAL
SERVICES
COMMITTEE
unemployed persons was observed. The seasonally
adjusted rate of unemployment reached 7,6% in June 2011
as compared to 6,5% in June 2010 and 6,5% in December
2010.
level.
It also keepsfiscal
contacts
withended
the regulatory
The government’s
balance
in deficit bodies,
by the
such
asthe
the first
Central
of Cyprus
(CBC),
thecompared
Cyprus and
end of
halfBank
of 2011
at –3,5%
of GDP
to
Securities
Exchange
Commission
(CySEC)
and
the
a deficit of –1,9% of GDP for the same six-month period
Commissioner
of be
Insurance
order the
to
of 2010. It should
noted thatcompanies
at the end in
of 2010,
government
deficit
was at –5,3%
of GDP.as well as other
exchange
views
regarding
the industry,
Public debt was
60,8% of
GDP by theBanks,
end of 2010,
from
Association
of atCyprus
Commercial
Insurance
58,0%
of
GDP
at
end-2009.
For the period January – June 2011, tourist arrivals reached
973.768 compared to 877.958 over the corresponding sixmonitored the economic crisis and its consequences in
month period of 2010, registering an increase of +10,9%.
Over the five months of January – May 2011, tourist
abroad.
income is estimated at €456,9 million compared to €383,0
million over the corresponding period of 2010 2010, also
Below
are antheincrease
main by
topics
thatIt the
Committee
has
registering
19,3%.
should
be noted that
concentrated
over the period
past three
months:
for the same on
five-month
of 2011,
tourist per capita
spending, rose to €699,5 compared to €638,6 over the
corresponding
last
period,
marking an increase by
ñ
Law relating
to year
Covered
Bonds
9,5%.
OUTLOOK
issued
by the Central Bank of Cyprus and cited its opinions
The outlook for the Cypriot economy following the
devastating explosion at the Naval Base at Mari Village, is
extremely bleak. Further to the heavy and irreplaceable
losses of human lives, the explosion caused massive
with
representatives
of the
Central Bank and
of Cyprus,
destruction
in vital
infrastructure
meansduring
that
which
various
concerns
of
ICPAC
were
households and businesses will have to incur discussed
increased
regarding
provisions of the Directive issued by the
costs in thethe
future.
members
Institute. estimate, the total cost to the
Based onofaour
preliminary
Cypriot economy to be incurred within 2011 rises to
approximately
billion,
or prepared
17% of GDP.
estimate,
In
addition, the€3
report
to be
by theThis
regulator
of
takes intoBonds
consideration
that the as
decrease
theissue
total power
Covered
was discussed,
well asinthe
of the
production simultaneously
increases
the cost has
perdecided
unit of
independence
of the regulator.
The Committee
production,
while
dependence
on
older
and
less
efficient
units, also contributes to elevated costs of electric power.
Furthermore, it has been added to the estimates, that
businesses had to revert to buying electric power
generators in order to secure uninterrupted supply of
the
Institutes
members.
electric
power,
thus incurring increased costs (since the
ACCOUNTANCY
ACCOUNTANCY CYPRUS
CYPRUS ñ
ñ VOLUME
VOLUME 104
104 ñ
ñ SEPTEMBER
SEPTEMBER 2011
2011
Institute News
Watch Negative-RWN for a possible downgrade. On 31
May 2011, Fitch proceeded with the downgrade of the
long-term issuer default ratings of the Republic of Cyprus
to ‘Α-’ from ‘ΑΑ-’, with a negative outlook.
electricity supplied by the EAC is less costly). It should be
pointed out that a recent estimate effected by EU experts
on the total costs to be incurred by the Cypriot economy
due to the destruction, points to approximately €2,7
billion.
Institute News
Moody’s also downgraded the Cypriot economy on 24
February, 2011 by two notches to ‘Α2’ from ‘Αa3’, with a
stable
However,
on 2011
16 May,
Moody’s
which outlook.
was published
in April
is open2011
for comments
announced
that it placed
up to 30 September
2011.the Cyprus economy anew under
review for a possible downgrade. Following the largescale destruction of the aforementioned explosion, and the
Marios Agathangelou
increasingly fractious political climate in Cyprus, which
Chairman
failed to allow an agreement on an immediate adoption of
fiscal disciplinary measures for the economy, Moody’s furLARNACA
– FAMAGUSTA
CO-ORDINATING
ther
downgraded
on 27 Ιουλίου,
2011 the Cypriot econCOMMITTEE
omy by another two notches to ‘Βaa1’ from ‘Α2’, with a
negative outlook.
the following
activities:
Standard
& Poor’s
also downgraded the Cyprus economy
The increase in the costs incurred relating to electricity,
will exert inflationary pressures, and consequently push
COUNCILʼS
ACTIVITIES
the
nominal GDP upwards.
The nominal GDP, contrary to
the real GDP, does not take into account inflation, and
During theelevated
third quarter
of 2011
the Council
of the Institute
therefore,
prices,
which
are expected
in the
following
months
(not onlymatters
of electricity,
as a
met four times
and considered
of interestbut
to ICPAC
consequence
of
other
products
as
well),
are
expected
to
inflate nominal GDP.
It should be noted that public finances were at a critical
On 5 even
September
delegation
the Institute
headed
point
prior 2011
to thea tragic
event,ofwith
many analysts
by the for
President,
Mr. Theodoros
Parperis,
with the
calling
the urgent
need to adopt
fiscal met
disciplinary
measures.
Ratingof agencies,
the
new Minister
Finance, repeatedly
Mr. Kikisdowngraded
Kazamias and
Cyprus
Republic’s
long-term
issuer
default
ratings,
citing
increased
over the government’s fiscal metrics,
the Cyprusconcerns
economy.
the absence of disciplinary measures, the small size of the
island’s economy, and the disproportionately large size of
On country’s
7 September
2011 Mr.
Christos
Senior
the
banking
sector,
whichKyriakides,
is considerably
Officer of
Institute,
attended
the Council meeting of the
exposed
tothe
Greek
government
bonds.
More specifically, Fitch Ratings announced on 17 January
2011,
the Cypriot
was placedwas
under
On 13that
September
2011economy
a press conference
heldRating
at the
on 30 March, 2011, to ‘Α-’ from ‘Α’, with the outlook
1. Onnegative.
13 April 2011
the committee
organised
lunch of
at
being
The long-term
sovereign
creditarating
the
Cyprus Tavern
Republic
lowered
further
July 2011
Zephyros
inwas
Larnaca
with
the on
new29director
of
to
‘BBB+’
from ‘A-’,
with aMr
negative
Inland
Revenue
of Larnaca
Mariosoutlook.
Kourouniades.
Hotel: Above
in Larnaca
subject
Field Audits
the
Note.
reportwith
takesa into
consideration
facts from
and data
Inland
Revenue.
valid as of 31 July 2011. ■
MAIN
ECONOMIC
INDICATORS
the President
of the Institute
Mr. Theodoros Parperis.
Panayiota Vayianou
Chairwoman
2007
and
CEOs
the European
Federation of Accountants5,1
G.D.P.
(realofgrowth
- %)
(FEE)
Member Bodies
Unemployment
(%) in Vienna and a Special Meeting of4,0
the
General
Assembly.
Inflation (Consumer Price Index - %)
2,4
Harmonised Index of Consumer Prices - %
2,2
Fiscal balance (% GDP)
COMMITTEESʼ
ACTIVITIES
+3,4
Public debt (% GDP))
58,3
2008
2009
20101
20112
Governance,
Internal
3,6
-1,7 Audit and
+1,0 Risk Management
0,0
committee
has,
within
the
scope
of
its
terms
of
reference,
3,6
5,3
6,5
7,0
4,7
0,3
2,4
3,6
4,4
0,2
2,6
3,8
+0,9 on the development
-6,0
-5,3
-7,0^
ñ Worked
of
a survey on
Corporate
48,4
58,0
60,8
65,0
companies
in Cyprus.
Its results
sent to all
-17,7
-7,9
-8,9 will be -8,0
members.
It
is
also
envisaged
that
the
results be
3,00
1,75
1,75**
--presented during a press conference, within the
Current AccountSTANDARDS
Balance (% GDP)
-11,6
ACCOUNTING
COMMITTEE
Repo rate* (31 Dec.-%)
4,00
of 2006,
financial
and rate
IAS19
relating
*presentation
As of 1st September
the main statements
refinancing operations
(repo) replaced
the marginal lending facility rate (Lombard) for the purpose of pricing local currency bank
loans. It is also noted that as of 1st January 2008, Cyprus joined the eurozone and therefore, interest
rates shallon
be asetwhite
by the European
Central Bank. the role, duties and
ñ Worked
paper describing
mainly
to
the
abolition
of
the
‘corridor
method’.
**ECB marginal lending facility
^Provided no corrective measures are taken
organisation:
It also
initiated
a Cyprus’
studyeconomy:
of FEE’s
paper
Sources
of statistical
data for
Ministry discussion
of Finance, Central
Bank of Cyprus & Statistical Service
Financial Statements’. The discussion
1‘Combined
Estimate
2 Bank of Cyprus Group Economic Research Division Projections
ACCOUNTANCYCYPRUS
CYPRUSñ
ñVOLUME
VOLUME104
104ñ
ñSEPTEMBER
SEPTEMBER2011
2011
ACCOUNTANCY
paper
ñ Risk Management
31
89
Institute
News
Practice management
tips
ñ Internal Audit
How to Make Your Small Practice
a Big Success
Practice Management Tips for SMPs
organisation.
Chairperson
By Giancarlo
Attolini, in
Deputy
Chair, IFACwith
SMP the
Committee
(see bio) and
ñ
The committee,
collaboration
European
PaulUnion
Thompson,
Director,has
SME
and SMPa Affairs,
AffairsDeputy
committee,
designed
seminarIFAC
on
Once your practice
is able
to identify(CySEC)
its edge, itand
should
INTRODUCTION
for September 2011.
Securities
Exchange
Commission
the
identify
its
target
clients.
Do
these
clients
fall
into
Commissioner of Insurance companies in order toa
particular category? Does your practice know about a
Today,
smalland
medium-sized
practices
(SMPs)
are
confronted
by
a
range
of
operational,
market,
and
particular industry, or do you have special expertise in a
regulatory
challenges.
According
to
the
January
and
April
particular area or trade? If so, you may want to consider
editions of the SMP Quick Poll, regulation and the pace of
developing a niche and marketing your practice to a
regulatory changes are among the top challenges for both
specific target audience.
SMPs and their small- and medium-sized entity (SMEs)
During
second
quarter
of the
the April
year SMP
the Committee
clients. To alleviate these and other challenges, IFAC’s
3. Offer the
business
advice:
While
Quick Poll
monitored
the
economic
crisis
and
its
consequences
in
Small and Medium Practices (SMP) Committee is
results indicated that traditional accountancy-based
regards
all areas
of economic
activities
in Cyprus
collaborating with IFAC member organizations like
services,to such
as audit,
accounts
preparation,
and and
tax
European
and International
initiatives BODY]
within its
abroad.
[INSERT
NAME
OF YOUR MEMBER
to scope
assist
services, are their main sources of revenue, SMPs are
domain
and Perhaps
continued
contribute
articles to
the
SMPs
globally.
the to
most
tangible example
of this
increasingly offering business advisory services in areas
Institute’s
magazine.
collaboration is the resources, tools, and advice aimed at
Below
the main
topics
the Committee
has
such as are
financial
planning,
riskthat
management,
and human
improving the ability of SMPs to provide high-quality
concentrated
on over or
theinpast
three
resources, alongside
place
ofmonths:
their more traditional
Panicos
G. Papamichael
professional
services (see list of resources at end).
offerings (see The Role of SMPs in Providing Business
Chairman
Support
to SMEs).
should
look closely at how your
ñ
Law relating
to You
Covered
Bonds
Despite the challenges, SMPs can and do prosper. This
practice can better help its clients and consider providing a
article suggests
some simple
tips to help SMPs improve
ECONOMIC
CRIME
AND FORENSIC
broader
range ofstudied
servicesthe
to help
successfully
run and
The
Committee
draftthem
legislation
and directive
the management(ECFA)
of theirCOMMITTEE
practice and increase their
ACCOUNTING
operatebytheir
businesses.
the longer
run, its
thisopinions
should
issued
the Central
Bank In
of Cyprus
and cited
chances of success.
result
in
more
successful
and
more
satisfied
clients,
which
can translate into more business and increased revenue for
7 TIPS
FOR SUCCESS
your practice.
on
organizing
seminars had been collaborating with the
Following
the passing of the legislation by Parliament,
education committee and the IT committee on corepresentatives
of the Committee had numerous meetings
The following practice management tips can help your
4. Target small businesses: SMPs are especially well
SMP succeed:
positioned to serve small businesses. As small businesses
themselves, they share similar aspirations, concerns, and
attributes. SMPs’ clients are almost exclusively small
1. Develop a mission statement, vision, and strategic plan:
businesses, and as a result of this specialization, SMPs
WriteECFA-ebulletin
a compelling mission
ontoyour
The
Volumestatement
1 Issue 1that
wasfocuses
emailed
all
members
of our Institute.
develop considerable
understanding of and expertise in
core
values
and
publicize
this
statement;
a
statement
such
such
businesses.
as “Helping
small
businesses
become
big businesses”
provided
positive
feedback
on this
initiative.
could be persuasive with potential clients. No matter how
Covered
Bonds
was discussed,
as wellgenerally
as the issue
the
5. Promote
the practice:
Accountants
haveoflittle
small the practice, you should support your mission
independence
of the regulator.
The Committee
has decided
expertise or experience
in promotion
or marketing;
it is not
statement with a strategy and plan.
that
the
report
of
the
regulator
is
to
be
in
the
form
ofcan
an
typically part of their core education and training. This
2. Identify your edge and carve a niche: Evaluate your
‘Agreed
Upon for
Procedures’
(‘AUP’).youAsmay
such,
impede growth
SMPs. Therefore,
wantthe
to
practice’s skills and capabilities and identify what sets you
consider hiring
an external
marketing
relations
Committee
will inform
the Central
Bankorofpublic
Cyprus
of the
apart. SMPs should continually look at how they can
ISA240”
andthemselves
the secondfrom
by the
a well-known
lawyer
consultant
who can an
develop
a plan
and strategy
to best
differentiate
competition UK
by offering
decision
to circulate
illustrative
example
of the report
to
O’Shea
Eoin
on
the
Bribery
Act.
The
UK
Bribery
Act
will
reach
your particular
additional services or becoming experts in a particular
the
Institutes
members. clients. Alternatively, you could
have
area. serious implications on those doing business in the
develop this skill set in-house by training an existing
2
90
1
Institute News
Practice management
tips
employee. Appropriate channels and activities to promote
and demonstrate your practice’s expertise should be
chosen depending on your objectives and target clients.
For example, you could host a call-in radio show, write a
newspaper column, or write a blog about small business
accounting and tax issues. In other cases, it may be
appropriate to establish a leadership position within local
7. Embrace new technologies: To compete effectively,
SMPs should consider automating their processes to
improve efficiency and turnaround times and, in turn,
lower costs. In addition, they should stay aware of new
technologies—both to help their own practices and so they
can advise their clients on technologies that may help them
operate more effectively. Helping clients identify and
implement new technologies can serve as a value-added
service, which can help generate new revenue, as well as
boost client satisfaction and loyalty.
Institute News
SMPs offer a unique value proposition to clients:
met
times and
considered
matters
of interest
to ICPAC
ñ four
Personal
attention
– SMPs
are often
available
to
and tomeet
the profession
at
large.
Other
issues
dealt
with
were,
in person.
ñ Customization – SMPs provide services closely
On 5 tailored
September
2011clients’
a delegation
to their
needs.of the Institute headed
new
Minister of
Finance,
Kazamias
ñ One-stop
shop
– SMPsMr.
offerKikis
a broad
range ofand
discussed
measures
to be taken
facing the problems of
services,
accountancy
and for
other.
the Cyprus economy.
ñ Trust, competency and responsiveness – SMPs
On 7have
September
2011ofMr.
Christos
a high level
integrity
and Kyriakides,
competence Senior
and
Officer
the Institute, attended the Council meeting of the
areofhighly
ñ Close relationship – SMPs build strong and
On 13lasting
September
2011 a press
conference
relationships
with their
clients.was held at the
theSource:
CyprusThe
economy.
The
pressinconference
given by
Role of
SMPs
Providingwas
Business
theSupport
President
of the Institute Mr. Theodoros Parperis.
to SMEs
business
or tradeParperis
associations
practice’s
Mr. Theodoros
and to
thepromote
Generalyour
Manager
Mr.
niche
and
attract
new
clients.
6. Develop relationships with other firms: SMPs should
(FEE) Member
Bodieswith
in Vienna
a Specialfirms,
Meeting
of
establish
relationships
other and
professional
both
the
General
Assembly.
accountancy and non-accountancy—such as legal, HR,
and IT firms—to meet client needs that fall outside their
area of expertise. By working together with other firms,
COMMITTEESʼ
ACTIVITIES
SMPs
can leverage resources
and help convince clients
that they have the capability of a much larger practice.
Having
a relationship
with other firms
may also result in
ACCOUNTING
STANDARDS
COMMITTEE
client referrals.
To
further leverage
of scale
synergies,
amendments
in economies
IAS1 relating
toand
changes
in your
the
practice may want to consider joining an accounting
network or association, or merging with another practice.
When developing relationships with other firms, it is
important to ensure that your firm’s mission, values, and
It also initiated
a study ofto those
FEE’sofdiscussion
paper
objectives
are complementary
the other firm(s).
2
Marios Agathangelou
PUTTING
IDEAS INTO ACTION
Chairman
To help you put the tips in this article into practice, we
LARNACAyou
– FAMAGUSTA
encourage
to download CO-ORDINATING
the Guide to Practice
COMMITTEEfor Use by Small- and Medium-Sized
Management
Practices. This free guide aims to help SMPs become more
proficient
managing
practices.
It comprises
eight
During theatthird
quartertheir
of 2011
the Committee
carried
out
stand-alone
modules
on topics ranging from planning and
the following
activities:
building your firm to managing people and client
relationships.
It features
studies, checklists
forms,
1. On 13 April
2011 thecase
committee
organised and
a lunch
at
and an office procedures manual.
[ADAPT SECTION TO INCLUDE YOUR MEMBER
BODY RESOURCES]
Hotel in Larnaca
with
a subject Field Audits from the
RESOURCES
FOR
SMPS
Inland Revenue.
The following resources (all free of charge) are accessible
Panayiota
Vayianou
via
IFAC’s
International Center for SMPs:
www.ifac.org/SMP.
Chairwoman
ñ
Publications—Guide
to Practice
Management
for
CORPORATE
GOVERNANCE,
INTERNAL
AUDIT
Smalland
Medium-Sized
Practices
(PM
Guide)
and
accompanying User Guide, and The Role of SMPs in
Providing Business Support to SMEs
ñ Presentations and videos from 2011 IFAC SMP Forum
in Istanbul, Turkey, including the session, SMPs
commenced
implementation
of (Session
its action3)plan and has
Evolving the
to Better
Serve SMEs
ñ Quarterly eNews and Relevant Links
Thebeing
survey
will be into
sent atonumber
the listed
The Governance.
PM Guide is
translated
of
companies
in Cyprus.
results
sent to list
all
languages
by IFAC
memberIts
bodies.
To will
see abe
complete
of translations
completed
and that
in progress),
members. It(both
is also
envisaged
the resultsvisit
be
IFAC’s
Translations
presented
duringDatabase
(www.ifac.org/Translations/database.php).
Copyright
June
2011paper
by the
International
Federation
of
ñ Worked©on
a white
describing
the role,
duties and
Accountants
(IFAC).
Allfollowing
rights reserved.
Used
with
responsibilities
of the
departments
within
an
permission
of
IFAC.
Contact
[email protected]
for
organisation:
permission to reproduce, store, or transmit this document. ■
ñ Risk Management
1
91

constantinos mavromichalis

Transcription

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