Journal Online December 2011

Transcription

THE CHARTERED ACCOUNTANTS JOURNAL DECEMBER 2011 VOLUME 90 NO. 11
The Chartered Accountants
DECEMBER 2011 VOLUME 90 NO. 11
Spotlight on success
Jan Dawson wins the Crombie Lockwood CA of the Year Award
The Enron effect and audit committees
Adopted: F4F3 gets members’ vote
11 NZICA erifiable CPD
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Cover2 CHARTERED ACCOUNTANTS JOURNAL DECEMBER 2011
DECEMBER 2011
contents
NEWS (latest)
4
From the CEO’s desk
6
Quiz – Holiday locations
Audit and Assurance Standards:
XRB or NZICA?
7
Award for excellence
Dr Michael Fraser from the NZICA
Technical Services Team recently
received a Highly Commended PhD
Award
On the cover:
Jan Dawson, winner of
the Crombie Lockwood
Chartered Accountant of
the Year Award. P20.
Briefcase
8
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Top roles decided at AGM
Big OE under threat?
9
EDITOR
Members pass Fit for the Future 3
proposals
Members voted in favour of Fit for
the Future 3 (F4F3) changes at the
NZICA AGM on 30 November
Condolences
10 Words of a wizard
An anonymous Journal contributor in
1930 believed that we should reduce
wages to cope with falling prices
Advertising sales by
Rosie Payne
DDI: 64-9-917-5931
Mob: +64 27 491 3570
Email: [email protected]
12 CA Program update
The academic requirements for the
new CA Program have been agreed
with the ICAA
13 Management accounting: from
scorekeeper to strategist
NZICA recently supported the
Fifth New Zealand Management
Accounting conference, hosted by
Victoria University of Wellington
15 New admissions
Congratulations to our people on the
rise
16 Show us your snaps
Photos from the Queenstown
Conference and the Tax Conference
The Chartered Accountants Journal
is published monthly (except January) by
the New Zealand Institute of Chartered
Accountants, PO Box 11-342,
Level 7, Tower Building
50 Customhouse Quay
Wellington 6011
Tel: 04-474 7840
Fax: 04-499 8033
Web: www.nzica.com
All material appearing in The Chartered
Accountants Journal is copyright.
Editorial material does not necessarily
reflect the views of the Editor or the New
Zealand Institute of Chartered Accountants.
The Chartered Accountants Journal is
printed by PMP Print.
7
NEWS (business)
17 Ask Uncle Tom
Surveys, disputes and cooking with
Tom
20
FEATURE
(2011 leadership Awards)
20 2011 Leadership Awards
Celebrating the best and brightest
The Chartered Accountants Journal is the
official magazine of the New Zealand Institute
of Chartered Accountants.
CHARTERED ACCOUNTANTS JOURNAL DECEMBER 2011
1
DECEMBER 2011
contents
COLUMNISTS
50 Cup Day cut
Interest rates cut across
the ditch
52 Taiwan on
New Zealand could soon have a
closer economic relationship with
Taiwan
40
FEATURE
(Advisory groups 2011)
32 Professional advisors
NZICA’s new advisory groups are a
vital bridge between members and
the Institute. So who are the people
representing the needs and views of
your sector?
NEWS (business)
40 Recovering from disasters
International disaster recovery
projects can provide lessons for
New Zealand in the wake of the
Canterbury earthquake
44 Paranoia helped prompt
Madoff probe
The whistleblower who exposed
Bernie Madoff’s Ponzi scheme
investigated his suspicions in part due
to paranoia
54 FRC to be streamlined?
The UK’s Financial Reporting Council
may shrink
IMAGE MATTERS
64 Image Matters
Annette Burgess ACA, client manager
at Leech & Partners, Christchurch,
gets a makeover
SHELF LIFE
66 What’s new in the library?
68 Latest readings
Excel
55 Inspiration from the World Cup
The process of winning the World
Cup is similar to the process of
winning in business
56 The Enron effect and audit
committees
Having an accounting expert on
board appears to improve the
effectiveness of an audit committee
58 Winston crashes the Key party
While the triumph of National was
expected, the success of New Zealand
First showed predicting elections is
not an exact science
60 10 years after Enron
US legislation aimed to restore
confidence in the markets after
monumental bankruptcies
INSTITUTE
70 Notices of decisions and orders
of the Professional Conduct
Committee and Disciplinary
Tribunal
72 Privilege Partner news
73 Hot deals
74 Upcoming courses at a glance
77 Classifieds
NEWS (opinion)
80 The power of bookkeeping
A review of Double Entry, by Jane
Gleeson-White
81 The joy of tax
Revenue officers the world over are
celebrating the discovery of happy
taxpayers
46 Seeking carbon, finding gold
Cutting carbon emissions has
brought financial benefits to three NZ
companies
58
64
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LATEST
From the CE’s desk
A
F4F3
Where the first two legs focussed on governance
and the structure of national boards and committees,
F4F3 was a review of member engagement. Member
engagement is at the heart of our strategy and the
changes will help make NZICA more responsive and
relevant to members.
This will mean changes to the way the branch
network is composed and to the composition of
Council. I urge you all to review the details of the
changes at nzica.com.
As part of the F4F3 review, it became clear that
the needs of NZICA members are different around
the country. Auckland, in particular, presents unique
challenges and opportunities and it was suggested
we take some time to understand the needs of
Auckland-based members, and to respond to those
needs.
With that in mind, you can expect to see me in
Auckland more often over the next 12 months,
talking with members and understanding their
relationships with NZICA.
This is not to devalue members in other parts of
New Zealand. It simply recognises that a market
the size of Auckland has unique characteristics. For
example, there is critical mass in sectors such as
the CFO group, which has vibrant SIG there. I look
forward to spending more time in the “City of Sails”
and learning more about the needs of members in
our largest branch.
We have had three years of governance reforms.
It is nice that they are now completed and that we
can now get on with the task of making NZICA more
relevant to members. Thank you to those who voted
for positive change. With your support, we have built
an excellent platform for our future.
Finally, I would like to wish a very merry Christmas
and a happy New Year to you all, and to your
families. Happy holidays!
With the affirmative member vote at the AGM in
November, we have finally completed the third leg of
the Fit for the Future review.
Terry McLaughlin FCA
NZICA Chief Executive
S NZICA MOVES into a new phase based on
member feedback and the Fit for the Future
outcomes, I feel it is time to introduce a
regular report on the work behind the scenes
that is creating positive change at your Institute.
A highlight of this year has been the great
progress NZICA has made in its collaborative work
with the ICAA.
A major step forward is an agreement to share a
joint IT platform and team. I am pleased to welcome
Leo Morta to the team as trans-Tasman Chief
Information Officer (CIO), responsible for leading and
executing integrated IT service delivery across ICAA
and NZICA. This is a wonderful outcome that clearly
demonstrates the purpose of the collaboration, and
shows that it is a true partnership.
Leo will be based in Wellington but will spend a
good amount of time in Sydney. He starts with the
Institutes on December 12.
To recap on the collaboration progress to date,
NZICA and the ICAA have agreed to launch a new
joint training programme, the Chartered Accountants
Program, in 2013. This world-class Program will align
the training of chartered accountants on both sides
of the Tasman. As a collaboration initiative, it reflects
the international quality of the qualification and the
increasing globalisation of the profession. As with IT,
we are moving towards common leadership of this
Program across the Institutes – I will update on this
early next year.
We have also formed a joint Chartered
Accountants Australia New Zealand (CAANZ) Board
through which NZICA and the ICAA will continue
to look at areas in which we can work more closely
together in the future, for the benefit of members of
both Institutes.
4
Thank you to
those who voted
for positive
change. With
your support,
we have built
an excellent
platform for our
future
Acclipse
New
ERHP requested
CHARTERED
CCH
HARRTE
TERREED ACCOUNTANTS
ACCO
AC
COUUNNTA
TANTTS JJO
JOURNAL
OUURRNAAL DECEMBER
DEECCEM
MBBEER 2011
220011
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5
LATEST
LA
ATEST
Get the Advantage
IF YOU’VE NOT already had a read, check
QUIZZICAL CORNER
out Advantage, the accompanying
brochure that came with your copy of
the Journal (New Zealand only).
NZICA’s new monthly guide to
training, development and networking,
Advantage replaces the NZICA CPD
brochure. It contains an outline of
what’s happening up and down the
country, the latest from our e-Learning
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This guide is just one of the ways that
we are making it easier for members to
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resources we have available.
Compiled by Papa Snazzy
Audit and Assurance Standards: XRB or NZICA?
HOLIDAY LOCATIONS
1. Diamond Head and Waikiki Beach
are in which US state?
2. Exploring Nubian monuments
while on holiday would place you
in which country?
3. New Zealand’s Hot Water Beach is
closest to which town?
4. Santorini Island lies on which sea?
5. Club Med first opened in 1950 on
which Spanish island?
6. Elizabeth Taylor and Frank Sinatra
were frequent visitors to the
famous Mexican beach resorts of
which area?
7. The Angkor temples can be
explored in which Asian country?
8. The 38 metre “Christ the
Redeemer” statue overlooks which
popular holiday city?
9. Once the temple of the gods, which
European city are you in if visiting
the Pantheon?
10. If you are rafting near Jinja
watching “jerry can kids”, in which
African country are you?
1. Hawaii 2. Egypt 3. Whitianga
4. Aegean 5. Majorca 6. Acapulco
7. Cambodia 8. Rio de Janeiro
9. Rome 10. Uganda
ANSWERS
SCORES
1-3 Homebody hero (jade)
4-7 Wandering wonder (silver)
48-10 Geographical genius (gold)
8Papa Snazzy (aka Adrian McNamara) wishes
Pa
Pap
everyone a wonderful festive season and
eve
hholiday. Enjoy 2012.
hol
6
NZICA'S COUNCIL recently decided that
members, in complying with Rule 11
(paragraph 98) of the Code of Ethics, must
use the auditing and assurance standards
of the New Zealand External Reporting
Board (XRB) for all audit and assurance
work undertaken. The XRB standards were
approved and issued in July 2011 but are not
currently effective. Standards for audits and
reviews of historical financial statements will
be effective for periods beginning on or after
1 September 2011. Standards for assurance
engagements other than Audits and Reviews
of historical financial statements are effective
when the engagement begins on or after 1
November 2011. Until the XRB standards are
effective, members must use the published
auditing and assurance standards approved
by NZICA’s Council. For example, the year
ends 31 December 2011, 31 March 2012
and 30 June 2012 and the six-month
interim period ended 31 March 2012 would
be audited (reviewed) following NZICA
standards and engagements relating to later
dates would follow XRB standards. Any
queries on the above matter can be directed
to the Technical Services Team at technical.
[email protected].
BRIEFCASE
Sutton on top of audit
David Sutton CA, was named
Auditor of Year by the
Institute of Internal Auditors
in November. Internal audit
and risk manager at Telecom,
Sutton was praised for his transformative
leadership of the risk and audit teams He
has been at Telecom for almost three years
and prior to that was risk and compliance
manager at Fisher & Paykel Appliances.
Accountancy professor voted tops
Vivienne Fox, Country Manager of Emerald Group Publishing presents Dr Michael Fraser of
NZICA with his award alongside Terry McLaughlin FCA, Chief Executive of NZICA.
Award for excellence
CONGRATULATIONS TO Dr Michael Fraser
from the NZICA Technical Services Team who
received a Highly Commended PhD Award last
month.
Fraser was recognised in the 2010 Emerald/
EFMD Outstanding Doctoral Research Awards
in Interdisciplinary Accounting Research
for his research into, and case studies on,
several New Zealand organisations. His work
documented the challenges and rewards of
applying a Full Cost Accounting tool.
The findings from the thesis allow people
to better understand the full impact of
their capital allocation decisions. The thesis
contained implications and recommendations
for legislators, policy makers and educators
alike.
Vivienne Fox, Country Manager –
Australasia, of Emerald Group Publishing,
says Fraser is a researcher whose work could
make a postive difference in the world of
accounting.
Accountancy professor Jill Hooks CA has
been voted Lecturer of the Year at Massey
University, Albany, by students. Hooks is
the first female to win the award in six
years, and beat 110 other nominees. The
event is organised by the Albany Students’
Association. Hook began teaching in 1968
at Feilding Agricultural High School, then
taught at Selwyn College in Auckland and
at the Auckland University of Technology,
before doing a Bachelor of Business Studies
extramurally at Massey followed by a
Master of Management Studies and a PhD
both from the university. She has worked
at Massey since 1997. She says she is lucky
because her teaching interest – financial
accounting – is also her research interest, so
her research provides insights and stories for
her teaching.
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LATEST
Top roles decided at AGM
BOARD
The 2011 AGM went without a hitch.
FELLOWSHIPS
NZICA WOULD LIKE TO congratulate 2012 President
Richard Austin FCA, whose appointment was
confirmed at the AGM on 30 November. We are
delighted to announce Liz Hickey FCA as Vice
President.
The AGM was also an opportunity to confer 2011
Life Memberships, Fellowships, and confirm the
composition of Board and Council for 2012.
COUNCIL
Council welcomes four new members in 2012.
Tim Loan CA
Lyall Evans CA
Shelly Mitchell-Jenkins CA
Cassandra Crowley CA
NZICA would like to thank the outgoing councillors
for their service to the profession. The following
members are leaving Council.
John Bennett FCA
John Apanowicz CA
Ross Jackson FCA (Past President)
Big OE under threat?
THE TRADITIONAL Kiwi OE in London may be a thing
of the past for young chartered accountants, warns
Sarah Butcher at eFinancialCareers.co.uk.
The UK job placement website notes that a falling
standard of living, plus more difficult immigration
restrictions, is making it harder for antipodean CAs to
make a career shift to the English capital.
Butcher notes that the latest Mercer Quality of
Living survey puts London at 38th, behind other
financial centres such as Zurich (2), Singapore (25)
or Dublin (26). Auckland ranks number three on the
survey, Sydney at number 11 and Wellington at
number 13.
“But even if you’re an antipodean accountant who’s
ambivalent about skiing at lunchtime or surviving the
journey home, there’s another reason you might not
8
Richard Austin FCA
We are pleased to welcome Catherine Drayton CA to the
Board for 2012, she fills the vacancy left by Liz Hickey FCA.
The following members received 2011 Fellowships.
Rhys Barlow FCA, Wellington
Vivienne Brownrigg FCA, Waikato/BoP
Rosemary Chung FCA, Auckland
Sheena Mason FCA, Manawatu
John Murray FCA, Marlborough/Nelson
Frank Owen FCA, Wellington
Ross Rattray FCA, Auckland
Bruce Richards FCA, Taranaki
Brian Roche FCA, Wellington
Gary Swift FCA, Auckland
Murray Taylor FACA, Auckland
Bruce Taylor FCA, Waikato/BoP
Alan Teixeira FCA, UK
Steve Wakefield FCA, Canterbury/Westland
Peter Wells FCA, Sydney
Deborah Weston FCA, UK
LIFE MEMBERS
Liz Hickey FCA
NZICA's highest honour, Life Membership, was conferred
on two members.
David Macdonald FCA, of Wellington
Jim Hoare FCA, of Auckland
come to London any more: it’s harder to get in,” writes
Butcher.
The reason is a change to the visa requirements that
affects chartered accountants working in contract roles.
The “Working Holiday” visa has been replaced with a
“Tier 5” visa which has a strict age limit of 31 years.
CAs under 31 who have £2,500 in the bank can get
in, but those older will not qualify.
Butcher says the visa change is already having an
impact on the UK contract market for accountants,
which has traditionally seen many candidates from
New Zealand and Australia.
The shortage of newly qualified professionals is
right across the financial services sector, she says. This
is likely to become a major issue as the UK economy
picks up.
“If and when the financial services market picks
up, the shortage could become a big problem: the
flow of antipodean accountants will be restricted to
inexperienced 20-somethings from now on.”
NEWS IDEAS: [email protected]
CONDOLENCES
Members pass Fit For The
Future 3 proposals
The New Zealand Institute of Chartered
Accountants extends its sincere
condolences to the families of:
Members voted in favour of Fit for the Future 3
(F4F3) changes at the NZICA AGM on 30 November.
F4F3 WAS UNDERTAKEN in 2011, focusing on
how NZICA looks after and engages with its
members, and delivers products and services.
It also looked at aspects of NZICA’s local
operations and structure, and ways to improve
the organisation’s responsiveness to member
needs and improve the reach, relevance and
access to NZICA products and services. There
are four key changes.
1. Products and services (in particular
professional development) will be better
targeted to members’ sectors, and made
more accessible via increased online
delivery.
2. Current NZICA Branch structure will
change to “Local Leadership Teams” (LLTs)
that will improve the relevance of, and
access to, NZICA products and services.
LLTs will advise NZICA about local member
needs and preferences for service delivery.
LLTs may be extended from current branch
areas to additional areas where there is
member demand for local service delivery.
3. Member “voice” – strengthening the
National Conference and Regional Forums
so they become key collaborative events
that connect members with each other,
office bearers, and management across a
range of issues.
4. Council composition will move from a
branch to a regional electoral college
model with changes to councillor
numbers in some areas. This will improve
proportional representation and ensure all
members have a vote. Members will vote
for a councillor for a region, rather than for
a branch.
The changes will be implemented
progressively in 2012, starting with the
establishment of LLTs in current branch
locations by 31 March 2012. The February
issue of the Journal will cover this in more
detail.
To find out more about F4F3, the research
that underpinned proposal development,
the proposals, and a summary of member
feedback, please visit nzica.com.
Kevin Frederick John Bryant CA (Hon
Retired) of Lower Hutt, who had been a
member of NZICA since 28 March 1958.
Frank Arnold Cossgrove ACA of
Gisborne, who had been a member of
NZICA since 19 November 1953.
Gordon James Matthews FCA (Hon
Retired) of Nelson, who had been a
member of NZICA since 30 April 1940.
William Robert Meredith CA (Hon
Retired) of Matamata, had been a member
of NZICA since 8 August 1957.
Robert Louis Neufeld CA (Retired) of
Sydney, Australia, who had been a member
of NZICA since 14 July 1965.
Richard James Wylie CA of Masterton,
who had been a member of NZICA since 17
February 1970.
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9
LATEST
Words of a wizard
The prospect of economic depression has always exercised the
imaginations of accountants.
IT IS 1930 and the bony fingers of the Great Depression
are just reaching these shores.
Still recovering from the Great War, the population of
New Zealand is 1.4 million and the national income is
soon to fall 40%.
The 1920s saw fluctuations in economic fortunes.
Exports of meat, dairy and wool to Britain provided
most New Zealanders with a comparatively reasonable
standard of living.
But after 1929, farm production, recently boosted by
the advent of tractors, electric milking machines and
superphosphate fertilisers, was hit hard through the fall
in commodity prices in Great Britain. Between 1929
and 1932 the price of wool, for example, plummeted a
whopping 60%.
The Accountants’ Journal in July of 1930 painted a
gloomy picture of the years to come. An anonymous
contributor, the “Wizard”, offered his opinion on
the state of affairs and what could be done to stem
the threatening tide of unemployment and general
hardship. The Wizard also looked at the economic
situation of other countries with a high dependence on
a handful of primary products.
“New Zealand is most affected by the fall in wool
and dairy produce prices and some other countries are
very much interested in one or other of these,” he wrote.
10
The Wizard
believed that
an important
strategy was
to reduce
wages to
cope with the
falling prices
“Australia is plunged into economic depression
and the government’s financial programme is
undergoing radical changes. Wool, maize and wheat
form over half the total exports of Argentina and all
these commodities have decreased in price – maize
by nearly 40%. The depression in Argentina has made
it very difficult for that country to borrow money.
Canada’s exports normally are represented to the
extent of nearly 40% by wheat.”
Brazil, he wrote, was suffering due to the price
of coffee having halved in 12 months. At the time,
coffee represented around 70% of the country’s
exports.
“The initial effects of falling prices are only in
a few cases felt directly by Great Britain, but their
secondary results are of great importance. Many
British manufacturers have seen their stocks of raw
material decline in value by about one-third in a few
months.
“The present decline is not peculiar to any country,
but is worldwide, and its effects are seen in the
growth in unemployment in various parts of the
world.”
The Wizard believed that an important strategy
was to reduce wages to cope with the falling prices.
“Falling prices effect an increase in the purchasing
NEWS IDEAS: [email protected]
BRIEFCASE
power of money and if wages were
automatically reduced so that their real
value remained constant, the disturbing
effects of falling prices would be less
troublesome.”
The declining birth rate was also a cause
for concern.
“In western and northern Europe,
the proportion of children to the total
inhabitants was formerly one third, but has
now fallen to about one fourth and this
notwithstanding the heavy war-mortality
among men who would be in the prime of
life now.
“There being a lower proportion of
children there is a higher proportion of
earners. As there is no greater amount of
work to be performed (indeed machinery
has reduced the amount) governments are
tempted to carry out unneeded road and
railway construction and other works to
keep the ’surplus’ earners employed.”
Sooner or later, he predicted, all the
necessary and unnecessary road, railways
and hydroelectric undertakings will be
completed and all the wasteland will be
planted with trees.
“Then we shall probably find that there
are two ways to lessen unemployment:
one (unpopular), a substantial increase in
the birth rate and a consequent increase
in the amount of clothing and food to be
produced with no increase in the number
available to produce them; and two, (very
popular) an all-round reduction in working
hours.”
Let’s return to 2011. The global economy
is in a sorry state, unemployment is
reaching new heights all over the world
and politicians in New Zealand are calling
for a rise in the age of retirement due to
our rapidly aging population. Now there’s a
conundrum for a wizard.
ALEXANDRA JOHNSON is a freelance Wellington
writer.
Member success in election
NZICA extends congratulations to the
following members who were successful
candidates in the 2011 election: Aaron
Gilmore ACA, Katrina Shanks CA and
Michael Woodhouse CA who all represent
the National Party.
South Waikato’s biggest accounting
firm gets bigger
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bigger. The practice has acquired the two
accounting businesses of Bell & Associates
in Tokoroa and Putaruru. Bell’s was placed
in liquidation by High Court order on
October 31. All of the Bell’s staff have been
offered positions at Graham Brown’s new
offices in the two locations. The expanded
practice will now have three partners and
40-plus employees in the two offices.
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11
LATEST
CA Program update
The academic requirements for the new CA
Program have been agreed with the ICAA.
FROM JANUARY 2013 the new trans-Tasman
Chartered Accountants Program will be in effect.
Following a three-year academic component,
provisional members will complete the new
Chartered Accountants Program which will include
four technical modules and a capstone module.
The academic requirements for the three-year
programme have now been finalised. These have
been agreed with ICAA so will be common across
Australia and New Zealand. The required topics
have not changed from the four-year academic
programme, however some topics may be completed
at different levels.
Some students have the choice as to whether to
complete four years or three years of study in 2011
or 2012. In general, students who complete four
years of study will then do Foundations and PAS/PCE
as at present. Students who complete three years
of study will complete the Chartered Accountants
Program.
We expect that a number of students who
have completed four years of study will choose
to complete the Chartered Accountants Program
instead of PAS/PCE, and some employers have
indicated that they will require this.
Academic schedules for each tertiary education
provider, showing the approved subjects that will
be offered to meet the required topics in 2012, are
available at nzica.com.
Current students and provisional members can
qualify by following either the current or the new
admission requirements. See nzica.com for details.
The important date to note is 2015 as this is the
last year that PAS/PCE will be offered.
This means that most students will need to
complete study to satisfy the four-year academic
requirements by the end of 2012 in order to be able
to satisfy the PAS/PCE pre-requisite requirements of
one year of general practical experience, completion
of the Foundations programme and one year of
specified practical experience.
12
We expect
that a number
of students
who have
completed four
years of study
will choose
to complete
the Chartered
Accountants
Program
instead of PAS/
PCE
In exceptional circumstances, where a provisional
member expects that they will not be able to
complete PAS/PCE in 2015 they should email
[email protected] outlining their situation.
From 2013, all students will complete a three-year
academic programme followed by the Chartered
Accountants Program.
The four technical modules being developed by
ICAA are Audit and Assurance, Financial Accounting
and Reporting, Management Accounting and
Finance, and Taxation. Learning outcomes for these
modules have been agreed between NZICA and
ICAA. The modules will be based on international
standards and, where necessary, New Zealand
standards will be referenced. They will all be
delivered online.
Each module will be offered twice in a rolling
12-month period (two modules per trimester).
Candidates are expected to study one module at a
time per trimester. There will be 120 hours of study
per module over 12 weeks (that is, about 10 hours
a week outside work time) and a 195-minute exam
in week 13. There will be online assessments during
each module (worth 20%) and candidates must pass
the final written exam (worth 80%).
The Capstone module developed by NZICA will
have a practical, integrated case study approach.
Learning outcomes for the capstone module have
been agreed between NZICA and ICAA. There will be
application of technical knowledge and professional
skills and competencies over 140 hours of study
over 14 weeks with a 210-minute exam in week 17
(worth 60%). The Capstone uses a blended learning
delivery, with online interactive material supporting
three mandatory face-to-face all-day Saturday
workshops. There will be also be assessments as part
of each workshop (worth a total of 40%). Capstone
will be available twice a year.
Completion of the new Chartered Accountants
Program will take place during the three years
of practical experience. It is expected that most
candidates will complete two technical modules a
year and the Capstone module during the third year.
We will publish a full timetable for 2013-2015
early next year.
Fees for the modules will be based on the ICAA
fees and will be converted based on a long-run
average exchange rate with annual CPI increases.
For further information on the Chartered
Accountants Program see nzica.com.
Management accounting: from
scorekeeper to strategist
By the Technical Services Team
NZICA IS PROUD to have supported the 5th New
Zealand Management Accounting conference, hosted
in November by Victoria University of Wellington.
The conference brought together management
accounting educators, researchers and practitioners
from the public and private sectors to share their
perspectives and experiences of the theoretical and
practical applications in this discipline area. Papers
were presented on a wide range of management
accounting issues, including: performance
measurement, behavioural issues, cost management
systems, accounting education, and ethical issues.
A feature of the conference was a keynote
presentation by NZICA Chief Financial Officer Arun
Patel CA. He outlined some of the changes NZICA
has undertaken with its Fit for the Future phase
three programme and the interrelationship with
management accounting tools. This phase of change
aims to maximise member value by reviewing the
ways members engage with NZICA, to ensure relevant
resources are provided.
In operationalising this change, management
accounting concepts were used in two key ways.
First, identifying the key areas where different
members derived the most value facilitated more
informed decisions about the activities undertaken (ie
segmentation). Second, in determining these activities,
the need to fully develop a system that monitored
performance and provided feedback on the strategic
direction became evident.
Management
accountants
must
understand
organisational
processes as
they relate to
marketing,
HR, legal
and service
provisions
The processes described in Patel’s keynote
presentation are not isolated to NZICA. They mirror
trends in other organisations around the world. One
of the key reasons for this is the changing role of the
management accountant.
Patel noted two key changes. First, management
accountants can no longer have a narrow cost focus.
While cost analysis might perform a central
part of the management accountant’s expertise,
straight calculations and “transfer of information”
no longer satisfy organisational requirements.
Instead, a more proactive and holistic approach
must be taken. This means proactively identifying
issues of strategic importance, applying the most
appropriate management accounting tools and then
communicating this to an ever-increasing audience in
a manner that adds value.
A second, and interrelated, change is the interaction
of the management accountant across different
discipline areas. Management accountants must
understand organisational processes as they relate to
marketing, HR, legal and service provisions. A good
management accounting system will be integrated,
understood and explicitly linked to organisational
strategic objectives. The removal of a siloed approach
has been a key undertaking of many organisational
functions, including the management accountant.
Predicting the future of management accounting
is a challenging task. However, Patel provided some
insight by reflecting on recent change. Increased
capability with technological advances, greater user
demands with regard to breadth of information and
raised awareness of social and environmental issues
may well go some way to shaping the future. It is
this latter aspect that has captured the attention
of financial reporting specialists with Integrated
Reporting. However, management accountants will
have much to offer in designing and collating the
systems that capture this non-financial information.
Patel noted the recent NZICA-hosted launch of
the Sustainability and the role of the management
accountant research report (available at nzica.com).
In closing, he drew attention to the significant
change that management accounting activities have
undergone in recent times. It is for this reason that
NZICA has formed a Technical Services Team and
employed a Management Accountant Specialist.
Keep an eye out for more on the latest trends in
management accounting and new offerings of
professional development courses in 2012.
13
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14
PEOPLE
admissions
NEW ADMISSIONS
CONGRATULATIONS TO OUR PEOPLE
ON THE RISE.
The following admissions to NZICA’s Chartered
Accountants, Associate Chartered Accountants and
Accounting Technicians Colleges, and Certificates
of Public Practice have been confirmed.
MOVING UP
BLAIR ARCHER CA
CA COLLEGE
Abela, James George ...................... Auckland
Abel, Darren Malcolm .. Westville, South Africa
Bean, Thirza .................................Canterbury
Bhana, Shirena ............................. Wellington
Bryleva, Elena................................. Auckland
Cargo, Hayden Sean .................. Waikato/BoP
Chan, Andrew Thomas Junior ........ Wellington
Chandra, Akansha .......................... Auckland
Chan, Kinlon .................................. Auckland
Chauhan, Pallavi ............................ Auckland
Cheng, Yi ....................................... Auckland
Coulton, Amy Lyn ........................... Auckland
Cyril, Shalini Suzanne ..................... Auckland
Doyle, Kelly .................................... Auckland
Eatwell, Benjamin James ..................... Otago
Fahim, Ghada Mikhail ..................Canterbury
Francis, Jodi................................ Hawkes Bay
Glew, Kylie Christine ....................... Auckland
Govind, Sonal................................. Auckland
Gray, Kieran ................................... Auckland
Grobbelaar, Jaco Andre ............................. UK
Gurr, Natalie Jean ........................... Auckland
Hughes, Naumai ............................. Auckland
Kelly, Francis Ireland ...............New York, USA
Lal, Bhavisha .................................. Auckland
Lau, Daryl....................................... Auckland
Leite, John...................................... Auckland
Li, Jinghua...................................... Auckland
Li, Mengsu ................................... Wellington
Liu, Haiying .................................... Auckland
Ma, Tao .......................................... Auckland
Matsudo, Hideto............................. Auckland
McFarlane, Sharlotte Elizabeth ... Waikato/BoP
Panapa, Wayne Trentham Gisborne/East Coast
Pathmanathan, James Premkumar Wellington
Pattekar, Supriya Anil .................... Wellington
Peng, Jia Yu .................................... Auckland
Quirke, Alicia Dallas ...................... Wellington
Ramani, Krishna ............................. Auckland
Shadwell, David ........................... Wellington
Singh, Harish Vinay Pal ................... Auckland
Smith, Danny John........................ Wellington
Smith, Kelly Marie .......................... Auckland
Stephens, Bryce Hinton ................... Auckland
Torrance, Andrew Lance Joseph .... Wellington
Vincent, Calvin ............................... Auckland
Visser, Jared Hudson ..................... Wellington
Ward, Sarah Elizabeth ................... Southland
Yusuf, Swaleha ............................... Auckland
Zeng, Jin Xiu .................................. Auckland
Zhou, Xiaozhou .............................. Auckland
ACA COLLEGE
Cai, Ningjing ................................Canterbury
Caswell, Shona.............................Canterbury
Holland, Sharon Margaret.............Canterbury
Kaur, Gunnjit .................................. Auckland
Matuku, Rohan ................................Taranaki
Mulder, Albertus Johannes ...... Nagoya, Japan
Sahay, Reena Ragini Mala ......... Waikato/BoP
Vora, Bakul Rameshbhai ................. Auckland
Wang, Xuanyu..................................... Otago
Wevita, Roshan ............................ Wellington
Zhu, Suzhen ................................... Auckland
AT COLLEGE
Bryant, Tracey Anne Rose ..................Taranaki
Cook Leanne Jodi ............................... Nelson
Kivell, Lynette ................ Central Bay of Plenty
Seebeck, Ellen Jane ..........................Taranaki
Yao, Zhi.......................................... Auckland
PUBLIC PRACTICE CERTIFICATES
Allred, Aaron Bruce ......................Canterbury
Johnson, Darren James ................... Auckland
King, Jill Heather ........................... Southland
Lee, Martin Moh Hian .... Central Bay of Plenty
MacKenzie, Ian Jonathan ................ Auckland
McCulloch, Grant David ................Canterbury
Mexted, Hamish George ............... Wellington
Taylor, Craig Robert ................... Waikato/BoP
Willems, Bernard Gerard ...............Canterbury
Accountant, Walker Davey
Limited, Christchurch
How long have you been in your
current role?
I have been working at Walker
Davey for just over four and half
years.
Why did you choose accounting as
a career?
It was something I enjoyed at
school and it was career I could
see myself pursuing as it can take
you anywhere in the world.
Where did you watch the final of
the Rugby World Cup?
With mates at Trevino’s
Restaurant and Bar, here in
Christchurch.
What keeps you busy in your
spare time?
Following sports and spending
time with my wife.
What is one goal you’re hoping to
achieve before the end of 2011?
Get my own secretary.
What’s one thing you’re looking
forward to about 2012?
Going over to the UK to watch the
London Olympics. I’m looking
forward to going to the rowing
and watching the athletics when
Valerie Adams attempts to win
gold in the women’s shot put.
What has been rewarding about
working in the accounting
industry so far?
The inspiration and help provided
by my mentor to improve my work
skills and assist me in passing
PCE 2.
15
PEOPLE
social
SHOW US YOUR SNAPS
Showcasing the Queenstown Conference and the Tax Conference.
1
2
3
4
1. The Queenstown Conference at the
Millenium Hotel.
2. Andy Syme, Sean and Nicky Geary and
Trudy Syme.
3. Lyn Hurring and Tracey De Vries.
4. Steve McCully and Bob King.
1. David Collins QC addresses the
conference while Hon Justice Tony
Pagone (far left), Casey Plunket (middle)
and Justice William Young look on.
2. Paul Dunne draws prizes with help from
Stephen Rutherford.
3. Trevor Chin of Staples Rodway receives a
prize.
4. Graham Wade, from conference sponsor
Provisional Tax Finance, gives Kirsty
Keating a prize.
1
2
16
3
4
NEWS
business
all confidential, of course. However, specific
juicy comments were reported verbatim to
partners with the names removed to maintain
the promised confidentiality. When one
comment reads something like, “Genghis
Khan could take pointers from Tom Davies’
management style” and, “The brightest thing
about Tom Davies’ ability is his use of yellow
highlighter”, and when I distinctly recall a
staff member using those comments in some
other context in the last week or so, I’ve
nailed their identity sufficiently.
I know I mustn’t kill, but I am able to
pronounce with some certainty their careers
are doomed. So much in the real world for
anonymity and accepting fair criticism.
Ask Uncle Tom
Surveys, disputes and cooking with Tom.
by TOM DAVIES FCA
I
n
common with a lot of organisations
these days, NZICA requires its
staff to participate in periodic surveys
concerning culture, management styles
and so on, and I’ve just been bribed
with chocolate fish into finishing off
my responses.
When one is called upon to make
critical assessments of management
confidentiality needs to be assured, and
so it is with NZICA. But, when you are in a
department of two persons, trust in promised
anonymity requires some faith.
I can see my general manager smiling at
me – is it because of the nice things I’ve said
about him, or is he smiling at the thought of
all the pleasant things he is going to do to
me for not being, shall we say, nice enough?
Doubtless I shall find out.
I remember some years ago in another life,
staff were invited to make telling comments
about the partners under whom they worked,
So much
in the real
world for
anonymity
and
accepting
fair criticism
Many years ago (yes, I think I can safely use
that phrase) I suggested that practitioners
include in their engagement letters a
statement that should a dispute arise over
fees that matter was to be settled by using
NZICA’s Fees Resolution Service.
At that time the cost of using that service was
very cheap, but now the cost is at least $1,000
per party. (NZICA pays the arbitrator).
Recently the government’s Disputes
Tribunal declined to deal with a dispute
involving a $3,000 fee on the grounds that
the engagement letter specified use of the
Institute’s Fees Resolution Service, hardly an
economical option. So if you are still including
that provision I recommend that you vary it
so that when the parties cannot agree between
themselves disputes involving $15,000 or
less be taken to the Disputes Tribunal, and
to NZICA’s Fees Resolution Service if the
amounts are greater than that.
$15,000 is the current maximum that the
Tribunal can deal with without the agreement
of the parties. With agreement it can go up to
$20,000.
I received a call recently from the Consumers
Institute which in turn had taken a complaint
from a society whose audit had been
performed on an honorary basis by the same
auditor since time immemorial.
I don’t know what happened, something
surely, but this year without any consultation
the auditor had whacked in a large fee. The
society was variously “outraged, distressed,
CHARTERED ACCOUNTANTS JOURNAL DECEMBER 2011 17
NEWS
business
appalled, horrified” etc. At least they
weren’t “gutted”, that great Kiwi
expression.
I gather that the fee was later
reduced to a nominal amount, but
it raises an issue which is reported
to me sadly quite frequently – large
increases in fees without prior
warning.
There is an ethical requirement
(para 143 if you’re interested) for
members to discuss fee increases with
clients which are likely to be outside
the clients’ expectations as soon as
practicable but always before billing.
If you want to get paid and keep
the client it makes perfect sense,
ethics aside.
It is mandatory for practitioners to
carry professional indemnity cover
at a level appropriate to the size of
the practice and the nature of the
services provided.
The intention of this provision is to
try to ensure that in the unfortunate
circumstance of a client seeking
recovery from a chartered accountant
there will be funds available to meet
the claim.
Most practices operate through a
company structure which normally
limits recoveries by clients to the
assets of the company which may not
be great, and sole practitioners and
members operating in partnerships
usually have their personal assets
protected in some way such as
through the use of a family trust. So
insurance proceeds may provide the
only real source of recompense for a
client.
Some practitioners have said that
rather than taking out the usual
insurance cover they prefer to self
insure, believing they have sufficient
assets to meet any likely claim. I
explored one such practitioner’s
asset structure, and we agreed that a
lifestyle block which had been on the
market for three years, a one-third
interest in a dairy farm and some
KiwiSaver deposits (we’ll leave out
18
the car of indeterminate age) did not
provide the instant liquidity required
to pay out a successful claim. This is
the reason, one of them any way, why
self insurance is not acceptable under
NZICA’s public practice rules.
Those rules aside, is it wise to put
the family estate at risk, perhaps at a
time when retirement is approaching,
when this could be avoided by a
modest
professional
indemnity
premium?
Frankly, it’s hard to think of
anything more depressing than
having to sell assets urgently to meet
a $500,000 claim on your 62nd
birthday, or your 63rd. Bad enough
on your 50th. Not too flash at 40
either.
I talked above about the perils of
frank responses in surveys, but there
are other survey traps to be avoided.
One which nearly did me in was
the earnest editor of the in-house
publication who came round looking
for some mug (me) to respond to
idiotic questions such as:
• Three words to describe yourself.
Come on – others can do it so
much better, but they do tend to
take more than three words, even
with the expletives deleted.
• What is your most romantic
moment? Can you possibly
imagine fronting the coffee
machine in the staff room after
having given an honest answer?
• If you had to leave Planet Earth
what three personal possessions
would you take with you? That’s
easy – a long piece of string to find
my way back would be top of the
list. Gibbon’s The Decline and Fall
of the Roman Empire (multiple
volumes) would wile away a lot of
light years, and it would have to
be my wife as my third personal
possession – oops, we won’t go
down that track! On the other
hand, if I don’t invite her along I
won’t need the piece of string. Job,
where are you when I need you?
• Who would you like to be
stranded with on a desert island?
Really! How am I supposed to
answer that? Even if my wife
didn’t much fancy desert islands
(and who could blame her?) if I
want to be fed tonight there’s only
one answer.
Talking of being fed, I bounced
through the front door a couple of
years ago full of love and bonhomie,
to be greeted with: “You’re just like
a baby sparrow, sitting at the table,
knife and fork at each wingtip,
mouth open waiting for Mother
Sparrow to put food in it.”
It would have been foolhardy
in the extreme to have pointed out
that baby sparrow would not have
needed a knife and fork. It had
clearly been a bad, bad day, and
in those circumstances my learned
father always advocated silence.
Any response is dangerous and the
outcome unpredictable.
I did manage an acknowledging,
“um”.
“It seems to me you should
volunteer to cook one night a week.”
Another “um”. Tactical error –
that was taken as agreement.
“So, which night will it be?”
Trapped, there’s no way out of this.
“How about Tuesdays?”
Today was Wednesday and with
luck by next Tuesday things would
have improved and all forgotten.
Dream on, Sunshine. Come Tuesday
afternoon I received a call: “And
what are we contemplating for
dinner?”
I did some contemplation of my
meagre culinary achievements and
decided I couldn’t face eating any
of them. “What say we try that new
restaurant in Petone?” And so was
born the family tradition of Tom’s
“Tuesday cooking night” – we eat
out.
Tom Davies FCA is Director –
Professional Support at NZICA.
You don’t have to be
an accountant to
appreciate this deal.
But you do to get it.
We’re fortunate enough to be NZICA’s
banking privilege partner, which means
you’re fortunate enough to be able to take
advantage of this very special deal on a
Choices Everyday home loan:
Call us on 0800 694 229 or pop into your
nearest Westpac branch. Remember to
have your NZICA ID handy.
5% p.a. floating home loan rate
As little as 5% deposit
5 Free QV quotes
6 months’ pre-approval
Interest rate is current as at 17th November 2011 and is based on a 5.00% p.a interest rate on a Choices Everyday home loan and is subject to change at Westpac’s discretion. You must be a current member of
NZICA to be eligible for this special rate. Westpac’s current home loan lending criteria and terms and conditions apply. An establishment fee may apply. A Low Equity fee may apply. An additional fee or higher
interest rate may apply to loans if the application is accepted but does not meet standard lending criteria. Westpac New Zealand Limited.
20
Celebrating the best and brightest
The 2011 NZICA Leadership Awards
kicked off with music in Wellington on 30
November.
Guests were greeted by the full force of
the Wellington Town Hall organ as they
entered the main auditorium for a night of
celebration and recognition.
Over 380 well-heeled guests enjoyed
fine food and New Zealand wines between
award presentations in a night that will be
remembered for the quality of finalists and
exceptional winners.
Kate Rodger of TV3 capably officiated
and confessed to being accounting royalty
– her grandfather was Sir William Rodger,
Life Member of NZICA and the first person
in New Zealand to be Knighted for services
to the accounting profession.
A performance by the extraordinary Fuse
Circus kept guests wide eyed before the
formal portion of the evening concluded
with the Presidential handover.
Ross Jackson FCA was officially
farewelled and Richard Austin FCA
welcomed as NZICA President. Liz Hickey
FCA will be his Vice President.
Many guests chose to party on at the
official after party on the Wellington
waterfront.
2011 WINNERS
“The calibre of all our winners is not only a reflection of the NZICA
membership as outstanding business practitioners, but testament
to the opportunities that are available for NZICA members,”
~ Terry McLaughlin, NZICA Chief Executive.
American Express Outstanding Service to the Profession Award
Kevin Simpkins FCA
Crombie Lockwood 2011 Chartered Accountant of the Year Award
Jan Dawson FCA
Westpac 2011 Outstanding New Member of the Year Award
Joe Hanita CA
Ernst and Young 2011 Public Sector CFO of the Year Award
Scott Scoullar CA
Prestige Print 2011 Best Annual Report by a Corporate Organisation
Christchurch International Airport
Prestige Print 2011 Best Annual Report by a Public Sector Organisation
Watercare Services
Prestige Print 2011 Best Annual Report by a Not-For-Profit Organisation
New Zealand Red Cross
Prestige Print 2011 Best Sustainability Reporting Award
STUDENT AWARDS
2011 NZICA Student Challenge
Phillipa Widdon and David Loveridge from the University of Canterbury
Lion Foundation Young Enterprise Scheme 2011 NZICA Young
Managing Director of the Year
James Agnew, Managing Director of Advanced Clean Energies
Lion Foundation Young Enterprise Scheme 2011 NZICA Excellence
Award for Most Profitable Business
Back Black Enterprises from Mt Aspiring College
21
FEATURE
2011 Leadership Awards
Crombie Lockwood CA of the Year Award
Jan Dawson CA
As CEO and Chair of KMPG, Jan Dawson CA became the first woman
to head a big-four chartered accounting firm in Australasia, winning
acclaim as one of New Zealand’s top female accountants – all while
raising two children and skippering a prize-winning yacht crew.
Such achievements demonstrate Dawson’s abilities as a leader,
highly-skilled businesswoman and strategic thinker who transformed
KPMG New Zealand into a unified, high-capability network. During
her tenure from 2006-2011, a period which included two recessionary
phases, KPMG’s net revenue increased by 18%.
As an independent director, Dawson holds directorships at Air New
Zealand, Westpac New Zealand Limited, is deputy chair of Counties
Manukau District Health Board and a member of the University of
Auckland Council. During her term leading KPMG New Zealand
she was a board member of KPMG Asia Pacific Region and KPMG
Australia and a councillor of KPMG International. She is currently
president of Yachting New Zealand.
Over her 30-year career, Dawson has built expertise as an audit
partner providing statutory opinions on public and private companies
with particular experience in financial institutions and banks. Her
experience includes advising on corporate governance and risk
management.
22
Graduating with a Bachelor of Commerce
(Senior Scholar Accounting) from Auckland
University in 1976, Dawson worked for
Barfoot and Thompson, and Price Waterhouse
before joining KPMG in Vancouver, Canada in
1981. Shortly after returning to New Zealand
in 1987 she became and partner and by 2002
was appointed managing partner for the
Auckland office before becoming CEO and
Chair in 2006.
Dawson believes in giving back to the
community. As well as being president of
Yachting New Zealand she is chair of its audit
committee and a member of the events committee
of the International Sailing Federation.
She is committed to supporting future
leaders as a member of Global Women, and
the Committee for Auckland’s Future Leaders
programme. She has been on the General Trust
Board of the Anglican Church’s Auckland
Diocese and treasurer for Auckland Rotary.
Ernst and Young 2011 Public Sector CFO of the Year Award winner
Scott Scoullar CA
CFO of Inland Revenue (IR) Scott Scoullar CA brings a balanced mix
of public sector and private sector experience to his role.
Scoullar has held the position since March 2009, and leads a team
of approximately 240 finance and planning, and facilities management
staff who are engaged in a wide range of activities.
His responsibilities include financial management, business
performance, enterprise portfolio management and crown revenue and
associated cash management.
His key successes in this role include overseeing the delivery of $63m
in operational savings during the 2009/10 year, with $27m reinvested
into priority areas within IR and $26m returned to the Crown. Another
success was good engagement with ministers during the development
of IR’s Budget 2010 Compliance Improvement bilateral funding
bid. Further, in the department’s recent Performance Improvement
Framework formal review, IR received a “strong” rating for both
financial management and efficiency processes and evaluation.
Prior to this Scoullar spent two years as IR’s financial controller in
the Service Delivery group.
Before joining the public sector, Scoullar spent 12 years working in
the corporate banking industry. This included providing direct business
and financial support to the managing director of National Bank. He
also spent a large amount of time in senior
management roles.
He holds a Bachelor of Commerce and
Administration from Victoria University. He
has been a member of NZICA since 1997 and
became a member of NZICA’s Public Sector
Advisory Group in 2011.
Acting Commissioner of IR Mary Craig
describes Scoullar as someone who leads by
example. She says many people at IR find his
enthusiasm and dedication both inspiring
and motivating.
Scoullar is a father of two children, aged
five and eight. They both do karate and
he enjoys spending time with them as they
engage in this pursuit. The family lives in
Whitby, Porirua. Scoullar’s interests include
rugby, jet skiing and motorsport. He is a
member of the Manawatu Mustang Owner’s
Club and says his 1967 Mustang is like a
third child.
FEATURE
Westpac 2011 Outstanding New Member of the Year Award winner
Joe Hanita CA
Joe Hanita’s primary focus has always been to empower Maori.
With iwi affiliations to Ngati Kahungunu, Ngati Kuia and
Rangitane, he has significant influence within NZICA’s Maori
membership.
Hanita established the Maori Accountants Special Interest Group
(SIG) in 2004 as he believed there was a need to cater for Maori in
the Waikato-Bay of Plenty region. The group’s achievements include
developing a charter, achieving at least four annual SIG events, and
growing the number of members on the SIG database.
Hanita has also been an executive member of Nga Kaitatau
Maori o Aotearoa (NKMoA) since its inception and currently
chairs the organisation. This group’s milestones include seven
annual conferences and a membership base that has grown to
approximately 300. Hanita says his personal vision for NKMoA
has always been to develop a sustainable and relevant organisation
that adds value to its members.
He has raised the profile of the accounting profession within
Maoridom, and ensured the profession understands the needs of
Maori members. Hanita also helps ensure the profession remains
attractive to Maori by promoting the support network to new and
existing members.
24
Hanita has more than eight years
experience in public practice and the public
sector. Outside of his professional role as
group accountant at Te Wananga o Aotearoa,
he devotes a lot of time to volunteer work.
His community involvement includes being
a trustee of the Aotearoa Scholarship Trust,
and vice chair of Taiohi Toa Trust, a Hamilton
youth prevention initiative with the New
Zealand police. He is also former treasurer
of Te Hunga Roia o Aotearoa (Maori Law
Society) and a member of NZICA’s 2011
Public Sector Advisory Group.
Hanita continues to learn te reo Maori,
something he began when he started
his tertiary education. He has also been
researching his whakapapa since 2000,
tracing his ancestral lines to England, Italy,
Scotland and Aotearoa. The eldest of seven
children, Hanita spends most of his spare
time with family.
I have been
fortunate to
play a wide
range of
roles both
within New
Zealand and
representing
New Zealand
which have
given me the
opportunity
to serve the
profession
and its
stakeholders
Making a difference to the profession
The winner of NZICA’s American Express
Outstanding Service to the Profession
Award is grateful for the opportunity to
“make a difference”.
K
evin
Simpkins FCA says he is inspired by the
opportunity to “make a difference” to the
role accounting plays, both within organisations and
society.
The winner of NZICA’s American Express
Outstanding Service to the Profession Award considers
himself fortunate to have held a wide range of roles, in
New Zealand and overseas, which have given him the
opportunity to serve the profession.
Since 1 July Simpkins has headed the new External
Reporting Board (XRB), an independent Crown Entity responsible
for the development of accounting, and
auditing and assurance, standards in New
Zealand.
“Through this period of establishment
of the XRB there has been the opportunity
to shape structures, relationships and
processes in a way which can be as effective
as possible for the various stakeholders
interested in financial reporting and
assurance in New Zealand for the next 20
years.”
Simpkins describes the establishment
phase as a period of “frenetic activity”.
This included establishing policies and an
organisational structure and appointing
board members for both the New Zealand
Accounting Standards Board and New
Zealand Auditing and Assurance Standards
Board.
He says getting to the start line on 1
FEATURE
July was significant and would not have
occurred without the goodwill of his fellow
board members, and chief executive Tony
Dale, former general manager Roy Tiffin,
and many other people.
“We received no additional resources
through that establishment period but there
was an expectation that we would open
the doors on 1 July. It was enormously
satisfying therefore to literally open the
doors and hold the first XRB meeting in our
Wellington offices on 1 July.”
Simpkins has clear goals for the XRB.
“While it has had a smooth and positive
start, there is more to be done to ensure the
long-run quality of its work and that it is
held in respect by diverse stakeholders. I
want us to achieve this over the next two
years.
“In relation to the disciplines of financial
reporting and assurance, I am concerned
that we develop a sensible balance in New
Zealand between when it is important
for us to be aligned with international
developments, and when we can find our
own appropriate solutions here. That
will not be an easy task but one that I am
committed to over the next few years.”
Simpkins, whose career started in
South Africa, says his first reaction to his
American Express Outstanding Service to
the Profession Award win was surprise,
then appreciation that the profession which
has given him so much, in turn recognises
his contribution.
He has worked for Ernst & Young as
national director of accounting and spent
more than a decade at the Office of the
Auditor-General (OAG). He describes
working for the OAG as a career highlight.
In May 2002 he was appointed Deputy
Controller and Auditor-General, serving in
this role until May 2005 when he resigned
and set up his own business.
Since January 2007 Simpkins has taught
financial accounting and government
accounting at Victoria University where he
in an adjunct professor.
He says the students inspire him with
their ability to learn and to adjust to new
developments, both in terms of knowledge
and technology.
“It could be easy to stop questioning,
challenging or striving for new knowledge.
26
I am concerned
that we develop
a sensible
balance in
New Zealand
between when
it is important
for us to be
aligned with
international
developments,
and when
we can find
our own
appropriate
solutions here
That is difficult when all around I see young
minds which explore and enquire.”
Simpkins says his students’ capacity to
think beyond narrow financial terms has
been both a challenge and an inspiration.
“I believe the accounting profession of
the future will integrate various dimensions
of performance of organisations including
social, environmental and other aspects. It
needs to do so to respond to the society of
today. I see among my students a willingness
to grapple with these issues that seems less
evident in some of my peers.”
A career in accounting provides an excellent
developmental ground for people who want
to move into management, Simpkins says.
His advice to new chartered accountants
is to pay careful attention to the context in
which they are advising or assuring.
“In recent years some have pursued a
‘one-size fits all’ approach to accounting
information. That ignores the context to the
detriment of the relevance and usefulness
of the contribution accounting can make.
I tell my students that if they learn nothing
else from me, I will be satisfied if they
remember to always pay attention first to the
context and only then apply their skills and
techniques into that context.”
When he is not working, Simpkins says his
time revolves mostly around family.
“My wife Joanne and daughters, Lauren
and Jemma, have supported me in my
professional roles and endeavours.
“In turn I have always done everything
I can over the years to be present at all
family events and milestones and to actively
support the girls in their own activities and
achievements.”
The family loves music and have all sung
in choirs over the years.
Simpkins and his wife enjoy walking and
future plans include completing a number of
New Zealand’s great walks.
“We are also avid sports followers enjoying
(and frequently travelling to watch) rugby
as well as cricket, football, tennis and other
sports.”
Simpkins continues to be involved with
not-for-profit organisations, having recently
stepped down as a board member and
treasurer of Scripture Union in New Zealand
and currently serving as a board member of
the New Zealand Choral Federation.
1
2
3
4
5
6
7
8
1. 2011 President Ross Jackson does a pre-Awards recce. 2. Fuse Circus in full swing during dinner. 3. Vice President (now President) Richard
Austin, Marcus Henry. 4. Behind every good man… Janet Crombie, Ginny Jackson, Barbara Crestani. 5. Martin Vogel, Kate Vogel, New Member
winner Joe Hanita, James Ashton, NZICA CE Terry McLaughlin. 6. Steph Walker, Lucy Parr, Andrea Liddall. 7. Alexandra Dawson, CA of the Year
Jan Dawson, Roger France, Julie France. 8. Paul Anderson and Public Sector CFO of the Year Scott Scoullar.
FEATURE
Category winner
Christchurch International Airport Limited
Prestige Print Annual
Report Awards
Liz Hickey FCA, Chief Judge, offers
comments on the winners.
A
nnual
reports are all about communication.
The NZICA Annual Report Awards provide
an opportunity for organisations to benchmark their
performance alongside others in their sector.
These awards recognise best practice – not just compliance
with reporting standards and legislation, but also how well
an organisation explains:
• what it set out to achieve
• how well it has performed, both financially and nonfinancially
• its current position and strategic outlook
• how well it is managed and governed
• anything else that may be relevant to the particular needs of an
organisation’s stakeholders.
The awards are also a celebration of the design, readability and clarity
of the annual reports.
Best Annual Report by a Corporate Organisation Finalists
•
•
•
•
•
28
Christchurch International Airport Limited
Fonterra Co-operative Group Limited
Marlborough Lines Ltd
Solid Energy New Zealand Limited
Tainui Group Holdings Limited
Christchurch Airport produced a clear, readable
annual report, with material of interest to its
range of stakeholders. The report was well
balanced and of consistent quality in all sections,
including discussion of the business, governance,
sustainability and financial reporting.
The quality of the finalists’ annual reports
meant the judges had a difficult task in
determining a winner. The judges were
impressed by those corporates that considered
the requirements and financial awareness of their
readers and tailored the reporting to meet those
requirements. The judges noted specifically that
Tainui Group provided a separate summarised
financial report booklet that clearly explained
the key judgements and balances in the financial
statements and provided explanations of the
operating performance. Similarly, Fonterra
clearly targeted its co-operative shareholders in
the way it reported.
The financial statement disclosures for
corporates complying with NZ IFRS are
extensive. Preparers and auditors need to
consider whether disclosure of non-material
items actually benefits the reader of the financial
statements, or merely adds to the clutter.
The judges note that those companies that
included succinct summary analyses of financial
performance were more favourably rated,
and that a balance of graphical and narrative
information and ease of navigating through the
annual report is important to enable the reader
to understand the operating performance and
objectives of the company.
Best Annual Report by a Public Sector
Organisation Finalists
• Guardians of New Zealand Superannuation
• National Institute of Water & Atmospheric
Research Limited
• Reserve Bank of New Zealand
• Watercare Services Limited
Category winner Watercare
Services Limited
The Watercare annual report presents a strong integrated view of operations.
It reports well to a range of
stakeholders, and pushes to
be at the forefront of best
practice reporting.
The judges were looking for an
annual report that went beyond
compliance with standards and
legislation,
and
demonstrated
commitment to reporting to the
users. Such a report has a coherent
and linked “story” to tell and reflects
the challenges affecting future
performance of the entity.
An annual report must also integrate
the entity’s non-financial performance
and credibly reflect its achieved
performance against that anticipated.
It is helpful to provide information
about the context within which the
entity operated and the challenges and
implications of continuing to operate.
Best Annual Report by a Not-for-profit
Organisation Finalists
• Agriculture Industry Training
Organisation Incorporated
• New Zealand Red Cross
Incorporated
• New Zealand Rugby Union
Incorporated
• Parents Incorporated
• Royal New Zealand Foundation of
the Blind
Category winner New
Zealand Red Cross
Incorporated
New Zealand Red
Cross begins its
annual report with
a pictorial record
of
achievements.
This sets the tone
for a report that flows, has consistent
communication throughout, with a
good statement of service performance,
a financial summary in pictorial
form, and well-presented financial
statements.
The judges noted that both the
number of entrants and the quality
of the annual reports in this category
had improved dramatically in recent
years. Selecting a winner was a tough
decision.
A modern annual report is not merely
a historical record. It provides real
insight into the operations, outcomes
and governance of the organisation.
In doing so, it considers stakeholders
such as funders (whether by grant
or donation) and their need for an
answer to the question: “If we support
this organisation, what will they do
with the funds pledged?” Answering
that question involves information
about the organisation’s purpose, its
governance and accountability, what it
plans to use the funding for, and how
well it has performed against plans in
the most recent year, and why.
All finalists exhibited the general
improvement in service performance
reporting observed across much of
the sector. However, the judges were
disappointed at the lack of forward
looking information for the coming
financial year or two, the planned
outcomes going forward and how
the entity was going to achieve those
outcomes.
The judges also noted that
financial statements for not-for-profit
organisations should be general
purpose, as stakeholders typically
do not have the ability to command
particular financial information, thus
making special purpose financial
statements inappropriate.
Award for Sustainability Reporting
Finalists
• Christchurch International Airport
Limited
• National Institute of Water &
Atmospheric Research Limited
• Otago Polytechnic
Category winner
Limited
The Christchurch Airport annual
report uses the Global Reporting
Initiative
guidelines
well
to
bring clarity to the reporting of
its performance with regard to
sustainability.
The report includes commentary
on the airport workplace and
people, governance, the challenges of
growth, environmental management
and community involvement. That
commentary alone in any other year
would be sufficient, but the report
also includes a succinct factual
section on the airport’s response to
the earthquakes.
Quality information is needed for
good decision-making, performance
management and monitoring of
organisations across the public,
private and not-for-profit sectors.
There is a real need for non-financial
information that is integrated with
financial information.
Sustainability is not just about
the environment, but also embraces
social, cultural and ethical practices.
How the organisation articulates
its concern for sustainable business
practices in the reports of the
CEO/Chair demonstrates whether
sustainability is viewed broadly.
All entrants provided historical
reporting of sustainability initiatives
within their organisations, although
at varying levels. Some provided
accompanying performance figures,
covering several years, which showed
the benefits of their initiatives. The
better reports provided quantitative
measures, or key performance
indicators (KPIs), that had been
created to help measure the benefits
of sustainability initiatives.
Any organisation that is fully
committed to sustainable business
practices must become forward
looking
and
establish
future
performance targets for itself.
Two other aspects are indicative
of sustainability reporting that meets
international standards: comparable
benchmark figures to show how
the reporting entity’s performance
compares with the performance
of other similar organisations and
external assessment (review) of nonfinancial information to assure its
quality.
In conclusion, well done to the finalists, and congratulations to the
2011 winners: Christchurch International Airport Limited, Watercare
Services Limited, and New Zealand
Red Cross Incorporated.
FEATURE
A message from our 2011 Leadership Awards sponsors
Crombie Lockwood Chartered Accountant of the Year Award
American Express Outstanding Service
This is surely the most prestigious business award in New Zealand.
The Chartered Accountant of the Year could also be called the Business
Rescuer of the Year; or Business Navigator or Mentor of the Year; most
likely, the Business Strategist and Builder as well. In short, the CA of
the Year should be recognised as a Companion of Business Growth,
which is why Crombie Lockwood is so proud to sponsor this Award.
Our focus is to help businesses financially survive any insurable
event; especially while they are growing, when the risk is greatest. We
also provide Complete Practice Insurance designed just for CAs.
Not just once a year but day by day, CAs and Crombie Lockwood
represent a natural partnership.
to the Profession Award
Westpac Outstanding New Member of the Year Award
With 1.2 million customers and 5,500 staff, Westpac is one of the
country’s largest full service banks – and this year we’re celebrating
150 years in New Zealand.
We’re about helping our people, customers, communities and
businesses get to where they want to be, and supporting programmes
that Kiwis are passionate about.
We love celebrating business success and leadership – that’s why
we’re the Sir Peter Blake Trust’s Foundation Partner, demonstrating
our commitment to developing leadership. We sponsor 17 Business
Excellence Awards nationwide, and are proud to complement this
business and leadership focus with our support of the NZICA
Leadership Awards.
Ernst & Young Public Sector CFO of the Year Award
Ernst & Young congratulates the finalists in the inaugural Public
Sector CFO of the Year, and particularly the winner, Scott Scoullar CA,
on this recognition as the best in his profession. As a leading global
professional services firm united by shared values and an unwavering
commitment to quality, we recognise the complex demands on Public
Sector CFOs to lead their organisations through excellent financial
discipline and a focus on results. Through many years of service to
the broader public sector - from performing core auditing services
to transformation programmes - we understand the drivers of high
performance and the critical role of CFO.
30
American Express is a leading global payments,
network and travel company backed by one of
the world’s most recognised brands. It offers a
broad array of charge, credit, prepaid and cobrand cards for consumers, small businesses,
midsize companies and large corporations. As a
New Zealand Institute of Chartered Accountants
Privilege Partner, American Express provides a
range of products for NZICA members, such as
the NZICA Gold Credit Card and the NZICA
Platinum Credit Card. As part of the 2011
NZICA Leadership Awards, American Express
would like to congratulate Kevin Simpkins
CA, winner of the Outstanding Service to the
Profession Award.
Prestige Print Annual Report Awards
Prestige Print is proud to support the 2011
NZICA Leadership Awards, this support has
stemmed from a successful working relationship
with NZICA. Prestige Print is a Wellington
based family owned and operated, GOLD
Enviro-Mark, commercial printer. When you
form a partnership with Prestige Print you soon
learn that we will go the extra mile to make the
printing process a stress free time for you. Our
clients range from small businesses to national
corporations and our services cover all possible
requirements ranging from low volume business
card runs to high volume multiple page booklet
runs.
To find out more about us call 802 5471 or
visit prestigeprint.co.nz.
A special thanks to our major prize sponsor, BMW.
Congratulations
to the
Crombie Lockwood
Chartered Accountant
of the Year
Jan Dawson
Crombie Lockwood is proud to sponsor the Chartered Accountant of the Year Award, just as
we are proud to be NZICA partners and major contributors to NZICA’s Canterbury Rebuild team.
Most of all we are proud to provide the market’s leading insurance solution to one in four CA’s
throughout New Zealand. To learn about IKON Complete Practice Insurance call your nearest
Crombie Lockwood office or visit www.crombielockwood.co.nz
FEATURE
Advisory Groups 2011
Professional advisors
NZICA’s new advisory groups are a
vital bridge between members and
the Institute. So who are the people
representing the needs and views of your
sector?
Asia Pacific regional board of Baker Tilly
International, the eighth largest international
accountancy and business advisory network in
the world. Guise is also a director of several
private companies and a trustee of a number of
trusts. He specialises in financial management,
succession planning and strategic direction
and has been involved in a number of sales
and purchases of businesses. He has a special
interest in the agricultural industry and import
and distribution businesses.
Doug Haines CA
by JENNIFER BLACK
NZICA PUBLIC PRACTICE ADVISORY GROUP 2011
Matthew Bellingham CA
Matthew Bellingham CA began his career in 1992 with
two-partner firm Colson White, based on the North
Shore of Auckland. Five years later, aged 26, he became
a partner. In 2001 the firm merged with a Parnell-based
practice to create Hayes Knight. He was appointed to
the management board and was essentially the joint
managing partner. In 2010 he was officially appointed the first CEO
of Hayes Knight NZ. Bellingham has extensive experience as a director
of several companies and not-for-profit boards. He is chair of the 2011
Public Practice Advisory Group, his first role with NZICA. He describes
the group as extremely talented with a great depth of experience,
representing different sized firms, regions and specialties.
Sharon Cresswell CA
Sharon Cresswell CA is based in PwC’s Hamilton office
and provides audit services to clients from Pukekohe
to the Central North Island and across to the Bay of
Plenty. She spends most days on the road visiting these
clients, so luckily she enjoys driving. Cresswell started
her career in London in 1993. She transferred to PwC
Auckland in 1999 for a two-year secondment, but never returned.
Already a UK CA, Cresswell became a New Zealand CA in 2003. By
joining the PPAG she hopes to be able to help identify the opportunities
that should come from this time of huge change that CAs face. Cresswell,
her husband Alan and their two young children, Tom and Amelia, take
every opportunity to spend time together, whether it is playing in the
garden or heading to the beach.
Peter Guise CA
Peter Guise CA is currently the chairman of Staples
Rodway New Zealand Limited, and has been a director
of the Auckland firm for 15 years. Prior roles include
managing director of Staples Rodway Auckland,
general manager of a private importing and distribution
company in the textile industry and financial controller
of a wholesale and retail company. Guise is currently a member of the
32
Doug Haines CA is a partner
at BDO in Wellington and describes his role as “incredibly
stimulating” providing mergers and acquisitions advice as
well as accounting services to
fast growing medium sized entities. He is an
experienced NZICA presenter and sits on a
number of advisory boards. Haines obtained
his business degree at Victoria University and
became a chartered accountant in 1998. He is
chair of BDO’s National Standards Committee, which oversees the technical compliance
and quality controls of that network. Haines
brings a desire to ensure that current NZICA
standards are relevant, consistently applied,
and reinforced appropriately in order to protect NZICA’s brand. In his spare time Haines
is a keen cyclist.
Stephen Lucy CA
Stephen Lucy CA commenced
his current role as an audit director at Audit New Zealand
(the operational business unit
of the Controller and AuditorGeneral) in August 1999. He
specialises in central government and Crown
entities work, with a particular focus on the
national security, health, and tertiary education sectors. Born in Wellington, Lucy achieved
a Bachelor of Business Studies through Massey
University in Palmerston North and qualified
as a chartered accountant in 1988.
His extensive experience includes external
audit (some 19 years at both Audit New
Zealand and KPMG) and operational
management. His KPMG experience in the
United Kingdom included due diligence work
for company acquisitions in the UK, USA
and Norway and internal review work for
the EuroTunnel Construction Project. Lucy’s
interests include attending major sports events
such as the rugby and soccer World Cups and
the occasional Formula 1 race. He has family
links to Gisborne, Temuka, Balclutha and
Granity.
Baubre Murray CA
Baubre Murray CA is a public
practitioner and director of
Dowse Murray Chartered
Accountants Ltd, a Wellington
firm specialising in SMEs.
She has been a chartered
accountant for more than 25 years originally
working for the then Audit Office, followed
by a period providing consulting services,
before moving into public practice. Dowse
Murray Chartered Accountants Ltd has a
strong technology focus using a virtual office
model with staff working offsite. Murray’s
role sees her helping clients on a daily basis,
which she finds extremely rewarding, and
she loves the variety each day offers. She is
a member of the NZICA Council and was
previously a member of the National Public
Practice Committee.
Michael Rondel CA
Michael Rondel CA is a
partner at Polson Higgs
and has been with the firm
since May 2002. He has
responsibility for the firm’s
Assurance Services Division.
Rondel has extensive experience in both New
Zealand and overseas providing professional
services to medium to large corporate entities
as well as involvement with a large number of
not-for-profit and public sector organisations.
His particular areas of expertise include
assurance-related assignments, due diligence,
systems reviews, strategic and business
planning and providing advice on governance
issues. Rondel has considerable experience in
the public sector and has conducted a range
of consulting assignments for both local
and central government bodies including a
number of territorial local authorities. In
addition to his client work, Rondel has been
involved with an extensive range of training
assignments both externally and within the
firm. He has presented nationally on a wide
range of topics for NZICA. He is on the
Canterbury-Westland Branch Committee and for the past two years
has been chair of the branch Public Practice Committee. A born and
bred Cantabrian, Michael lives in Christchurch and is married with
three children.
Greg Sheehan CA
Greg Sheehan CA was raised on Auckland’s North
Shore and, while he loves the city as a place to work
and do business, he and his wife Nickie have moved
themselves and their three children to Martinborough
to grow pinot noir under their Tree House Estate
label. Sheehan says running a small vineyard operation
provides the perfect antidote to the manic pace of being a CA. He
is one of two partners in a 15-staff Martinborough-based firm,
Sheehan & Shaw, servicing clients around New Zealand. Sheehan says
although he travels a lot and spends too much time in Koru Lounges,
this is easy compared to the schedule he had when he was CFO of
Nike Australia or Air New Zealand’s group financial controller. He
is a former general manager of the National Party and the Auckland
based charity Parent’s Inc. Sheehan says accountants must continue
to broaden their skills and cautions that accountants who only work
with numbers may be left behind as a new generation of savvy, smart
businesspeople become the advisors of tomorrow.
Ann Tod CA
Ann Tod CA has been with KPMG since 1980, and an
audit partner since 2003. She was National Training
Director from 1993 to 2000, joining the global KPMG
team in New York for a period to develop audit
training material. Tod’s clients include New Zealand
and multinational entities, primarily in the SME sector.
She has extensive client experience in banking and finance, forestry,
construction, import and distribution, and manufacturing. Co-leading
a team of 40 consultants in Auckland, Tod recognises the importance
of coaching and mentoring. This has enabled her to build strong and
dedicated teams to ensure delivery of quality service. She served for six
years on the NZICA Admissions Board. In 2011, Tod was appointed
to the Board of the International Federation of Netball Associations
(IFNA), an appointment which reflects both her strong commitment to
the game as auditor of Netball New Zealand, and her personal passion
for netball as a player and referee. She lives in Auckland and is married
with three daughters.
Craig Wyatt CA
Craig Wyatt CA is currently a partner in five-partner
Dunedin and Oamaru practice Harvie Green Wyatt. A
founding partner of this firm and previously a partner
in one of the Big-4 firms, Wyatt has been in public
practice for 22 years. Specialising in agribusiness, he
has a large, diverse client base and works in both the
Dunedin and Oamaru offices. His involvement with NZICA includes
being the current Otago Region Councillor. He and wife Kathy have
two teenage boys. Wyatt’s interests include travel, motorsport and
trail bike riding in the North Otago high country.
FEATURE
NZICA REGIONAL ADVISORY GROUP 2011
Rob Braithwaite CA
Rob Braithwaite CA is a KPMG partner and heads the tax
division of its Hamilton office. He has been a partner since
2000 with more than 25 years experience with KPMG
in tax, audit and general compliance and accounting.
Braithwaite’s clients are primarily agribusiness related
corporate entities, but he also provides advice to other CA
firms and legal professionals. He is particularly interested in agribusiness
and formerly served on NZICA’s Primary Sector Committee. Braithwaite
co-authored the CCH publication Tax Guide to Farming, Forestry and
Fishing (currently being revised) and has presented a number of seminars
on tax issues, particularly as they relate to the agribusiness sector. He is
married with four children aged between five and 23. For fun he drives a
1955 Pontiac.
George Collier CA
George Collier CA is a director of Ibbotson Cooney Limited, a firm of chartered accountants and business advisors in Alexandra, Central Otago. He was on the Primary
Sector Committee and is a member of the NZ Institute of
Primary Industry Management. Collier has specific interests in succession planning, equity partnerships and free
holding tenure reviews. Before joining Ibbotson Cooney Limited, Collier
had a farm advisory consultancy business. He has a Bachelor of Agricultural Commerce and a Postgraduate Diploma in Agricultural Science.
Marilyn Davies CA
Growing up on the family farm in Eketahuna set
Marilyn Davies CA on the path to becoming one of New
Zealand’s most successful rural accountants. A director at
Busing Russell, Davies has succeeded in the commercial
sector, thriving in the areas of business development and
business mentoring/coaching. She has forged a reputation
for helping clients achieve personal and financial success. Davies’ “can
do” approach to her work has helped many of her clients grow their
businesses and their wealth. Davies is also passionate about her family
(three adult children and granddaughter Willow) and friends. She has
a keen interest in photography, travel, concerts and theatre. Davies’
enthusiasm for her community and province has seen her actively involved
in car show “Americarna”, many charitable trusts and as a judge in the
Taranaki Chamber of Commerce Business Awards. She is also an advisor
to a number of boards.
Lyall Evans CA
Lyall Evans CA is the director of six-partner firm BDO
Gisborne Limited, specialist sheep and beef advisors. The
53 year old is married with three children and has been
a chartered accountant for 30 years. He was a member
of the former Primary Sector Committee and previous
chair of the committee. Over the years he has written
and presented continuing education courses throughout NZ for both
NZICA and TEO on farm accounting, farm taxation, forestry and family
trusts. He also presented GST courses in Australia in 2000. Evans advises
34
extensively in the area of succession for farm
owners. He has an interest in the presentation
and content of farm financial accounting reports
for livestock businesses.
Chris Joblin CA
Chris Joblin CA is the CFO
of Tainui Group Holdings, an
investment company with a
number of interests across the
property and primary sectors,
including its flagship asset The
Base retail centre in Hamilton. Before joining
TGH, Joblin held a number of senior financial
positions in New Zealand and the United Kingdom. The most recent was with AFFCO Holdings Limited. Joblin has a special interest in
the primary sector, having enjoyed a significant
part of his career to date within companies with
significant primary sector investments. He is a
member of the Institute of Finance Professionals
of New Zealand. Based in Hamilton, Joblin and
wife Colleen have two young children.
Richard Perry CA
Richard Perry CA has been is
CFO of Landcorp Farming
Limited since 2003. Landcorp
is a state owned entity that
owns and manages more
than $1.5 billion in assets,
comprising more than 100 sheep, beef, deer and
dairy farms throughout New Zealand. Perry
leads Landcorp’s Finance and Information
Services Division and previously held senior
finance and accounting roles at the Reserve
Bank of New Zealand. He is a certified treasury
professional and has been involved in various
NZICA working groups including the Banking
and Finance SIG and Primary Sector Committee
prior to the Regional Advisory Group. He has
been a technical advisor to the International
Monetary Fund for more than 15 years and has
consulted and taught in a number of countries in
this capacity. He is married with three children
and is passionate about agriculture, hunting and
the outdoors.
Rajnesh Sharma CA
Rajnesh Sharma CA joined
Turners & Growers (T&G)
in June 2004 as the finance
manager. In 2006 he was
offered an export manager role
within the company’s international division,
managing the Pacific region operations.
Sharma has a Bachelor of Commerce degree
from the University of Auckland and attained
his full NZICA membership in 2000. He
started his career in the audit division of
BDO, where he gained extensive experience
in best practice procedures, controls and
corporate governance, due diligence and
company formations. Before joining T&G
Sharma held senior positions in various
industries. Sharma is married with a nineyear-old son and his interests outside work
include travelling with family, rugby, soccer
and cricket.
Frazer Weir CA
Frazer Weir CA is a partner at Polson Higgs where he
specialises in providing financial consultancy, succession planning and accountancy services to clients, predominantly in the agricultural sector throughout the
South Island. As part of this work he advises several
corporate farming ventures with multiple shareholders, or acts for individual shareholders investing in these companies.
In addition to being on NZICA’s Regional Advisory Group, Weir
is also a member of the New Zealand Institute of Primary Industry
Management Canterbury Westland Branch committee. Before joining
Polson Higgs in 2002, Weir worked for the Bank of New Zealand as
agribusiness manager in North Canterbury. Until 2004 he was also
a shareholder in a dairy farm equity partnership in Southland. He is
married with two young children and enjoys getting outdoors on his
block of land during weekends.
Cros Spooner CA
Cros Spooner CA is currently
the chief operating officer at
Beef + Lamb New Zealand
Limited. His specific responsibilities include organisational strategy and finance
and corporate support services. Spooner has
19 years of experience in the primary sector.
He has previously worked for Wrightson
Ltd as general manager rural supplies and
was CFO at Regal Salmon Ltd and commercial manager of Riverlands Marlborough
Ltd. Spooner began his career with KPMG
Christchurch.
NZICA PUBLIC SECTOR ADVISORY GROUP 2011
Michael Beever CA
Michael Beever CA immigrated to New Zealand in
2008 and has been CFO at Statistics New Zealand
for the past three years. He is CIMA qualified. Before
coming to New Zealand he held a range of positions
in the travel and financial services industries in the UK
and Australia. His experience covers internal auditing,
management accounting, commercial pricing, project accounting and
financial controller positions. Beever lives in Wadestown with wife
Fiona and their two sons, both under the age of three. In his “spare”
time, he is slowly working his way through New Zealand’s finest
tramps, having completed Routeburn, Heaphy and the Abel Tasman.
Joe Hanita CA
Stephen Stafford-Bush FCA
Stephen Stafford-Bush FCA
began his career in 1976
straight from school, spending two years learning the
ropes at Porter Wigglesworth
and Grayburn in Auckland.
He completed his accounting qualification
while working at Peat Marwick, now KPMG,
in the audit department. He has also worked
in KPMG’s London office. Back in New Zealand, after a role with Audit New Zealand,
Stafford-Bush went back to KPMG to help
establish their Risk Management, Internal
Audit and Fraud Prevention and Investigation Department. His pace of life changed in
the nineties after buying a lifestyle block in
Karaka. Stafford-Bush then bought a wellestablished accounting practice in Waiuku.
He has been a Director at McConnell Stafford-Bush and Associates for two years following the merger with a Pukekohe practice.
Joe Hanita has iwi affiliations to Ngati Kahungunu,
Ngati Kuia and Rangitane. He is the group accountant at Te Wananga o Aotearoa and has more than
eight years’ experience in public practice and the
public sector. Hanita has significant influence within
NZICA’s Maori membership. He is passionate about
developing the potential of the Maori economy and keen to represent Maori interests at a governance level. He is also interested in
encouraging more Maori to pursue education. Hanita has served on
a number of boards and trusts over the past six years. He is the chair
of Nga Kaitatau Maori o Aotearoa (the National Maori Accountants
Network), Vice Chair of Taiohi Toa Trust and Vice Chair for the
Waikato Branch Committee. He won the Westpac 2011 Outstanding
New Member Leadership Award.
Darren Mitchell CA
Darren Mitchell CA grew up in Invercargill and studied at Otago University, but has lived in the Christchurch region for the past 20 years. Building on 10
years of experience in private practice with a focus on
business services and information systems, he changed
tack and entered the public sector in a finance role with Christchurch
FEATURE
Polytechnic Institute of Technology. Ten years on Mitchell holds the
dual roles of CFO and director of corporate services in New Zealand’s third largest polytechnic. Married to Toni and with three children aged between three and 11, he lives on a lifestyle block in North
Canterbury, which offers many opportunities for work life balance.
Mitchell says it is great to go home after work and get immersed in the
world of family, and the countless jobs that owning a larger property
conjures up.
Robert Nelson CA
Robert Nelson CA started his accounting career in
manufacturing, then he progressed through financial
services and property to local government 14 years
ago. After the recent amalgamation, he is financial
controller at Auckland Council. His area of interest
is external financial reporting. Nelson says Auckland
Council provides a variety of work and scale of operation not always
apparent to outsiders. He says applying the accounting standards to
a public sector group with commercial activities has its challenges,
as does publishing 10-year financial plans. Nelson is married with
two adult sons. One son lives overseas, giving Nelson and his wife a
reason to travel and explore new places, food and local wines. Spare
time is spent on DIY projects, driving his 1959 MG sports car or at
the family’s holiday house north of Auckland.
Ron Pearson CA
Ron Pearson CA was recently appointed deputy CEO
and director corporate and business services at Counties Manukau District Health Board. He has been with
the DHB for 12 years, originally as finance director.
He is also a foundation director of healthAlliance NZ
Ltd, a foundation director of charitable fundraising
organisation the South Auckland Health Foundation, chair of Manukau Health Trust and was previously a director of Manukau Water
Limited. Pearson has had a diverse range of senior finance roles in a
number of publicly listed companies, including Winstone Auckland
Ltd, Feltex International Ltd, and McConnell Dowell Ltd, as well as
similar finance director roles at Affco and the NZ Apple & Pear Marketing Board. Pearson lives in Auckland with wife Ngaire. He has two
adult sons and two grandsons. He is a dedicated collector (and consumer) of quality South Australian shiraz, with a wine cellar to match.
Scott Scoullar CA
Scott Scoullar CA is the CFO of Inland Revenue, and
has been for five years. This is his first public service
position. Before moving to IR, Scoullar worked in the
banking sector. He is regarded as a high-performing
CFO and won NZICA's inaugural Ernst and Young
2011 Public Sector CFO of the Year Award. He lives
in Whitby, Porirua, and has two children, aged five and eight. Scoullar says his old 67 Mustang is like a third child. His interests include
rugby, motor sport and jet skiing at the weekend. He brings to the
advisory group a balanced mix of public sector and private sector
experience.
36
Wendy Venter CA
Wendy Venter CA is the deputy chief executive, risk and
assurance at the Ministry of
Social Development.
She previously worked at the
Office of the Auditor-General
as Assistant Auditor-General, Parliamentary
Group, where she oversaw the office's
work in central government. This included
advising parliamentary select committees
on the performance of government agencies
and the Auditor-General on risks, issues and
developments in central government. Venter
was the lead auditor of the financial statements
of the New Zealand government for a number
of years and has led several high-profile
Auditor-General investigations including
the 2008/09 inquiry into the integrity of
Immigration New Zealand's visa operations.
She has worked at Audit New Zealand and
the Office of the Auditor-General in a variety
of roles. Born and educated in India, Venter
came to New Zealand to work at the Audit
Office on a graduate exchange programme.
She is married with an 18-year old daughter
and a 16-year old son. Her interests outside
work include food (eating and cooking!),
films, reading and most sports, particularly
cricket, and golf.
Fergus Welsh CA
Fergus Welsh CA has more
than 20 years of public sector
management experience. At
the start of 2010 he was appointed to a new leadership
position in Treasury as CFO
and Chief Accountant. As chief accountant
his role includes leading the development and
implementation of strategies for improving financial resource management across government. Before that Welsh was the CFO at the
Ministry of Economic Development.
Marc Warner CA
Marc Warner CA is the deputy chief executive – people,
capability and resources at
the Ministry of Social Development (MSD) and has been
chair of the Public Sector Advisory Group. He has nine years of experience
in various positions in MSD and is a former
public service CFO. Earlier this year Warner
led the ministry’s Canterbury Earthquake Recovery response, immediately after the February 22 earthquake. Before working at MSD
Warner worked for the Ministry of Health
then formed consultancy firm Hunter Group,
and later was one of three who established,
then sold, an "internet security" company,
128i Ltd. Once a keen cricket player, Warner
is now a keen sports follower, although his
sporting passion is golf.
Phillippa Wilson CA
Phillippa Wilson CA is the
group manager corporate
services at South Taranaki
District Council. Besides a
two-year period when she
worked for the Department
of Internal Affairs (Local Government Policy
Unit), her career has been exclusively in the
local government sector. She started work in
1968 as an office junior and worked through
the ranks to become a chief executive.
Wilson was president of the Society of Local
Government Managers from 2005-2007 and
prior to taking up her role in South Taranaki
a year ago she was at the Auckland Regional
Council. Wilson lives with her husband
Douglas in a beautiful 1909 villa on a large
section in Eltham, South Taranaki. Her
interests include travel, gardening, dining out
and restoring her house. She is passionate
about public sector accounting and finance
and says the Public Sector Advisory Group is
an opportunity for her to give something back
to the accounting profession.
NZICA CORPORATE SECTOR ADVISORY
GROUP 2011
Lynley Belton CA
Lynley Belton CA’s first job in
finance was in a Christchurch
chartered accountancy firm as
a school leaver. She gained her
CA qualification in 1983. After nine years in the CA environment, one CA merger too many prompted
her move to the corporate world, right on top
of the sharemarket crash. A few years, many
lessons and a couple of industries later, she entered the world of magazines. She has held a
number of roles in this sector including general manager of Gordon & Gotch, then New
Zealand’s largest magazine distribution company. Following a short return to a finance and project management role for Fairfax, she took up
her current role as general manager of Fairfax Magazines in December
2006. She is the current chair of the Magazine Publishers Association
and serves as an industry representative on the Audit Bureau of Circulation and the Advertising Standards Complaints Board.
Tony Candy CA
Tony Candy CA has been a member of NZICA for about
30 years. He has worked in various industries from record manufacturing, paper merchandising and envelope
manufacturing to steel distribution, along with a stint
providing accounting services in a small chartered accountancy office. In 1988 he joined Steel & Tube Holdings as the financial controller of the steel merchandising division. In
1992 he was appointed chief financial officer and company secretary. In
June this year Candy relocated to Auckland and took up a position as
CEO of Atlas Steels, based in East Tamaki. Candy is married with three
adult children. He has a general interest in sport and is a keen golfer.
Mark Conelly CA
Mark Conelly CA joined Noel Leeming Group Limited
as CFO in January 2005 after spending four years as
CFO of Crane Distribution NZ Limited. Prior to that,
he held various senior financial positions with Richina
Pacific Limited, and the IAG Insurance Group in New
Zealand. He has experience across a number of sectors,
including manufacturing, insurance, distribution, financial services and
corporate, in both New Zealand and China. At Noel Leeming Group,
Conelly is responsible for the finance function, decision support, human
resources, payroll and technology. He has nearly 60 staff reporting
through to him. He is chairman of the Ronald McDonald House Trust in
Auckland. He is on the development committee for St Kentigern School.
Conelly is also Life Member of the Child Cancer Foundation and is a
Paul Harris Fellow, an award made by Rotary International, for services
to the community. He lives in Auckland and is married with two schoolage children.
Lucy Hickman CA
Lucy Hickman CA joined NZICA as the financial
reporting specialist in August 2011. She was originally
appointed to the Corporate Sector Advisory Group,
but on joining NZICA has been appointed manager
of the group. Hickman returned from London in early
2009 and worked as CFO at Trade Me. Her work
experience in London includes assisting with the finance integration after
the takeover of TNS by WPP, and working on the separation project
at British Telecom. Hickman also has experience in public practice
including audit and transaction services in New Zealand, Australia and
the UK. Outside of work she enjoys spending time with her husband and
one-year-old daughter. When she has time she enjoys running around the
Wellington waterfront. Hickman is involved in her community as the
treasurer of her local Plunket branch and is a committee member of the
Hataitai Community House.
FEATURE
Craig Holloway CA
Craig Holloway is the head of strategy execution at
Kiwibank. He is responsible for the management of
Kiwibank’s strategic framework. He was part of the core
team that implemented the strategy execution system in
2007 and his current role evolved as part of the project. In
2009, Kiwibank become the first New Zealand company
to be admitted to the Hall of Fame for Executing Strategy. He has been
with Kiwibank since 2004 and was originally financial controller of group
reporting. Prior to this, Holloway worked within finance in a variety of
companies including Fonterra, New Zealand’s largest company, KPMG
and Greenwich Natwest in the United Kingdom. He holds a Bachelor of
Commerce and Administration from Victoria University in Wellington.
Tim Loan CA
A born and bred Southlander, Tim Loan is passionate
about the place. Having spent 10 years with Ernst &
Young in Invercargill and Wellington, he moved into the
corporate sector 14 years ago in a finance manager role
for an SOE. Loan and his wife Julie moved back to Invercargill eight years ago when he took up the position of
GM Finance for what is now SBS Bank (a role that many feel he is aptly
named for). He has three school-age children and the family is keenly
involved in their local church. They enjoy the Southland/Central Otago
lifestyle that living at the bottom of the country affords. Loan has governance roles with a couple of other organisations and has been on the local
NZICA committee since 2005, most recently as chair and now councillor
for Southland. He relishes the networking and learning opportunities that
being involved with other corporate sector members provides. As part of
this advisory group Loan is keen to ensure that the relevance of NZICA is
enhanced for the corporate sector community and that greater opportunities are provided for sharing and learning between regional and metro
corporate sector members.
Marin Matulovic FCA
Marin Matulovic is director of finance at the University
of Auckland, a position he has held since 2003. He was
an NZICA Council member for five years, from 20042009. During that time he was a member of the National
Corporate Sector Committee. Matulovic has been actively
involved in NZICA’s Auckland Branch activities for 12
years in various capacities, including being a member of the Auckland
Corporate Sector committee for 10 years. The CFO/Financial Controllers
Special Interest Group was established in 1995 and Matulovic has chaired
the group since 2001. During this time the SIG has maintained an average
membership of over 400 members and has had a high attendance rate of
over 200 members for the 11 meetings per year.
Bevan Miller CA
Bevan Miller CA started his career as an auditor and
audit manager for KPMG. He then joined Telecom and
spent eight years in various finance roles, including group
reporting manager and head of finance and commercial
for the International Division. For the past three-and-
38
a-half years he has been CFO of Wakefield
Health, an NZX-listed owner and operator of
private surgical hospitals. As a member of the
Corporate Sector Advisory Group, Miller looks
forward to engaging with NZICA on a range of
significant professional issues.
Jannine Mountford CA
Jannine Mountford is the
Commercial Manager of
Fletcher Building Roof Tile
Group, responsible for leading
finance teams located in New
Zealand, Asia, Europe and
USA. Before joining Fletcher Building she held
senior finance roles in various organisations,
including a privately owned infrastructure
products manufacturer and a not-for-profit
training organisation. Her experience in these
roles means she brings insight to the challenges
finance leaders in SMEs and NFPs face with
reporting, statutory and tax compliance.
Mountford started her accounting career in
1985 at Alcan NZ as an accounting cadet,
completing her degree part time at MIT
and becoming a CA in 1996. She is Fletcher
Building’s sponsored participant in this year’s
NZ Global Women’s Leadership programme.
Mountford and her husband Rob live in
Auckland where they enjoy playing golf and
spending time with family and friends.
Gary Swift CA
Gary Swift began his career
as a chartered accountant
working in auditing with roles
in Wellington, London and
Toronto for what is now part
of Ernst & Young. Since then,
he has been the CFO of a number of businesses.
The most recent was Watercare Services Limited
in Auckland where he was CFO for 12 years.
Swift has been chief executive of Auckland
Council Investments Ltd since November
2010. He has also been involved in a wide
range of community groups in Wellington and
Auckland, mostly as treasurer. Swift is married
with four adult children. He was a finalist for
the NZICA CA of the Year Award in 2010.
Chair of the Corporate Sector Advisory Group
2011, Swift is a former NZICA Council
member and Board member, and former chair
of the Sustainable Development Reporting
Committee.
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NEWS
business
A Brisbane street after the January 2011 floods.
inundated, and recovery and aid support came
from across Australia and New Zealand. A
Commission of Inquiry into the Queensland
floods has made recommendations regarding
flood preparedness, but has not yet completed
its work.
The recoveries observed in these two
disasters have enough similarities with the
Christchurch experience that it is possible to
flag some critical factors for the years ahead
in Christchurch. We have also seen some key
roles for accountants and auditors, and the
finance community more broadly, that might
be of interest to members intent on playing a
part.
01
1
Recovering from disasters
NT
ERBURY 2
TROPICAL CYCLONE NARGIS
CA
International disaster recovery projects
can provide lessons for New Zealand in
the wake of the Canterbury earthquake.
by TIM KIRBY CA, JOHN LEAKE and KEN GRANGER
N
ZICA
members in New Zealand and abroad have looked
on in horror at the effects of the earthquakes that
have been rocking Christchurch since September 2010.
The city’s community is now undertaking a recovery
project that will take years.
This article provides an outsiders view1 of how NZICA
members might play a part, based on experiences with
other international disaster recovery projects.
On the 2 and 3 May 2008, Tropical Cyclone Nargis
made landfall in Myanmar, formerly Burma. With winds
up to 200kph and a 3.6-metre storm “surge” hitting the Ayeyarwady
Delta, Nargis travelled north east passing just north of Yangon,
formerly Rangoon. The official death toll was 84,537 with 53,836
people missing, believed dead, and 19,359 injured. The recovery
was officially declared complete in 2010, but work on disaster risk
management continues.
On 11 January 2011, the Brisbane River broke its banks, leading
to evacuations in the Brisbane CBD and inner suburbs. Residents
were evacuated over the course of the next two days until floodwaters
peaked on 14 January. While wider flooding disrupted large parts
of Queensland, more than 22,000 Brisbane homes were reported
40
The authors were engaged to review various
reports and assessments of the recovery and
reconstruction efforts undertaken jointly by
the government of the Union of Myanmar, the
UN and ASEAN.
As part of that review, we considered four
key stages of recovery; the immediate postcyclone situation, the initial post-cyclone
recovery, the recovery and reconstruction
effort and post-recovery efforts to build
disaster risk management capacity.
Looking across the reporting of various
parties, we found some explanations for what
seemed to be less recovery than planned,
and some suggestions for continued capacity
building. A summary of the findings is
presented below.
Recovery from tropical cyclone Nargis
• Recovery and redevelopment was shortfunded – while recovery plans were costed
at US$1,000m, and funding of US$690m
agreed to by international donors and
governments, we were only able to identify
receipt of around US$178m.
• Priorities shifted as funds became limited –
use of funds received was prioritised away
from planned environmental protection
and disaster risk management programs, to
health services and rebuilding.
• Reporting encouraged a level of adaptive
management – public reporting was
focussed to encourage improvement in this
particular recovery program, rather than to
track performance over time.
• Effort was focussed on priority townships
and regions – the most affected areas in the
Delta have achieved the most recovery but,
even in these areas, the resilience to disasters
is still below pre-Nargis levels. Welfare of
the communities is expected to remain at a
new lower equilibrium for a long time.
• Community capital remains low –
physical capital has not been sufficiently
restored, and productive capacity remains
diminished. Human capital has not been
sufficiently restored. Sufficient financial
capital has not been made available.
Natural capital has not been rehabilitated
and is not yet being managed sustainably.
Social capital is strong, and has remained
so despite dislocation caused by Nargis.
• Sustainable livelihoods based on the natural
resources of the Delta were not being created
– recovery and reconstruction efforts were
not integrating sustainable environmental
management and disaster risk management
into operational decisions.
• Vulnerability to future disasters is now
higher – plans to restore mangroves, which
provide many disaster mitigation benefits,
have not been achieved. Disaster planning
and awareness programs have not achieved
the planned reach. Personal security,
including documentation of rights and
ownership, had not yet been restored.
• Future efforts should focus on disaster
preparedness – early warning systems and
impact modelling for the region would help
communities to prepare for disasters. Safe
haven construction should continue. The
principle of “build back better” should
continue to be applied and also applied to
the natural systems of the Delta.
• Specific areas of need – analysis of the social
data collected by reporting teams allowed
identification of specific “townships and
regions of need” across a range of issues,
which could be used to prioritise future
programs.
• An approach to disaster risk reduction in
wider areas of Myanmar was proposed.
QUEENSLAND 2011 FLOODS
Disaster risk management plans were in place
for a number of Queensland areas prior to the
2010 floods, and there is evidence to suggest
that these were effective at mitigating the
impacts of flooding.
There will
be a role for
independent
commentary
to keep
funders
“honest”
to their
promises of
resources
to assist in
Christchurch
Since the recovery from the floods, planning
for disaster risk management has begun
again. This time, though, in addition to
regional scale management plans, individual
key institutions such as the Queensland
Cultural Centre (QCC) have begun preparing
their own disaster risk management plans.
It is in this site-specific planning that
Institute members may play a part, given
their understanding of their businesses and
business risks. Business continuity planning
is, after all, one component of an effective
disaster management process.
Our work for the QCC sought to identify
strategies for improving disaster risk
management. We concluded that:
• Flood risk exists. The QCC precinct,
its precious collections and the valuable
services it provides to the community, are
at risk from a major flood in the Brisbane
River.
• There is a good risk management culture.
A healthy risk management culture
exists across the QCC precinct, and the
commitment to risk management was
undoubtedly reinforced by the experiences
of January 2011.
• The fragility of reputation was hard to
assess. Risk assessments had trouble
quantifying the potential threat to the
national and international reputation of the
QCC facilities as a safe venue for hosting
world-class exhibitions and theatrical
performances.
• There are things that can be improved
further.
A
range
of
prioritised
implementation strategies were identified,
including building better recognition of
cultural assets into risk planning, better
management of information regarding
hazard, exposure and vulnerability, and
more formalised coordination of risk
management between facilities in the
precinct.
THE METHODOLOGY OF DISASTER RISK
MANAGEMENT
Our work in both reviews followed a riskbased approach that sees risk as being the
interaction between the hazard phenomenon
(in this case a severe cyclone and a flood),
the elements of the community exposed to
the impact of that phenomenon (people,
buildings, economy, etc) and the degree to
NEWS
business
which those elements are vulnerable to that
impact. Members may find this more suitable
for business continuity planning than the
more general ISO 31000 methodology.
This relationship was illustrated in Figure
1 below.
EXPOSURE
VULNERABILITY
RISK
HAZARD
Figure 1. The hazard-exposure-vulnerability
relationship (after Crichton, 1999)
This diagram illustrates the cost effective
nature strategy of disaster risk reduction. It is
usually impossible to remove the hazard but
the risk to the community can be, in theory,
be reduced to zero, if one can eliminate
either the exposure, or the vulnerability. In
practice DRR aims to reduce both to as low
as reasonably practicable.
So what roles have we seen for accountants
and auditors in these projects? As the
Christchurch community now has the
handling of post-quake response down pat,
it is more worthwhile to consider roles in
recovery and reconstruction, and building the
disaster risk management capacity.
As accountants, we are used to consolidating
reported
financial
information,
and
identifying trends that need attention. There
will be a role for independent commentary to
keep funders “honest” to their promises of
resources to assist in Christchurch. We found
that the trend of under-delivering committed
funds to the Tropical Cyclone Nargis recovery
seriously hampered recovery in Myanmar.
Coordination of information regarding
impacts and progress is critical to allow for
sophisticated research and decision making
in recovery and reconstruction, and for
ongoing disaster risk management. We found
that such coordination was hampered by
multiple data and reporting formats, differing
views on transparency and competing
demands for limited funding. These issues
42
CAs can play
a part in
reminding
clients to
have basic
off-site
backups and
recovery
plans in
place
are not new for accountants, and neither are
many of the solutions for management. In
particular, accountants could be well placed
to remind funding bodies of the importance of
information for good decision-making, and to
encourage CERA to resist the temptation to
divert resources from long-term information
management in favour of short-term efforts
and good news stories.
As business experts, chartered accountants
are often responsible for risk management
and business continuity in their businesses.
CAs can play a part in reminding clients to
have basic off-site backups and recovery plans
in place. Communities in the Delta had not
recovered a sense of security to pre-cyclone
levels. This was continuing to weaken capacity
for recovery and reconstruction in quite simple
ways. For example, the key documents for
whole communities were destroyed, making
it hard for people to prove identity and
claim relief. In the same sense, Christchurch
individuals and businesses, including member
firms, lost records that were critical to access
bank accounts, establish title to assets and
rights to insurance.
Accountants may be uniquely positioned
to help quantify reputation risks, through
techniques used for valuing intangible
assets. Disaster risk plans for QCC resulted
in a different order of priorities when the
risk of loss-of-reputation was considered.
The loss of lucrative World Cup games for
Christchurch unfortunately provides a realworld example.
Finally, we found that the evaluation
tasks of these reviews required the kind of
structured logical thinking that accountants
often do very well. We all find such evaluations
very rewarding, and recommend others get
involved, in particular as Christchurch will
need help for many years to come.
1 While Tim Kirby grew up, studied and worked
for a period in Christchurch, the authors are
not Christchurch-based.
Tim Kirby CA, John Leake and Ken Granger
work together as members of Environmental
Risk Science and Audit (ERSA) Pty Ltd, and also
provide individual consulting services based
in Australia. Kirby is currently the Chair of the
Institute’s Sydney Branch/Local Leadership
Team.
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NEWS
business
Paranoia helped prompt
Madoff probe
The whistleblower who exposed Bernie
Madoff’s Ponzi scheme investigated his
suspicions in part due to paranoia.
by JOHN GILL FCA
H
arry
Markopolos is the guy
who blew the whistle on
Bernie Madoff’s Ponzi scheme.
Harry wasn’t an auditor. He
was a financial competitor, an
analyst tasked by his firm with
matching or beating Madoff’s
achievements.
After
modelling
every
imaginable scenario, including
retrospective selection of the best actual results,
Markopolos still could not approximate what
Madoff was doing. So without setting foot
in Madoff’s firm and without observing any
fraudulent transactions, he knew that what
was reported was impossible.
Further, the consistency of the results, even
if such a result was possible in the short term,
44
No one can
have 12
flawless
months
let alone
years of
consistently
excellent
results
was impossible. Markets are volatile. No one
can have 12 flawless months let alone years
of consistently excellent results. When the
whole market tanks, if you are still producing
positive results there has to be fraud.
Markopolos, along with David Fisher, tells
the story in the book No One Would Listen: A
True Financial Thriller.
Because Markopolos was a competitor, and
to be honest because he was a bit paranoid, and
because the Securities Exchange Commission
(SEC), the agency established after the
Great Depression to protect the public, was
blindingly inept, no one acted.
After five neglected warnings to the SEC
from Harry across nine years, Madoff, with
the Ponzi scheme collapsing around him
because of its size and the pressures of the
global economic crisis, handed himself in,
reporting the biggest fraud in history.
Harry hadn’t just identified a possibility or
even probability; he had nailed it as fraud.
Like Sherlock Holmes in the Silver Blaze story,
when the fact that the guard dog that didn’t
bark in the night was a clue to an inside job,
Harry had shown that there was no footprint
of trades to match what Madoff was doing.
In fact Madoff wasn’t doing anything but
taking in money and feeding it back to earlier
investors. No footprint, no one on the other
side, therefore a hollow fund.
And how could it go unnoticed for so long?
Human nature being what it is, Ponzi schemes
have happened before Madoff and will surely
happen again.
Smart guys on Wall Street thought they knew
what Madoff was doing. One hypothesis was
that Madoff had propriety software, a black
box that had all his data and all his maths and
experience and it could beat the market. So
who was his mathematician-magician? There
was no one. We all know how demanding
economic or business models are and anyone
who has built one knows how bad they are,
sometimes good for the macro results but
hopeless for micro and always hopeless with
timing.
Another hypothesis was that Madoff was
“front running”, taking an order from a client,
buying it himself and then re-selling to the
client and taking a profit on the way. This is
of course insider trading and illegal but such is
the tolerance for corruption in market trading
in Wall Street that this lesser offence was taken
as a credible explanation, blinding
critics from the reality that there was
a Ponzi scheme running.
Typically a Ponzi scheme has a
relativity short life. Funds come
in. The rewards are excellent. This
attracts more investors. All the
investors take their dividends but
don’t seek their capital back (why
would they?) and often plough back
their dividends as well. They tell their
friends who also invest to get this toogood-to-be-true result. And one day
the financial genius is gone and so too
the victims’ funds.
It’s typically an unsophisticated
investor who gets duped into investing
in a Ponzi scheme. It’s inconceivable
that an investment fund, having done
due diligence, could be caught. In fact
one of Harry’s friends offered to put
$50m into a trust account for Madoff
to work his magic on. The fund
manager would see the trades, rather
than handing over the funds in blind
faith. Madoff walked away. So did
they, but no market alert was issued.
No matter how delusional Madoff
might have been, even a moderate
intelligence can foretell that if the
return to investors is so much higher
(1–2% per month) than the real
earnings of the scheme (in this case
nothing) and the cost of operating are
more than trivial, then within a few
monthly cycles, perhaps as few as five,
surely no more than 10, the capital
will be used and the scheme collapse.
In Madoff’s case the fraud lasted
for almost 20 years, fuelled by
unprecedented growth, investor greed
and investors being prepared to be
part of something a bit dodgy such
as insider trading, but never thinking
that someone they so much admired
could be duping them.
Most investors were individuals,
but others were investments funds
in the USA and Europe. They each
thought that they had a special
personal relationship with Madoff
and were accessing something not
available to the public. They were the
chosen ones, onto a good thing that
was a secret and wasn’t to be talked
about.
What about the auditors? Madoff
changed them regularly, including big
names, and took them along for the
ride. Several times a year he cashed
out, moving to Treasury bills for
ease of audit and valuation. Harry’s
observation on this was that it also
meant that Madoff wasn’t even in the
market for the full year, how could he
possibly achieve brilliant results. And
why would you cash up just to make
life easy for an auditor? No one else
does.
Surely though there is more to an
audit than verifying the existence and
ownership of assets at balance day.
What about testing the reliability of
the income and testing the internal
controls on the trades. There is an
element of stock and flow in such a
business and audit testing both is
surely fundamental.
Both auditors and analysts failed.
When Markopolos first spotted the
Ponzi scheme there was $7 billion in
it. Nine years later at the crash there
was $65 billion. He now kicks himself
for having been ineffective and as
I read his warnings it seemed to me
that he did contribute to the problem
by losing focus, by lecturing on the
“red flags”, all 30 of them, instead of
simply stating that the results could
not be replicated ex post and that
there was no footprint of trades.
What was going on in Madoff’s
head when he started, a desire to
defraud for personal gain or just
vanity, thinking that he was too smart
to be caught? Once started, every day
must have been loaded with stress
thinking is today the day it all comes
tumbling down. Madoff did a lot of
damage.
As of April 2011 the trustee liquidating Madoff’s defunct investment
firm has recovered $7.6 billion and
charged fees of $175.5 million for the
work involved.
John Gill FCA, is CFO of Datacom New
Zealand.
NEWS
business
the range of these companies, industries and
possible outcomes. The companies found
cost savings, opportunities to boost revenue,
and other unique advantages.
THREE COMPANIES
Seeking carbon, finding gold
Cutting carbon emissions has brought
financial benefits to three NZ companies.
by BRUCE GILKISON CA
C
arbon
is a hot topic. There is no shortage of it, just
too much in certain places.
As carbon dioxide in the atmosphere it acts as a
greenhouse gas (GHG), warming the planet and keeping
it habitable.
With higher concentrations, boosted by burning of
fossil fuels and deforestation, it leads to climate change
and probably to droughts and storms, to sea level rise
and extinctions. Sir Nicholas Stern1 said climate change
was “the greatest market failure the world has ever seen”.
GHG emissions present risks and opportunities for businesses.
Increasingly, the costs of these are becoming internalised, to correct
the failure and slow the damage. In various ways, companies are
rewarded for reducing their impacts. Some have opted for carbon
neutrality – no net GHG emissions – and have struck gold.
This article describes the experiences of three companies that
embarked on a journey to cut their emissions. I was asked to assess
the results of their carbon neutral certification. I was fascinated by
46
Toyota NZ is a subsidiary of Toyota
Motor Corporation, a multinational with
a reputation for environmental leadership,
and a commitment to “sustainable mobility”
and ultimately to zero emissions from
production, use and disposal of vehicles; its
turnover is larger than New Zealand’s GDP.
Toyota NZ has about 220 employees,
and strongly supports the parent company’s
commitment.
InterfaceNZ is a New Zealand company
with 15 employees and two directors. It
supplies “sustainable design-led flooring
solutions”, including carpet tiles which
typically contain 50% recycled material. It
has exclusive distribution arrangements with
Interface Inc, a USA-based company with a
widely publicised goal: a “zero footprint by
2020”.
InterfaceNZ is unrelated, but shares that
company’s philosophy and has embarked on
a similar journey.
J Friend & Co is a small, family-owned
producer of boutique honey products. Its
honey is organic and ‘single origin’, with
no blending of product from different floral
sources, regions or seasons. About 40% of
production is exported.
THREE KEY INDUSTRIES
The companies are linked to the transport,
construction and agriculture industries.
Road transport produces about 10% of
global (human generated) carbon emissions,
and the level is rising rapidly. On current
trends there could be a billion cars in the
world by 2030, and a billion more by 2050.
Buildings account for a third of worldwide
emissions in their construction and use.
Agriculture causes about 13% of global
GHG emissions, including methane and
nitrous oxide, but in New Zealand the share
is much higher – about 48%.
CHOICES
carboNZeroCertTM
certification
involves
measurement, management and mitigation
of GHG emissions. Management includes
minimising these, and mitigation usually
means buying credits to offset the rest. The
process was developed at Landcare Research,
a New Zealand Crown Research Institute,
and is recognised in over 50 countries.
CEMARS®
(Certified
Emissions
Measurement And Reduction Scheme)
certification is similar, but with no obligation
to buy offsets. In each scheme, an organisation
has to measure all emissions from sources
it owns or controls, from energy used, and
from certain other sources resulting from its
activities.2
The companies chose to have their
organisations carboNZero certified. J Friend
& Co also had its honey products certified,
requiring emissions relating to their GHG
life cycle to be measured, managed and
offset. Toyota NZ has both CEMARS and
carboNZero certification.3
SAVINGS
Rigorous measurement and management
procedures cut emissions, but how did they
affect costs?
For Toyota NZ, the certification process
prompted reviews that paid big dividends.
Energy audits found opportunities for
savings in lighting, heating, cooling, and
operation of paint ovens.
From 2006 to 2010, sales were up but gas
and power consumption was cut by 35%,
and savings of $200,000 were made at the
two main sites.
A wider search led to larger savings. A 28%
reduction in air travel meant total savings of
$2.1 million compared with “business as
usual” in that period. Travel was cut, for
example, through the use of online used
vehicle auctions and teleconferences.
It would be overstating the case to credit
the savings in travel entirely to certification
(the recession presumably played a part), but
this provided the impetus and momentum.
InterfaceNZ recouped its certification
and offset costs many times over in just one
project. It changed its thinking on freight of
imports. Instead of receiving these at a central
port and forwarding them to other centres as
previously done, these now go straight to the
port nearest their end-use, with higher per
unit freight costs but overall efficiencies. This
saves carbon, freight, handling and storage
costs of $80,000 a year.
Both companies link progress in these
areas to staff bonuses, helping to embed the
commitment.
J Friend & Co’s savings were smaller
but significant. Certification challenged the
company to think longer term, leading to
savings in water heating, honey processing,
and heating of work areas.
The directors expected costs would rise
as production increased; in fact, these were
unchanged while volumes doubled.
The
process
was
developed
at Landcare
Research,
a New
Zealand
Crown
Research
Institute,
and is
recognised
in over 50
countries
GROWING SALES
Each company had strong demand for their
products and services in challenging times.
InterfaceNZ was the first building materials
company to be carboNZero certified. This
helped to build a reputation for leadership,
with tangible results. From 2007 to 2010,
nationwide building consents declined in
floor area; against the trend, InterfaceNZ’s
volumes increased almost 90%.
The company’s advantage is likely to
grow as demand for greener buildings and
materials grows. An international survey4
found that 98% of “Generation Y” workers
aspired to work in a greener workplace.
Toyota was the first car company to
be carboNZero certified, enhancing its
reputation for environmental leadership. The
company has ranked first in Motor Industry
Association surveys of the brand which
“cares most for the environment” every year
since 2005.
Increasingly, tender documents from
government agencies and major corporates
provide opportunities for certified companies
to present their credentials. For maximum
points, information on a company’s footprint,
with third party verification, is useful. Both
these companies are certain that certification
has helped them win significant tenders.
J Friend & Co developed new export
markets in Australia and Asia, and the
directors believe this was helped by its
certification. This is also helping to establish
markets in UK and compete with local
products there, despite concerns about “food
miles”.
UNIQUE ADVANTAGES
The directors of J Friend & Co set up business
with a dream of producing great honey
“without compromising the environment”.
NEWS
business
Certification gave structure to the
dream. Progress is measured and
independently verified, helping to
prove their commitment and results
to others and, importantly, to
themselves.
InterfaceNZ’s certification enabled it to demonstrate integrity and
commitment to a sustainable future,
reflecting the ambitious “zero footprint” goals set and publicised by
Interface Inc.
Toyota NZ has built up systems,
knowledge, expertise, efficiencies,
and a forward-looking culture,
and is continuing to do so. The
company found that new efficiencies
had prepared it well for the recent
downturn.
By choosing carbon neutrality, it
showed it was not just relying on its
parent’s reputation but was breaking
new ground in New Zealand. And
with Toyota’s “zero emissions” goal
and policies of kaizen and yokoten
(“continuous improvement” and
“best practice sharing”) there is a
real chance that experience here will
help the group elsewhere.
MOMENTUM
Some experiences and benefits were
common to all three companies.
They were early adopters. The
carboNZero savings alone had
justified the cost and effort. But
each gained other benefits too, from
bolstering their brand, creating a
point of difference, and proving
their credentials.
They embarked on the certification
process because they considered
it was the right thing to do. Each
expected benefits but not financial
ones. They were seeking carbon
savings, not cash; they found both.
1 Former Chief Economist of the World
Bank and a British government
advisor, in a 2006 report “Stern
Review: The Economics of Climate
Change”.
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NZICA members
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2 A summary of requirements for
carboNZero certification was included
in Chartered Accountants Journal,
May 2008, pp. 56–59, “Perfect
Timing for World’s First Carbon
Neutral Winery”. Details of emissions
covered are shown in each company’s
disclosure statement, available at
www.carbonzero.co.nz.
Authorised
offsets for these companies include
native forest regeneration, wind
power, and renewable energy from
landfill waste projects.
3 Vehicle freight is excluded from the
latter because Toyota NZ has limited
control over this, but included in the
former so it is still obliged to manage
and reduce freight emissions.
4 “Generation Y and the Workplace,
Annual Report 2010”, Johnson
Controls, as quoted by NZ Green
Building Council.
Bruce Gilkison CA is a sustainable
business consultant. bkep.gilkison@
xtra.co.nz
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the world. As you travel on
Interislander, take a stroll on the decks, enjoy a meal, a drink or even catch a movie. Or
of course, you could just take in the
breathtaking view.
www.interislander.co.nz
48
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CHARTERED ACCOUNTANTS JOURNAL
DECEMBER 2011 49
PETER SWITZER IN AUSTRALIA
Cup Day cut
Interest rates cut across the ditch.
T
HE RESERVE BANK of Australia finally succumbed to public
harassment from media, and industry experts, as well as the
economic realities, to cut interest rates on Cup Day.
So, we have had a double dividend – provided you put
your money on Dunaden in the Cup and were deep into a
home loan.
But even if you missed those two pay-offs, the likely results from the official
rate cut from 4.75% to 4.5% should be greater business opportunities, more
willing consumers and better job prospects – provided the RBA comes up
with a few more cuts. That said, the very prospect that we could be into an
easing cycle should help both business and consumer confidence return to
more healthy levels.
In fact, it has already started to show but money markets are pricing three
more 0.25% cuts and that, if it happens, will certainly do a lot to right the
wrongs of the past 18 months, where the economic and market analysis of
the central bank’s board was simply wrong. Their Cup Day cut proved that
(following a bout of rising unemployment and falling inflation).
Meanwhile, the Gillard government is so worried about the economy
and its goal to turn the Budget into a surplus by 2012-13, that it is now
preparing for a mini budget, which is something we last saw two decades
50
ago when Paul Keating was the
country’s Treasurer.
Now the economically-trained
out there could be scratching
their heads and wondering why
a government opts for tighter
budgetary or fiscal policy when
there is falling inflation and rising
unemployment. Why be in a hurry
to go to a surplus when the debt to
GDP ratio for the country is one of
the lowest in the OECD?
That’s a good question and many
local economists are telling anyone
who will listen that it wouldn’t
matter if the surplus turned up one
or two years later than planned.
However, the promise is seen as a
political badge of honour for the
current Treasurer, Wayne Swan,
who recently was named as the
world’s best finance minister by
Euromoney magazine.
Don’t worry, the irony of
this award and the name of the
magazine in question – Euromoney
– has not been lost on the cynics
and comedians over here.
Back to why the government is
seeking a budget surplus in tougher
times, it is thought to be a part of a
prodding exercise to get the RBA to
come up with a few more rate cuts.
The supposition has to be that only
a number of rate cuts will really turn
around this economy, especially
with the black clouds of Europe
and its debt problems overhanging
global financial markets threatening
an EU recession as well as a much
slower growing world economy.
Australia via its commodities,
which are pushed along by strong
global demand, is in need of a shot
in the arm and that’s where rate cuts
fit into the government’s overall
plan to pump up the economy. Of
course, the RBA acts independently
and while the Gillard government
has been totally hands off, it seems
to be saying, publicly, if we tighten
up fiscal policy, then this gives you
– the RBA – scope to cut rates more.
Recent history has shown that
the monetary policy of the Reserve
Bank has helped crush consumer
and business confidence, convert us
into a nation of savers afraid of debt
and make us unwilling to take risks
comfortably. And so what rate rises
have taken away, maybe only rate
cuts can give back. Well that seems
to be the government’s current play
and for a change I think they are
absolutely right.
Mind you, the Gillard team have
made life harder than it needs to be
for businesses and consumers with
its historic move to pass a carbon
tax into law. This tax will target
our top 500 polluters who then
will pass the tax down the line. The
government has set tax cuts slightly
higher than the expected slug to
average household budgets but we
won’t know the impact until the
middle of next year when the tax
starts. The following year will be
interesting as it will culminate with
the next federal election.
The Australian Financial Review’s
Laura Tingle has an historical take
on this carbon tax, which has
sent Labor’s political polling into
devastation territory if an election
was held now. She suggests that: “It
may well be that – as was the case
with Paul Keating – voters sit quietly
on their verandas, biding their time
with baseball bats in hand.”
Despite his wayward inclination
towards interns and extra-curricular
activities, former US President
Bill Clinton was absolutely on the
money when he reminded his fellow
Democrats: “It’s the economy,
stupid.”
Business-wise,
Qantas
boss
Alan Joyce underlined the labour
problems we have here with unions
really trying to lock in substantial
Why be in a hurry
to go to a surplus
when the debt to
GDP ratio for the
country is one of
the lowest in the
OECD?
pay gains and more crucially – job
security – as the airline has a business
plan to set up a hub and related
business out of Asia. The impasse
between management and unions
resulted in Joyce pulling his planes
out of the sky and the case has been
forced into a determination by the
watchdog – Fair Work Australia.
One final point that has been
perplexing investors over here is
why by mid-November the US stock
market indexes were all in positive
territory for the year but our market
was down around 10%, and that’s
despite the fact we are linked to
Asia through our commodities and
we avoided a GFC-recession.
Well, this is where the high
interest rate story comes in again.
The high rates along with big spurts
in commodity prices have pushed
our dollar over parity and this has
hurt companies sensitive to a strong
currency. So, maybe investors can
look forward to a lower dollar as
rates fall and then better stock
prices, or can we?
Well, like most things in
economics, it is a split decision.
The forex team at Macquarie says
our dollar is heading down to the
low US90c region, however the
chief economist at RBS Morgans,
Michael Knox, thinks it’s heading
up towards US109c.
The economist and investor in
me wants Macquarie to be on the
money and so the overseas traveller
in me will just have to cop it
sweet.
Peter Switzer is a business and
financial commentator.
51
PETER ISAAC ON BANKING
G
Taiwan on
New Zealand could soon have a closer
economic relationship with Taiwan.
S A PIECE OF mercantilist diplomacy it passed almost unnoticed.
But the Taiwan and New Zealand joint investigation into the
value of an economic cooperation agreement is as important for
this country in its way as the earlier Free Trade Agreement with
Taiwan’s neighbour across the strait, China.
With its similarity of standards, Taiwan is now on its way
to becoming the Asian crossroads for New Zealand banking, investment and
accounting. Of course the document of intent between Wellington and Taipei is
an agreement only to look at having an agreement. This though is an immense
breakthrough. It is not long ago that financial and trade representatives from
Taiwan scheduled to speak before official gatherings in New Zealand, suddenly
and almost literally had their lecterns snatched away from them, and often at the
last moment.
Whatever the stated reason, everyone knew the real reason why. China was
unhappy at what it saw as the official approval accorded to the speaker from
Taiwan, and its displeasure was made manifest with the result that the speaker
did not speak.
All this was very awkward and made more so by Taiwan in recent years, after a
period of jostling for the position with India, becoming the word’s fourth-largest
repository of foreign reserves, making it, from the New Zealand aspect anyway,
a global financial superpower.
Until very recently New Zealand’s manoeuvring to gain access to this resource
was hampered by the need for investment approval authorities to be mindful of
Chinese attitudes to anything resembling direct investment in New Zealand by
Taiwan.
Imagine, for example, the reaction if Taiwan investors had disclosed a bid for
a troubled corporate dairy farm?
Now though the situation is changing. New Zealand can look forward to
an applied relationship with what many in the banking and investment sphere
believe is the most Western-aligned of all Asian nations in terms of commercial
attitude, and accounting and banking practices and processes.
A
52
Taiwan also offers New Zealand
enterprises the advantage of dealing
direct, as opposed to negotiating
through a thicket of government and
quasi-governmental agencies.
Also substantially unnoticed are the
reasons for China’s giving the thumbs
up, and be in no doubt that this is
what happened, for nations such as
New Zealand to start openly talking
to Taiwan to about doing more
talking in future.
In case there is an impression that
New Zealand has been overly timorous
about Taiwan, we should now remind
ourselves about this country’s early
intervention with generous visa
arrangements for Taiwan visitors, a
move which was implemented in spite
of disapproval from China.
China and Taiwan share a problem
in common. It is the volume of money
from the United States into Asia.
This has the effect of weakening the
US dollar while placing unwanted
appreciation
pressure
on
the
currencies in the countries in which it
is deposited.
Then came the event that has had
so much to do with the change of
attitude by China to Taiwan, and
thus with nations which want to do
business with Taiwan. It came from
the US Federal Reserve two-thirds of
the way through this year. Growth,
or the absence of it, has become such
a problem that rates will be held
down for the next two years. The
announcement had as big an impact
externally as it did within the United
States itself.
It was a clear statement that Asian
nations would become saturated with
more unwanted parking in the form of
the US dollar. A great deal of this is
regarded as hot money.
The real underpinning worry though
is that the anticipated dollar volume
entering high-growth economies such
as China and Taiwan’s will make their
export economies uncompetitive.
So China and Taiwan face the
problem of over-investment of
such volume that it will clog their
competiveness. It is thus in China’s
interest to free Taiwan from its
straitjacket and in doing so free it to
diversify its own investing beyond the
high-growth Asia hothouse, which
could just drown in its own liquidity.
Of course this particular thaw
formal discussions in order to have
more such discussions.
Corporate accountants should
follow carefully the progress of
these negotiations, especially so in
regard to the attitude of the unseen
third party hovering over the New
from Taiwan, a small and
demonstrable democracy, offers an
alternative also to inward investment
from the United States, Japan and
now China. Inward investment
from China is starting to ignite the
same feeling of disquiet generated
It is in China’s interest to free Taiwan from its straitjacket and in doing
so free it to diversify its own investing beyond the high-growth Asia
hothouse, which could just drown in its own liquidity
across the Formosa Strait will take
time and China is unlikely to relax
its policy of barring Taiwan from
international bodies of all stripe,
especially those in health and finance
(with their heavy symbolism).
But
New
Zealand
officials
accurately picked up the signal that
China was relaxing elements of
its attitude to Taiwan and thus we
followed Singapore in embarking on
Zealand-Taiwan negotiating table,
which is of course China.
The indirect aspect is important
here. We are talking about the
Australian-owned banks with far too
big a proportion of their borrowing
ratio derived from China, which
renders them vulnerable to what,
by any description, are penalties for
unbalanced fund sources.
Direct and approvable investment
by similar such investment from
the United States and more latterly,
Japan.
How strange to recall now how so
recently in New Zealand the thought
of United States economic hegemony
seemed imminent, so overwhelming,
and so scary?
Peter Isaac is a financial journalist and
author.
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53
GRAHAM HAMBLY IN THE UK
FRC to be streamlined?
The UK’s Financial Reporting Council may
shrink.
HE UK’S FINANCIAL Reporting Council (FRC) wants to downsize,
T
replacing its existing seven operating bodies with two boards –
one focusing on codes and standards and the other on conduct.
Among the proposals is for the FRC to set standards of
governance, accounting and audit in the interests of investors in
the corporate sector. It is believed the accountancy disciplinary
arrangements should be narrowed to cover the quality of work and conduct
of accountants in preparing and auditing reports for the capital markets. This
would leave other cases of potential misconduct to be dealt with by the relevant
professional body.
The FRC wants to beef up its independence. So it has asked for the power to
require a recognised supervisory body to impose sanctions on an audit firm or
individual in respect to poor work.
The refocused body also wants the ability to make its own rules for disciplinary
arrangements, without needing to obtain an agreement of the accountancy
professional bodies.
WHAT WOULD JESUS DO?
Chartered accountant Tim Sanders recently became a media star when he
stopped off from getting his sandwich to chat to the anti-City protesters camped
outside St Paul’s Cathedral.
The debate that ensued made national newspapers and the evening news.
The “capitalist” was not what the crowd expected. He told them that there
has been grotesque greed across all levels. The average CEO’s pay in 1970 was
around 30 times the average wage. Today it is 300 times. Sanders said that
means they are just robbing the system.
He then told the growing crowd that Greece has collapsed and then it will
be Spain and Portugal. Governments of the world will simply print billions,
trillions! That will result in hyper-inflation. Another Zimbabwe.
He also stressed that everyone had to understand the meaning of “too big
to fail”. He then went on: “Capitalism without bankruptcy is like Christianity
without hell.”
Ultimately he was scared about the world his children will inherit.
KPMG GOES HI TECH
KPMG has has launched a new UK graduate recruitment process which is says
is “fit for the digital age”.
Using 3D animation, the software application takes students into a simulation
of a real office environment. Students are given a variety of tasks to do which
mimic the multi-tasking frequently required in a modern office job. While
studying a spreadsheet to find certain information, for example, an email
might also arrive that needs a response or the student might receive a voicemail
notification that they need to listen to, or a video clip they need to watch.
KPMG believes by creating a real work situation students will gain a better
understanding of what it would actually be like to work at KPMG, while it
54
can see how well-suited applicants
might be to genuine working life.
The assessment process also uses real,
specially trained actors to carry out
one-on-one roleplays with students.
Michelle Quest the Head of People,
said: “We want to take recruitment
firmly into the digital media age.”
PWC JOINS 30% CLUB
PwC’s Ian Powell has become the
13th chairman to sign up for the
30% Club, a group that is committed
to bringing more women on to UK
boards.
On average, FTSE 100 companies
have 12% female representation on
boards. PwC in the UK currently
has 18% female representation with
Gaenor Bagley and Stephanie Hyde
occupying two of the 11 board roles.
GOING CONCERN REPORTING
IMPROVEMENTS
The Sharman Panel of Inquiry has
unveiled its preliminary report into
the reporting of going concern and
liquidity risks.
Sharman firstly wants to see
harmonisation and clarification of
the purpose of the going concern
assessment and the disclosure
process in the accounting standards
and code. He also wants the going
concern assessment process to focus
on solvency risks as well as liquidity
risks, whatever the business, including
identifying risks to the entity’s
business model or capital adequacy
that could threaten its survival.
Sharman said there should be a
move away from the three-category
model of auditor reporting on going
concern to an explicit statement in
the auditor’s report. In that report
the auditor should say if they are
satisfied that, having considered the
assessment process, they have nothing
to add to the disclosure made by the
directors about the robustness of the
process and its outcome.
Graham Hambly is a British journalist
and editor of PQ magazine.
JOHN HAYLOCK ON PUBLIC PRACTICE SECTOR
Inspiration from
the World Cup
The process of winning the World Cup is
similar to the process of winning in business.
IGHT TO SEVEN. It’s a score-line that will forever remain etched in
the minds of All Blacks supporters. Our team won the 2011 Rugby
World Cup by the slimmest of margins. But to the delight and eternal
relief of every New Zealand rugby supporter, the All Blacks did win.
It was a day we had dreamt about since 1987 when then AB
captain David Kirk held the William Webb Ellis Cup aloft.
In the October Journal I wrote about the power of dreams and hoped that a
young Richie McCaw was also inspired by that famous image of a beaming David
Kirk. Similarly, I hope many other young rugby players have been inspired by
McCaw and his team of 2011 (and I hope we don’t have to wait another 24 years
to see them succeed.)
But while dreams are vitally important and give a sense of purpose to any
endeavour, winning a World Cup requires more than dreams. Bringing a successful
team together requires great planning, the right group of people and the ability to
perform under enormous pressure.
The process of winning the World Cup is similar to the process of winning in
business and there is much we can learn from the All Blacks of 2011.
E
ATTENTION TO DETAIL
Tony Woodcock scored his early try through a gaping hole in the French lineout.
That flaw in the French defence had been identified by the coaching staff and a move
prepared to exploit it. The move was practised before the game and then executed
to perfection.
This is just one example of the detailed planning that lead to the team’s success.
It will be very interesting to see how
well a more experienced Wallabies
perform under Robbie Deans in 2015.
Collectively, that 2015 Australian team
will probably have more experience
than the All Blacks.
FOCUS ON WHAT’S IMPORTANT
Once again England performed poorly
in 2011. One of the contributing
factors appeared to be various offfield distractions. While it is important
to relax, the nature of that relaxation
needs to be in keeping with achieving
the goal of being at the tournament.
DON’T TAKE YOUR COMPETITION FOR
GRANTED
In 1999 and 2007 it seems the All
Blacks took France for granted – and
lost. Nevertheless, the talk before the
2011 final was mostly that the All
Blacks would be far too good.
While all the evidence from earlier
games indicated that would be the case,
I don’t think the All Blacks got sucked
in by those suggestions they would win
by 20 or 30 points.
It was a tight game because the
French played with passion and played
very well – not because the All Blacks
took them lightly. There was too much
pain in the past for that to happen. Let’s
hope it never happens again.
CREATE A CULTURE OF SUCCESS
BACK UP
All the best made plans can turn to custard when stuff happens. And stuff certainly
did happen, especially to those wearing the number 10 jersey.
The selectors had appeared indecisive in recent seasons over who deserved to be
Dan Carter’s backup. Was it Slade? Was it Cruden? Was it Donald? In the end the
fact that all three players had international experience was vital.
This All Black team wasn’t just reliant on Plan A working. Backups were in place.
EXPERIENCE COUNTS
In 1999 England had a poor tournament. Their team and their coaches weren’t
experienced enough to succeed. Clive Woodward was, however, reappointed as
coach and he stuck with many of the same players, who then went on to win in
Australia in 2003.
The All Blacks of 2011 were very similar. They failed in 2007 yet Graham Henry
was reappointed as coach. Many of the same players then returned in 2011 and
succeeded.
The All Blacks of 2011 were the most experienced All Blacks team ever and that
experience was vital in a tight final.
In international sport the All Blacks
have an unparalleled history – winning
more than 75% of their games over the
past century (and 85% under Graham
Henry). No other team has such a
sustained record of excellence.
This record of success is not down to
any one person. It is part of the culture
that is passed on from player to player
and team to team.
While there are great players in the
All Blacks, that is not the key reason
for their success. They succeed because
they are a great team.
John Haylock is Practice Performance
Manager at BankLink. john.haylock@
banklink.co.nz
55
STEVE CAHAN ON RESEARCH
The Enron effect and
audit committees
Having an accounting expert on board appears
to improve the effectiveness of an audit
committee.
HIS MONTH IS the 10th anniversary of the bankruptcy of Enron,
T
which is noteworthy as companies around the world continue to
deal with the effects of regulatory changes made after the Enron
collapse.
In the US, the changes were swift and meaty. Not surprising
since Enron was no small fry. Just six US companies were larger
at the time. Signing the Sarbanes-Oxley Act (SOX) in 2002, President George
W Bush called it the “most far-reaching” reform of business practices since the
1930s. SOX set up the PCAOB and laid down stiff rules for financial reporting
and auditing.
Reform-minded policymakers in other countries followed suit. These reforms
(understandably) had fewer teeth than SOX, but they were still significant. For
example, in New Zealand, the NZX and Securities Commission issued “best
practice” guidelines in 2003 and 2004 to improve corporate governance.
Audit committees (ACs) were a focal point of the reforms in NZ, the US and
elsewhere. Enron’s AC was widely criticised for its lax oversight and was seen as a
major culprit in the company’s collapse. Shore up the audit committee and public
confidence would improve, the reformers thought.
Among other things, new rules in SOX called for the AC to be composed
entirely of independent directors and to have at least one financial expert. New
Zealand’s guidelines also recommend that every AC have a financial expert,
although “financial expert” was defined more narrowly than in the US. While the
NZ guidelines are voluntary, companies have to explain if they deviate from the
recommendations.
For academics, regulatory change is something to smile about. In a lab
56
experiment, a researcher can randomly
assign subjects to different conditions
(some mice get drugs, others get
a placebo). Not so for accounting
researchers, since they cannot force
companies to change their accounting
or governments to change their
policies.
A regulatory change is good because
it lets researchers compare companies
before and after the change or, if
the change affects only some firms,
companies that are affected or not
affected by the change.
This month I look at the research on
the post-Enron reforms. I’ve chosen
four studies written by New Zealandbased authors. They provide evidence
on the efficacy of the reforms, and
show how New Zealand academics
contribute to the wider debate. All
four studies appear in highly ranked
journals (like a league table, better to
be at the top than the bottom).
Vic Naiker, a colleague of mine at
the University of Auckland, has been
particularly active in this area. In a
2009 paper, he teamed up with Divesh
Sharma, formerly of AUT, to focus
on “revolving-door” appointments to
the AC. That’s where a former audit
partner joins the AC of a prior client
and her audit firm still audits that
client.
Such appointments make regulators
bristle. Close ties with their former
audit firm might impair the objectivity
and independence of these “affiliated”
former audit partners. Indeed, in
November 2003, the NYSE and
NASDAQ in the US set listing rules
that require a three-year “cooling-off”
period before an affiliated former audit
partner can serve on a board or AC.
Not all agree. Some argue that
affiliated former audit partners
have intimate knowledge of a firm’s
reporting practices that make those
individuals ideal candidates for board
and AC positions. Legal penalties
and reputation concerns, they say,
are sufficient to ensure that affiliated
former audit partners maintain their
independence.
Using US data and a sample of
former audit partners who were
appointed before the NYSE/NASDAQ
listing rules were imposed, Naiker
and Sharma (2009) examine whether
affiliated former audit partners on the
AC are associated with more internal
control deficiencies. Contrary to the
“cooling-off” argument, they find
both affiliated and unaffiliated former
audit partners reduce the likelihood of
an internal control deficiency, and they
do so by a similar amount.
In another paper, Dhaliwal,
Naiker and Navissi (2010) focus on
the definition of “financial expert”.
Under section 407 of SOX, ACs
need to include at least one financial
expert. In implementing section 407,
the SEC defines “financial expert”
broadly including someone who has
accounting expertise, finance expertise,
or supervisory expertise (eg, a CEO).
Dhaliwal et al consider whether
experts in each category are effective
in terms of improving earnings
quality, measured by the consistency
of the firm’s accruals over time.
Stable accruals suggest less earnings
manipulation by managers. In their
sample of US companies, they find that
accounting expertise matters most.
Having a finance expert on the AC
can lead to incremental improvements
in earnings quality but only if there
is also an accounting expert on the
AC. On the other hand, supervisory
experts on the AC don’t seem to have
an impact on reporting quality, either
directly or indirectly.
That’s little comfort for the SEC, but
good news for New Zealand. The best
practice guidelines here take a leaner
view. In general, financial experts are
those with experience as a chartered
accountant or chief financial officer.
In a third paper, Sharma, Naiker
and Lee (2009) use NZ data and
examine whether characteristics of
AC members – including expertise
– are related to how often the AC
meets. Although a noisy proxy for AC
effectiveness, one interpretation is that
more meetings mean better oversight
and monitoring. Sharma et al find that
ACs with a financial expert meet more
frequently when faced with a high risk
of financial misreporting.
Umapathy Ananthanarayanan, a
PhD student at Massey University, and
two co-authors use New Zealand data
to examine whether ACs that fit the
definition of best practice are less likely
to compromise their independence.
Their paper, Sharma, Sharma and
Ananthanarayanan (2011), assumes
the economic bond between auditor
and client grows as the client provides
a larger chunk of the revenues of a
Of course, all
the regulation in
the world won’t
prevent another
major accounting
scandal
particular city office. Think of Enron,
which was Andersen’s largest client in
its Houston office.
However, an effective AC might
counteract this bond. That is, ACs
that fit the NZ Security Commission’s
best practice guidelines (comprise
only non-executive directors, have
a majority of independent directors,
have an accounting expert, and have
an independent chair who is not the
chair of the board) may be able to
resist pressure from management.
Using a sample of New Zealand
firms in 2004 and 2005, they find
best practice ACs are associated with
fewer income-increasing earnings
manipulations when client importance
increases.
Overall, the research seems to
suggest certain aspects of SOX –
such as the “cooling-off” period and
inclusion of supervisory experts –
are unnecessary. On the other hand,
having an accounting expert on the AC
– as recommended in New Zealand –
appears to improve the effectiveness of
the AC.
Of course, all the regulation in
the world won’t prevent another
major accounting scandal. History
buffs out there should read Dale and
Tonya Flesher’s classic 1986 paper.
In that paper, they detail the massive
accounting fraud at Kreuger & Toll
Inc, which at its peak was the world’s
largest producer of matches. In the
1920s, the shares of Kreuger & Toll
were the most widely held in the US.
Kreuger & Toll’s massive fraud
was kept hidden by its particularly
opaque financial statements. Flesher
and Flesher argue that the eventual
bankruptcy of Kreuger & Toll in 1932
was one of the major reasons for the
passage of the Securities Act of 1933
in the US. Sound familiar?
REFERENCES
Dhaliwal, D, V Naiker, and F Navissi.
2010. The association between
accruals quality and the characteristics
of accounting experts and the mix
of expertise on audit committees.
Contemporary Accounting Research
27: 787-827.
Flesher, D, and T Flesher. 1986. Ivar
Kreugar’s contribution to US financial
reporting. The Accounting Review 61:
421-434.
Naiker, V and S Sharma. 2009. Former
audit partners on the audit committee
and internal control deficiencies. The
Accounting Review 84: 559-587.
Sharma, V, V Naiker, and B Lee. 2009.
Determinants of audit committee
meeting frequency: Evidence from
a voluntary governance system.
Accounting Horizons 23: 245-263.
Sharma, V, D Sharma, and U
Ananthanarayanan. 2011. Client
importance and earnings management:
The moderating role of audit
committees. Auditing: A Journal of
Theory and Practice 30: 125-156.
Steven Cahan FCA is a Professor of
Financial Accounting at the University of
Auckland Business School.
57
NEIL MILLER ON POLITICS
Winston crashes
the Key party
While the triumph of National was expected,
the success of New Zealand First showed
predicting elections is not an exact science.
HIS COLUMN WAS written on the Monday morning after the 2011
T
election.
While details are yet to be confirmed, it is clear that John Key will
be the Prime Minister of a National-led government with United
Future and probably Act as coalition partners and, potentially,
the Maori Party and Greens in looser support arrangements.
Five weeks before polling day, this columnist made a series of predictions
which were published in the previous edition of the Journal. Several of those
forecasts proved to be extraordinary prescient while others were considerably
off the mark.
I predicted National would poll 48%, which turned out to be slightly optimistic
58
as provisional voting results have them
at 47.99%, the highest result recorded
by any party under MMP.
They will be delighted to have seized
Waimakariri and held New Plymouth,
Waitakere and Auckland Central
against determined challenges, but
disappointed to have lost West CoastTasman and not done better in some
vulnerable Labour seats.
That said, they will be well pleased
by the party vote results in Wellington
and Christchurch and their strong
mandate overall.
Labour slumped to its worst result
since 1928 with just over 27% of the
vote, well short of my pick of 32%.
Goff was an active and determined
campaigner but Labour’s message
was simply not resonating with
voters. This was their equivalent of
National’s annihilation in 2002 and
they will have to make significant
changes to avoid a similar extended
stay in opposition.
Despite believing ministers such
as Paula Bennett and Anne Tolley
were unpopular and that Epsom was
winnable, Labour made no real gains
outside the West Coast. They have
lost a number of talented MPs after
deciding to protect the lower profile
pair of Rajan Prasad and Raymond
Huo on the list.
The Greens polled 10.5% which
was marginally higher than my
prediction of 10%. It was their best
return ever and will see a large intake
of new MPs join “Team Green”.
Their campaign stressed the
economy and Russel Norman was
reassuringly non-threatening, though
the Green brand was hurt when their
activists systematically vandalised
National billboards around the
country.
Party members will agonise over
how closely they should work with
National but New Zealand’s most
successful third party will want to
have a real policy impact after missing
out so often.
The
Maori
Party
surprised
detractors with a spirited defence
of their record in government. I had
picked them to retain four seats but in
the end they could hold just three, with
Rahui Katene losing Te Tai Tonga to
Labour’s Rino Tirikatene. Although
they are likely to seek a further role in
government, the Maori Party will be
considering their strategic position,
particularly with both co-leaders set
to retire at the next election.
While I was always sceptical of
Don Brash’s claim that Act could get
10-15%, my prediction of 3% was
also too high.
I correctly called that National
voters in Epsom would hold their
collective noses and vote Act but
Brash’s party barely scraped past
1%, well short of even a second MP.
Brash has already indicated he will
resign and third-ranked candidate
Catherine Issac has stated the
party needs to “rebrand” after this
humiliating result.
Although I rightly picked that
both Mana and United Future would
be one man bands, like all pundits I
underestimated the results for New
Zealand First and, to a lesser extent,
the Conservative Party which I did
not think would even figure. Colin
Craig is thought to have spent over
a million dollars on a campaign
which saw the Conservatives record
a more than respectable 2.8% of the
vote. However, his dubious claim
that independent polling showed
him ahead in Rodney was debunked
when he was roundly thumped by
more than 11,000 votes.
Perennial survivor Winston Peters
Britannia did a stonking good job
transferring my UK pension to NZ.
Brendon Johnson
is back with seven little-known
friends after New Zealand First
defied all expectations to register
6.8%, well up on my call of 3%.
Although he now vehemently denies
the “tea party tapes” had anything to
do with his success, it was the oxygen
Peters needed to burst back into the
public eye, even if he initially said
the taping was a despicable tabloid
tactic.
Peters has already provided a
taste of what is to come with the
extravagant assertion that some
parties spent “four thousand times”
as much New Zealand First. Last
election, both Labour and National
spent around $4m on their campaign.
Even assuming a 10% increase in
National’s spending this year, for his
claim to be true New Zealand First
would need to have spent less than
$1,100 on their entire campaign,
unlikely given they had a taxpayerfunded advertising allowance of
$102,000 and an extensive billboard
campaign.
The focus now goes on ministerial
portfolios, the new Labour leadership
team and just how destabilising
Winston plans to be for the next
three years.
Neil Miller is a Wellington writer and
contributor to National Radio’s The
Panel.
“I love NZ.
So does my
UK pension.”
If you want my opinion, get their free assessment.
You might have access to your money now.
* Conditions apply.
www.ukpensionstonz.com
0800 857 367
A Disclosure Statement is available upon request and free of charge.
BR026CAJ6
59
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The Enron Building, downtown Houston.
significance threshold are also
summarised in the public portion
of the board's inspection report
available on the internet.
AUDIT PLANNING
Often these weaknesses display a lack
of forethought in planning the audit
(planning is a rolling event, not just
once a year) and too ready reliance
on what rests in the audit working
papers from last year, when in fact
the risks have changed, sometimes
materially. Audit planning is a first
step to a successful audit.
The
International
Auditing
Standard ISA 300 deals with planning
an audit of financial statements.
It discusses audit planning from a
strategic point of view and ends with
a detailed requirement for adequate
documentation.
AUDIT PLANNING REQUIREMENTS IN
ISA 300
10 years after Enron
US legislation aimed to restore confidence in
the markets after monumental bankruptcies.
FTER THE MASSIVE bankruptcies of Enron and WorldCom 10
A
years ago the Bush administration rushed though landmark
legislation, known as the Sarbanes-Oxley Act (SOX). This
was aimed at restoring confidence in the markets by requiring
corporate executives to certify 1) financial statements and 2)
their use of appropriate internal controls.
SOX also limited consulting by auditors to ensure that independence was
maintained and that their audit opinions could be relied upon.
SOX established the Public Company Accounting Oversight Board (PCAOB)
to conduct an annual inspection of each registered public accounting firm that
regularly provides audit reports for a number of clients.
The PCAOB inspection includes a review of selected audits of financial
statements and of internal control over financial reporting. If the PCAOB
inspection team identifies deficiencies in those audits, it alerts the firm to the
deficiencies during the inspection process. Deficiencies that exceed a certain
60
1. Requires the auditor to plan the
audit so that the engagement
will be performed in an effective
manner.
2. Recognises
that
planning
involves
the
engagement
partner and other key members
of the engagement team to
benefit from their experience
and insight.
3. Recognises that planning is not
a discrete phase of the audit but
instead a continual and iterative
process that continues until the
completion of the audit.
4. Requires the auditor to perform preliminary engagement
activities regarding engagement
acceptance and continuance,
evaluation of compliance with
ethical requirements including
independence, and establishing
an understanding of the terms
of the engagement.
5. Requires the auditor to establish
an overall audit strategy for the
audit that sets the scope, timing
and direction of the audit, and
that guides the development of
the more detailed audit plan.
6. Provides guidance on the overall
audit strategy in terms of
consideration of the resources
to deploy for specific audit
areas, the timing of when these
resources are used, and how
such resources are managed,
directed and supervised.
7. Requires the auditor to develop
a detailed audit plan based on
the high-level direction provided
by the overall audit strategy.
8. Requires the auditor to update
and change the overall audit
strategy and audit plan as
necessary during the audit.
9. Requires the auditor to plan
the nature, timing and extent
of direction and supervision of
engagement team members and
review of their work.
10. Establishes
documentation
requirements.
In the USA the PCAOB has
mandated adherence to Auditing
Standard 5 (AS5). This standard
establishes
requirements
and
provides direction that apply
when an auditor is engaged to
perform an audit of management's
assessment of the effectiveness of
internal control (IC) over financial
reporting (FR). That assessment of
management is integrated with an
audit of the financial statements.
This includes audit planning and
details 12 procedures in planning an
audit in very prescriptive language.
The PCAOB is fixated on
their instructions to assess the
effectiveness of internal controls.
Audit personnel supervision also is
emphasised for an audit plan.
PCAOB AUDIT PLANNING
engagements for the client.
2. Matters affecting the industry,
eg laws and regulations,
economic
conditions
and
technology influences.
3. Matters
relating
to
the
company’s business, including
its
organisation,
operating
characteristics
and
capital
structure.
4. The extent of recent changes,
if any, in the company, its
operations, or its internal control
over FR.
5. The
auditor’s
preliminary
Audit planning is
a first step to a
successful audit
judgments about materiality,
risk, and other factors relating
to the determination of material
weaknesses.
6. Control deficiencies previously
communicated to the firm or its
audit committee.
7. Legal or regulatory matters that
the company is aware of.
8. The type and extent of available
evidence on the effectiveness of
ICs over FR.
9. Preliminary judgments on the
effectiveness of ICs over FR
10. Public information about the
company that could lead to
material FS misstatements and
effectiveness of internal controls
over FR
11. Knowledge of the risks the
company could face and
continued acceptance of auditor
role.
12. Complexity of the company’s
operations.
PROCEDURES
1. Knowledge of the company’s
internal controls over FR
obtained
during
other
Recent PCAOB inspection reports
displayed on the PCAOB web
page reveal that several AS5 audit
procedures recommended in an
audit plan were either absent or not
followed by firms being reviewed.
CASE A
In this audit, the firm failed in
the following respects to obtain
sufficient competent evidential
matter to support its audit opinion.
i. The firm failed to perform
sufficient procedures to test
the issuer's allowance for loan
losses. The issuer determined the
general portion of its all estimate,
which represented a significant
portion of the all, using certain
factors such as loan grades. Data
for this calculation was obtained
from information technology
systems that reside at a thirdparty service organisation.
ii. The firm relied on these
systems, but it failed to test
the information technology
general controls over certain of
these systems, and it failed to
test certain of the application
controls over these systems.
iii. Further, the firm's testing of the
controls over the assignment and
monitoring of loan grades was
deemed insufficient.
CASE B
In this audit, the firm was found
to have failed to sufficiently audit
inventory in the following respects.
i. The firm failed to sufficiently test
the costing of work-in-progress
and finished goods inventory.
Specifically, the firm's tests of
controls over the costing of
such inventory were limited
to verifying that management
reviewed and approved the
cost allocation factors, without
evaluating the review process
that provided the basis for
management's approval.
ii. Further, the firm did not test the
completeness and accuracy of
certain underlying data that the
issuer used in the cost allocation
process.
61
iii. The
firm's
substantive
procedures were insufficient
because, for certain of its
analytical procedures, the firm
did not use data with predictable
relationships to the recorded
amounts and, for others, the firm
failed to develop expectations
that were precise enough to
provide the necessary level of
assurance.
iv. The firm failed to identify
and test internal controls over
the issuer's assertion that its
raw material inventory was
recorded at its average cost and
accordingly failed to establish a
basis for its reliance on controls
in designing its substantive audit
procedures in this area.
v. The firm's substantive testing
did not address whether the
issuer's raw material inventory
was carried at its average cost, as
the firm reviewed only the most
62
recent invoice for the items it
selected for testing.
MANAGEMENT OVERRIDE
AS5 recognises that many smaller
companies are less complex, ie have
fewer business lines, less complex
processes and FR systems and more
centralised
accounting
systems.
Management override of ICs is an
additional evaluation required with
such entities. Management may
be fewer in number and this could
impact on separation of duties.
PUBLIC SECTOR AND NFPS
As governments try to become more
effective, they increasingly outsource
specialised services to NFPs who in
turn receive government grants. This
in turn occasions the need for an audit
plan with the auditors reporting back
to the lead funder.
Audit planning becomes an
imperative in such outsourcing
situations. Spillover audit planning
effects from the for-profit sector have
rippled through to the public sector as
well.
In the USA the counterpart of the
NZ Auditor-General is the Inspector
General. The Inspector General
Act 1978 established government
auditing in the USA. Almost all
government agencies are required to
have “inspectors general”. The Act
provides planning and policy direction
on how to conduct, supervise, and
coordinate audits and investigations
relating to the programmes and
operations of each government entity.
Each of the 50 states has its own
state audit office. All have audit
plans and increasingly MS Project is
being used to plan audits using Gantt
charts.
US correspondent Ashley Burrows FCA
is a director of ACAUS (Association of
CAs in the USA).
NZICA Toolkits
Helping you and your clients stay one step ahead, these essential resources
give practical guidance through a comprehensive manual and CD of easy to
use templates.
CASH MANAGEMENT TOOLKIT
Better cash management means a better business for all
A step-by-step journey through the entire cash management process,
including funds coming in, funds going out and the planning, control
and measurement of the funds themselves.
NEW ZEALAND AUDIT MANUAL AND TOOLKIT
Practical assistance to improve your auditing
Core concepts and practical guidance are brought to life through
case studies and supported by over 100 forms, tools, work papers
and templates.
CHARTERED4ACCOUNTANTS
For further information visit nzica.com/publications or call 0800
NZICA JOURNAL DECEMBER 2011
63
Image matters
PEOPLE JUDGE OUR PROFESSIONALISM BY THE WAY WE LOOK
Cat Lyne has worked in
fashion for 16 years and for
Kimberleys for more than
three years. Kimberleys’17
stores nationwide stock local
and international labels.
Clothing ranges from casual
to corporate, in sizes 8-16,
appealing to a wide age
spectrum.
kimberleys.co.nz
Monica Meggett has been
with True Grit Hair Spa for
nearly three years and has
recently qualified
to the next level of her
training, becoming part of
the New Generation team.
She enjoys expressing her
creativity through
hairdressing.
truegrithairspa.co.nz
Lucy Harvey is a Christchurchbased freelance makeup
artist with more than11 years
industry experience
with weddings, formal
occasions, photographic
work, film and television and
special effects makeup.
She can create a complete
hair and makeup look
for your special occasion.
lucyharvey.co.nz
STYLISTS’ TIPS
A
Annette Burgess ACA,
Client manager, Leech & Partners, Christchurch
nnette Burgess ACA joined the accounting
profession five years ago after raising children and
working in the primary sector.
Her former workplace, Christchurch’s Pyne Gould
Corporation building, collapsed in February’s
earthquake.
“I was lucky, finding refuge under my desk for sixand-a-half hours until my rescue. Ten of our team
made it out alive” Annette says.
The company is making a fresh start in a single
storey office, well outside the CBD.
A keen cyclist, Annette bikes to work each day then
gets showered and dressed. As she had stored
most of her clothes in her locker, these were lost in
the earthquake.
“Like the office, my wardrobe needs a fresh start. I
have always struggled to get the look required for
a professional position and hope your consultants
can offer me some tips for work-appropriate, easycare wardrobe essentials and a hairstyle that will
cope with my daily commute.”
She describes the dress code at her work as “smart
office-appropriate clothing”, and her own typical
look as comfortable, with the weather forecast
determining her outfit choices.
“I would like a simple, age appropriate, natural
look for the office. Currently, I wear hardly any
makeup and it looks as though I forgot to get
dressed in the morning.”
Annette says the highlight of the makeover was
“bringing it all together”.
“The makeover gave me a kick start in the right
direction and made me realise what I’ve been
missing out on.”
Annette before her Image Matters makeover.
64
CLOTHING: Cat chose a simple, classic look to suit
Annette’s petite frame, and her lifestyle.
“Annette always wears pants so I decided to style her
in a Ben Sherman flair skirt, as it gave her a lovely
waistline.”
“Annette likes simplicity and suits the classic colours.
The coral cardy was used as an alternative to the jacket
to lift the outfit.”
The jacket’s fabric has some stretch, meaning it can be
worn at a desk without restricting movement.
Cat says Annette needs to dress to suit her petite frame
by enhancing her waist with skirts that cinch in at the
waist and dresses that don't come below the knee, as
this will only shorten her.
MAKEUP: Lucy designed a casual but professional look
for Annette.
“She was not used to wearing much makeup and I
wanted her to feel comfortable with the outcome while
still looking professional.”
All the products she used were from the Youngblood
range, which is available exclusively through trained
makeup artists and beauty therapists.
Lucy highlighted Annette’s green eyes with “Chestnut”
eyeliner, smudging this to soften the line.
She used eye shadows “Shitake” and then “Gilded”.
“Gilded is a warm copper with a satin/shimmer finish
which really brightens the eye and is perfect worn alone
with a little eye liner and lashings of black mascara.”
Lucy used Youngblood Natural Mineral Foundation in
“Tawnee” then swept Mineral Radiance in “Riviera”
over Annette’s cheekbones.
“I finished with lip liner in “Pout” and lipstick in
“Smoulder”, a lovely natural tone with just enough
colour to suit both day and night makeup.”
Metalicus “Windows
jacket to go” in
black and white
$225
HAIR: Monica describes Annette’s new hairstyle as
“subtly sultry, yet easy and feature-enhancing”. As
Annette had recently had a dramatic haircut from long
hair to a bob, Monica decided just a trim was needed.
“I added a little layering to balance out the volume of
her beautiful, curly locks.”
She selected colour from the L’Oreal Richesse range of
semi-permanent colours, with rich, burnt auburn tones
and some soft, scattered toffee highlights.
Monica used Kerastase Chroma Reflect, a heat protecting
product for colour treated hair. She also used L’Oreal’s
curl taming crème gel Curl Candy and finishing spray
Sparkling Mist.
Ben Sherman
“Light gathers
skirt” in black
$155
Marilyn Seyb Jeune
“Fav crop” cardy in
coral $110
Marilyn Seyb
“Fancy frock” in
black
$249
Do you know an Image
Matters candidate?
Please send a full-length
photo and details to:
[email protected]
INSTITUTE
shelf life
What’s new in the library
Business Information Librarian Kamala Bain takes a look at what’s
new on the library shelves.
Here is a selection of new items available from the library. To request, please contact Library and Information Services, email
[email protected] or phone 04 474 7882, citing the item’s identification number.
AUDITING
Auditing cloud
computing: a
security and privacy
guide, by Ben Halpert,
John Wiley & Sons,
2011
Presents a collection of
white papers on auditing
the security and privacy of company data
that is held "in the cloud".
believes entrepreneurs must follow in
order to avoid falling into "the passion
trap". Explains how to evaluate your own
ability to start a business, get to know your
potential market, and develop a robust
business model and strategy.
chairman, duties and liabilities, lessons to
be learned from the 2008 financial crisis,
and special circumstances surrounding
small and medium-sized businesses,
charities and others.
ID No: 34647
ID No: 34638
The new director:
powerful yet simple
FRAUD AND FORENSIC ACCOUNTING
strategies for
Fraud auditing and
becoming a
forensic accounting,
company director in
by Tommie W
ID No: 34580
New Zealand, by Ron
Singleton and Aaron
The 1% windfall: how
successful
companies use price
to profit and grow,
by Rafi Mohammed,
HarperCollins, 2010
Discusses ways in
which companies can
improve their pricing practices to increase
profitability and growth.
ID No: 34649
Scott, Global
J Singleton, John
BUSINESS AND MANAGEMENT
Publishing Group,
Wiley & Sons, 2010
Discusses common fraud
schemes, "red flags" for
fraud, a fraud risk assessment, and fraud
prevention and detection. Considers IT
aspects of fraud, and the evaluation of nonfinancial evidence such as body language
in a fraud investigation. Discusses the use
of expert witnesses in court, including
general criteria and effective tactics.
2011
Provides a short, pithy guide to becoming
a company director in New Zealand.
Discusses what directors do, critical
personal qualities, election and selection,
understanding company finances, and
directors' duties and liabilities.
ID No: 34459
ORGANISATIONAL EFFECTIVENESS
ID No: 34528
The resilient
6 secrets to startup
success: how to turn
The effective board:
your entrepreneurial
building individual
passion into a
and board success,
thriving business, by
by Neville Bain and
John Bradberry,
Roger Barker,
Amacom, 2011
Institute of Directors
Asserts that an
entrepreneur's extreme passion for a new
business idea can actually contribute to its
failure. Outlines six principles the author
66
organization: how
GOVERNANCE
UK, 2010
Provides a guide to best
boardroom practice from a UK perspective.
Discusses the role of the board and its
adaptive cultures
thrive even when
strategy fails, by
Liisa Valikangas,
McGraw-Hill, 2010
Describes how four basic
tools – innovation, design, adaptability
and strength – can be used to create a
culture of resilience in an organisation.
Includes real-life examples of how resilient
LEADERSHIP
The performance pipeline: getting
the right performance at every level
of leadership, by Stephen Drotter,
Jossey-Bass, 2011
Discusses the author's concept of the
Performance Pipeline, a system for
distributing accountability throughout
an organisation. Asserts that each layer
of an organisation can and should have
FEATURED BOOK
a unique purpose and measurable
results. Describes how leaders should
"pass down" to the layers below them
the things leaders there need to be
successful. Discusses the specific results
that should be expected at each level of
leadership, from the CEO to individual
employees.
ID No: 34636
organisations have successfully overcome
challenges such as facing new competitors,
recovering from a downturn, experimenting
with new opportunities, and re-thinking
their company strategy.
Rescue the problem
ID No: 34648
project failure, by
The little black book
Todd C Williams,
of management:
Amacom, 2011
essential tools for
manager's guide to
resolving problems
so everyone can get
back to work, by
Susan H Shearouse,
Amacom, 2011
Outlines the author's
approach to managing conflict in the
workplace. Focuses on why conflict occurs
and provides a series of strategies for
effective conflict resolution.
ID No: 34639
preventing, and
ID No: 34561
recovering from
PERSONAL DEVELOPMENT
Conflict 101: a
guide to identifying,
Draws on research where the principles of
Disruption theory were applied to 48 new
ventures.
project: a complete
Provides a step-by-step guide to rescuing
a struggling project. Discusses techniques
for identifying the fundamental cause of
project problems and outlines four critical
stages – audit, analyse, negotiate and
execute – to getting a project back on
track. Includes a range of real-life examples
from the author's career as a project
turnaround specialist.
ID No: 34482
STRATEGY
The innovator's
getting results now,
by Suzanne Turner,
McGraw-Hill, 2010
Provides a series of
two-page overviews of
100 common management tools such as
balanced scorecard, benchmarking, SWOT
analysis, Just in Time, Six Sigma, time
management, presentations and teambuilding. Includes tips on when and how
to use each tool, as well as examples and
exercises.
ID No: 34484
manifesto: deliberate
PROJECT MANAGEMENT
Project management accounting:
budgeting, tracking, and reporting
costs and profitability, by Kevin R
Callahan, Gary S Stetz and Lynne M
Brooks, John Wiley & Sons, 2011
Provides an introduction to project
management accounting and finance.
Covers cost accounting, budgeting and
project profitability. Includes a new
chapter on project risk management, new
and updated case studies, and sample
checklists.
ID No: 34510
disruption for
SUSTAINABILITY
transformational
The future of value:
growth, by Michael E
how sustainability
Raynor, Crown
creates value
Business, 2011
through competitive
Demonstrates how
Disruption theory can help mangers
to predict more accurately which new
ventures will survive and which will not,
asserting that this theory is statistically
proven to be an effective predictive tool.
differentiation, by
Eric Lowitt, JosseyBass, 2011
Discusses how
sustainable business practices can be used
to create value for an organisation.
ID No: 34637
A more comprehensive list of new items can be found in The Informed
Professional – Latest Articles and Publications, which is published monthly to the
library section of the Institute’s website – nzica.com/library
67
INSTITUTE
shelf life
Latest readings – Excel
Business Information Librarian Daniel Gray surveys recent key
articles on Excel.
To request any of these items or a specific subject search, contact Library and Information Services. Email: [email protected],
or phone 04-474 7882, citing the item’s identification number or your topic of interest.
ARTICLES
Make dashboard reports picture
perfect, by Neale Blackwood,
Intheblack, 81 (9) October 2011
Responds to a question about the difficulty of
getting reports and tables onto a dashboard
due to different column widths.
ID No: 34705
Calculating operating variances, by
Jason Porter and Teresa Stephenson,
Strategic Finance, 93 (3) September
2011
Explains how to complete a benchmarking
analysis with an Excel-based Master
Budget by using actual results to calculate
a company's operating variances. Discusses
how to interpret these variances and use them
to improve next year’s budget and operating
results.
ID No: 34595
Evaluating difficult formulas, by
Bill Jelen, Strategic Finance, 93 (3)
September 2011
Provides tips to help you find and interpret
Excel formulas when you receive a worksheet
from a colleague or client.
ID No: 34596
Pivotal advance boosts Excel's
power, by Jeff Lenning, Journal of
Accountancy, 212 (3) September 2011
Discusses the capabilities of the PowerPivot
plug-in to Microsoft Excel, and provides a
step-by-step guide to creating a PowerPivot
Pivot Table.
ID No: 34615
68
Advanced in-cell drop-down lists,
Check every date between two
by Neale Blackwood, Intheblack, 81
dates, by Bill Jelen, Strategic Finance,
(8) September 2011
93 (2) August 2011
Responds to a question about data
validation and the possibility of having one
drop-down list dependent on the selection
from another drop-down list.
Describes a formula that can be used to
check every date between two dates for
specific criteria eg how many times the first
of the month fell on a weekend.
ID No: 34704
ID No: 34546
Dealing with spreadsheet risk, by
Closing the loop on closing the
Dave Corbin, Internal Auditing, 35 (7)
books, by Jeff Adler, Strategic
August 2011
Finance, 93 (1) July 2011
Suggests that poor spreadsheet controls
are common in many organisations.
Describes the various steps involved in
developing an effective process to manage
spreadsheet risks.
Comparing budgets to performance,
Discusses the use of electronic applications
for closing the books, focusing on the three
key processes of task checklists, account
reconciliations and variance analysis.
Provides a brief summary of the pros
and cons of using Excel and outlines the
potential benefits and obstacles of using an
integrated, automated application instead.
by Teresa Stephenson and Jason
ID No: 34542
ID No: 34606
Porter, Strategic Finance, 93 (2)
August 2011
Frequency distribution, by Bill Jelen,
Describes the creation of a Flexible Budget
which uses actual sales levels rather
than planned sales to determine how
much of a change in profit is due to the
difference between projected and actual
sales. Discusses how to conduct a variance
analysis of contribution margins using both
the Flexible Budget and the Static Budget.
Strategic Finance, 93 (1) July 2011
ID No: 34545
analyse company performance, by
Describes how to create a frequency
distribution in Excel using the frequency
function or a pivot table.
ID No: 34547
Turning budgets into business: how
to use an Excel-based budget to
Jason Porter and Teresa Stephenson,
Strategic Finance, 93 (1) July 2011
Discusses how to use an Excel-based
budget for making managerial decisions
and investigating variances. Provides
guidance on how to add a contribution
margin income statement to an existing
master budget. Also demonstrates how
to calculate the breakeven point and
margin of safety by using the fixed- and
variable-cost information from the income
statement.
ID No: 34544
Excel: frequency distribution, by Bill
Jelen, Strategic Finance, 93 (1) July
2011
Looks at two ways to create a frequency
distribution in Excel through the frequency
function, and the use of a pivot table.
ID No: 34466
Make the most of macros, by Neale
Blackwood, Intheblack, July 2011
Provides a beginner’s guide to the use of
macros in Excel. Discusses recorded macros,
security settings, Excel trust centres,
running macros, and skill levels.
ID No: 34471
Excel: using sparklines to visualize
your data, by Bill Jelen, Strategic
BOOKS
Principles of finance with Excel, by
Simon Benninga, Oxford University
Press, 2011
Discusses the use of Excel for financial
analysis and decision-making. Designed as
an introductory finance text that integrates
Excel into the teaching and practice of
finance. Includes chapter summaries and
practical exercises. A separate section
provides detailed explanations of the Excel
topics used throughout the book covering
graphs, function data tables, dates, Goal
Seek, and Solver.
ID No: 34658
Financial simulation modeling in
Excel: a step-by-step guide, by Keith
A Allman, Josh Laurito and Michael
Loh, John Wiley & Sons, Inc. 2011
Discusses the theory and practice of
financial simulation modelling in Excel.
Provides a step-by-step guide to creating
multiple, smaller models as opposed to a
single unified model.
ID No: 34634
Finance, 92 (12) June 2011
Explains how to use sparklines in an
Excel worksheet and highlights how to
understand the axis size of the sparklines.
ID No: 34318
Excel: ranking values in a pivot
table, by Bill Jelen, Strategic Finance,
92 (11) May 2011
Explains how to use Excel 2010 and Excel
2007 to rank values in a pivot table.
ID No: 34285
Dashboard your scorecard, by Mark
W Lehman, Carol M Lehman and Jim
Feazell, Journal of Accountancy, 211
(2) February 2011
Advises how to present a visual dashboard
report for your scorecard using Microsoft
Excel.
Microsoft Powerpivot for Excel
2010: give your data meaning, by
Marco Russo and Alberto Ferrari,
Microsoft Press, 2011
Explains how to use the PowerPivot add-in
to Microsoft Excel to produce business
intelligence reports. Designed for users
with a good understanding of Excel, this
book describes PowerPivot's programming
language, DAX, and provides detailed
explanations of specific PowerPivot tasks
such as data modelling and integrating
PowerPivot with Microsoft SharePoint.
Includes a companion DVD containing
workbook examples, a Microsoft Access
version of the book's sample database and
a complete electronic version of the book.
Winning CFOs: implementing and
applying better practices, by David
Parmenter, John Wiley & Sons, Inc.
2011
Presents ideas for CFOs, controllers and
corporate accountants who are looking to
improve the performance of the finance
team. Discusses rolling forecasts, annual
reporting and how to manage accounts
receivable and payable. Includes a number
of templates and checklists.
ID No: 34127
Intermediate structured finance
modeling: leveraging Excel, VBA,
Access, and PowerPoint, by William
Preinitz with Matthew Niedermaier,
John Wiley & Sons, Inc. 2011
Designed as a hands-on guide to help
financial analysts with fundamental Excel/
VBA knowledge to develop greater skills.
Demonstrates how Access, PowerPoint and
Outlook can be integrated into a modelling
environment and focuses on the design and
execution of an Excel/VBA user interface.
Uses a structured finance model case
study to demonstrate product integration.
Includes examples of Access and VBA
code, Excel menus, UserForms, financial
calculation algorithms and reports.
ID No: 33913
For these articles, books and other
new items in the library this month
subscribe to the Informed Professional
Bulletin by email: [email protected]
ID No: 34388
ID No: 34208
69
INSTITUTE
news
Notices of Disciplinary Tribunal decisions
70
(Member guilty of being convicted
of an offence punishable by
imprisonment and the conviction
reflects on his fitness to practise
accountancy and/or tends to bring
the profession into disrepute)
the profession into disrepute)
accountancy and/or tends to bring the
profession into disrepute)
At a hearing of the Disciplinary
Tribunal of the New Zealand
Institute of Chartered Accountants
held in public on 7 November
2011, Mervyn Ian Doolan a
Chartered Accountant (retired)
of Gold Coast, Australia pleaded
guilty to a charge under the New
Zealand Institute of Chartered
Accountants Act 1996 and the
Rules made thereunder relating
to being convicted of an offence
punishable by imprisonment and
the conviction reflects on his fitness
to practise accountancy and/or
tends to bring the profession into
disrepute.
The
Disciplinary
Tribunal
ordered that the member’s name
be removed from the Institute’s
register of members and that he pay
to the Institute the sum of $3,900
in respect of costs and expenses.
No decision other than the
direction as to publicity shall take
effect while the member remains
entitled to appeal or while any
such appeal by the member awaits
determination by the Appeals
Council.
The
Disciplinary
Tribunal’s
full decision can be found on the
Institute’s website www.nzica.com/dt
R J O Hoare
Chairman
Disciplinary Tribunal
New Zealand Institute of Chartered
Accountants
7 November 2011
held in public on 7 November
2011, Gary William Soffe a
Suspended Chartered Accountant
of Hamilton pleaded guilty
to a charge under the New
Accountants Act 1996 and the
Rules made thereunder relating
to being convicted of an offence
punishable by imprisonment and
the conviction reflects on his fitness
to practise accountancy and/or
tends to bring the profession into
disrepute.
The
Disciplinary
Tribunal
ordered that the member’s name
be removed from the Institute’s
register of members and that he pay
to the Institute the sum of $3,900
in respect of costs and expenses.
Council.
The
Disciplinary
Tribunal’s
R J O Hoare
Chairman
Accountants
7 November 2011
held in private on 7 November
2011, Donald Menzies Young a
Chartered Accountant of Auckland
pleaded guilty to a charge under the
Accountants Act 1996 and the Rules
made thereunder relating to being
convicted of an offence punishable
by imprisonment and the conviction
the profession into disrepute.
The Disciplinary Tribunal ordered
that the member be censured subject
to the Institute now accepting
his resignation (subsequently the
Institute has accepted the member’s
resignation) and that he pay to the
Institute the sum of $4,000 in respect
of costs and expenses.
Council.
The
Disciplinary
Tribunal’s
R J O Hoare
Chairman
Accountants
7 November 2011
Notices of decisions and order of the Professional Conduct Committee
At a meeting of the Professional
Conduct Committee of the New
Accountants (NZICA) held in private
on 30 August 2011, the Committee
considered matters relating to the
conduct of “the Member”, a Chartered
Accountant in public practice. The
Committee found that the following
matters would otherwise warrant being
referred to the Disciplinary Tribunal.
In the Member’s role as a Chartered
Accountant in public practice and
in relation to a complaint by “the
Complainant”, the Member:
(a) removed
the
Complainant’s
minority shareholding in a
company without a signed share
transfer form
(b) failed to manage the conflict of
interest present in the Member’s
personal relationship with the
Complainant, in that the Member
acted as the Complainant’s
accountant and/or handled the
Complainant’s financial affairs
during a period of relationship
acrimony
(c) claimed all of the company losses
for the 2009 and/or 2010 tax
years in the Member’s personal
tax returns when the Complainant
had a financial interest and/or
shareholding in the company and
was entitled to their share of the
losses.
With the written consent of the
Member, the Professional Conduct
Committee made the following orders,
which shall be entered on the Member’s
record.
1. In accordance with Rule 21.6(d)
(v) the Member be severely
reprimanded.
2. In accordance with Rule 21.6(d)(vii)
the Member pay costs to NZICA of
$1830.
The Professional Conduct Committee
considered it was in the public interest
to direct publication of its decision
and the orders made, without mention
of the Member’s name or identifying
details of third parties.
Details of the decision and the
Professional Conduct Committee’s
orders are published in the December
2011 edition of the Chartered
Accountants Journal and on NZICA’s
website www.nzica.com/dt
DJ Barker
Chairman
Professional Conduct Committee
Accountants
20 October 2011
At a meeting of the Professional
Conduct Committee of the New
Accountants (NZICA) held in private
on 30 August 2011, the Committee
considered matters relating to the
conduct of “the Member”, a Chartered
Accountant in public practice. The
Committee found that the following
matters would otherwise warrant being
referred to the Disciplinary Tribunal.
In the Member’s role as a Chartered
Accountant in public practice and
in relation to a complaint by “the
Complainant”, the Member:
1) failed to identify the following
deficiencies in the financial statements
and/or to take the appropriate action
to ensure they were remedied prior to
issuing an unqualified audit report:
a) a note to the financial statements
showed that a fund had a
positive closing balance when
this fund was actually in deficit,
the difference between these
balances being a material amount.
(While the member provided an
explanation for the accounting
treatment adopted the Committee
considered that there was
inadequate disclosure to allow a
reader of the financial statements
to understand the accounting
treatment adopted);
b) a note to the financial statements
disclosed a material amount as
being received when this amount
had not been received by the
company as at the balance date;
c) a note to the financial statements
included a material amount
as “Trade receivables” which,
although a receivable, was not a
trade receivable;
d) a material provision which was of
a non-current nature was included
under a separate heading called
“current liabilities” which should
have read “non-current liabilities”;
e) the Statement of Cash Flow did not
balance in that the “Closing cash
and cash equivalents” recorded
a different amount to the “Total
cash and cash equivalents”.
With the written consent of the
Member, the Professional Conduct
Committee made the following orders,
which shall be entered on the Member’s
record:
1. In accordance with Rule 21.6(d)(v)
the Member be severely reprimanded
2. In accordance with Rule 21.6(d)(vii)
the Member pay costs to NZICA of
$2025.
The Professional Conduct Committee
considered it was in the public interest
to direct publication of its decision
and the orders made, without mention
of the Member’s name or identifying
details of third parties.
Details of the decision and the
Professional Conduct Committee’s
orders are published in the December
2011 edition of the Chartered
Accountants Journal and on NZICA’s
website www.nzica.com/dt
DJ Barker
Chairman
Professional Conduct Committee
Accountants
20 October 2011
71
Privilege Partner News
Myles Noble (left) of
Crombie Lockwood
accepts his award for
Claims Professional of
the Year at the recent
General Insurance
Industry Awards.
Crombie Lockwood triumphs
at insurance awards
At the recent General Insurance Industry Awards, Crombie Lockwood’s Head of Claims
and EQ Response, Myles Noble, was chosen as the Claims Professional of the Year. Myles
continues to do a great deal of work with NZICA members around the country but in
Christchurch in particular. Crombie Lockwood’s Wellington Branch was also named
Broking Office of the Year and the company had two individuals, Dan Donaldson and Tony
Rowe as finalists for Broker of the Year. As far as many NZICA members are concerned
Myles was already ‘claims professional of the year’ and we congratulate him on his welldeserved recognition.
Crombie Lockwood provides public practitioners with IKON Complete Practice Insurance,
developed exclusively for Chartered Accountants offering unique levels of protection and
exclusive benefits only available to NZICA members.
Visit nzica.com/privileges/crombielockwood
Vero's 6th year as a Top 5 workplace
Vero has been nominated for the sixth time in this year’s JRA Best Workplaces Awards which
aims to find New Zealand’s best place to work. This year a record number of employees gave
feedback on their workplaces, with more than 31,700 Kiwis responding from 237 different
organisations across the country. Now in its 12th year, the JRA Best Workplaces Survey has
become the benchmark for best workplace practices nationwide. Vero was one of five
companies nominated as a finalist in the Large Workplace category.
Vero specialises in home, contents, travel, car and boat insurance, and as an NZICA member
you have access to these policies at specially negotiated rates.
To find out more visit nzica.com/privileges/vero
Still time to take up special transfer
terms from Accuro
Christmas, beaches and BBQs are just
around the corner – the good news is
that you have until 20 December 2011
to transfer from your existing medical
insurance provider to Accuro SmartCare,
potentially without the need for further
underwriting*. So dust off that old policy,
and find out why Consumer has given
Accuro SmartCare Hospital and Surgical
plan the tick for the third year running.
If you are a non-smoking NZICA member
and choose to pay your premiums by direct
debit, you can save 22.5% off the normal
premiums – that has got to look good on
your bottom line!
As a not-for-profit member organisation
providing health insurance to New Zealanders
for over 40 years, Accuro can provide
comprehensive health insurance at the lowest
possible price.
So before Christmas arrives find
out more about this offer by visiting
nzica.com/privileges/accuro, or speak to one of
Accuro’s friendly membership team by calling
0800 222 876.
*Terms & Conditions apply.
Hot Deals
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Insurance Companies and Brokers
FREE professional accident management for fleet
and private vehicles, leased or owned.
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pick-up/delivery service and late-model relief vehicles.
HOT DEAL
All customers will receive a
voucher for a free WOF check
through our business partner
AutoSuperShoppes
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10OFF
FOR NZICA MEMBERS *
It’s why travelling
with us just
feels better.
Visit avis.co.nz or call 0800 655 111
*Valid until 30 November 2011. AWD number – R035200 to
be quoted at the time of booking. Further conditions apply.
Visit www.avis.co.nz or call 0800 655 111 for full details.
60 branches throughout NZ,
see www.autosupershoppes.co.nz.
To take advantage of the Hot Deal and for more information on tthe
he VIP accident
management service offered to NZICA members, visit www.nzica.com/privileges/cms
Management
SPECIAL NZICA MEMBER OFFER
Enjoy a complimentary room upgrade with
every HOTBREAKS booking.
This voucher must be presented on check-in
Participating hotels:
Copthorne Hotel & Resorts Bay of Islands
Copthorne Hotel Auckland City
Millennium Hotel Rotorua
Kingsgate Hotel Rotorua
Copthorne Hotel & Apartments Queenstown, Lakeview
Kingsgate Hotel Dunedin
Valid until 31/01/2012. Subject to availability. Conditions apply.
For full terms and conditions visit www.millenniumhotels.co.nz/hotbreaks
Check out the latest Member Privileges at nzica.com/privileges
> EVENTS
EVENTS CALENDAR
Check out what’s happening in your region at a glance. New courses and events
are being added all the time. For an up-to-date list check out nzica.com/events
CATEGORIES
NORTHERN REGION JANUARY 2012 - MARCH 2012
DATE
SPECIAL INTEREST
GROUPS GROUP
GENERAL TECHNICAL
SKILLSGROUP
GENERAL BUSINESS AND
TECHNICAL KNOWLEDGEUP
MANAGEMENT
ACCOUNTINGUP
TIME
LOCATION
26/1/12
Xero certification training
9am–4pm
Auckland
8/2/12
9am–4pm
Auckland
8/2/12
Write like a leader
4–6pm
Auckland
16/2/12
The outperforming finance function
9am–1pm
Auckland
20/2/12
9am–4pm
Auckland
9am–1pm
Whangarei
1–5pm
Auckland
4–6pm
Auckland
20/2/12
FINANCIAL ACCOUNTING
AND REPORTING
21/2/12
LEADERSHIP AND BUSINESS
STRATEGY
22/2/12
TAXATION
ETHICS, VALUES
ATTITUDES
NAME
Demystifying NZ IFRS for privately held companies and
NFPs
NFPs
Managing year end tax issues and legislative changes
29/2/12
Leading and managing people
8/3/12
The accountants’ one-day business and tax update
8.30am–
5pm
8.30am–
5pm
Auckland
Auckland
SOCIAL EVENTS
FUNCTIONS
PERSONAL &
INTERPERSONAL SKILLS
MIDLAND REGION JANUARY 2012 - MARCH 2012
AUDIT AND
ASSURANCE
INSOLVENCY
COMING
SOON
• Leadership series
Feb 2012, Hamilton
• Corporate Intelligence
Protection
March 2012, North
Island locations
• Business Insite: VNC
Cocktails
Feb/Mar 2012,
Tauranga
74
TIME
LOCATION
31/1/12
DATE
NAME
9am–4pm
Hamilton
31/1/12
9am–4pm
Napier
8.30am–
5pm
Hamilton
9am–4pm
Tauranga
8.30am–
12.30pm
Hamilton
5.30–8.30pm
Hamilton
15/2/12
Building a business case
17/2/12
22/2/12
NFPs
23/2/12
New members quiz night
23/2/12
24/2/12
NFPs
NFPs
8.30am–
12.30pm
8.30am–
12.30pm
Tauranga
Napier
27/2/12
9am–4pm
Hamilton
14/3/12
Business Insite: Red Stag Timber
4–5.30pm
Rotorua
> EVENTS
CENTRAL REGION JANUARY 2012 - MARCH 2012
DATE
NAME
17/1/12
26/1/12
Data risk management
TIME
LOCATION
9am–4pm
Wellington
8.30–
10.30am
Wellington
2/1/12
Back-to-work breakfast
8–9.30am
Masterton
3/1/12
Back-to-work breakfast
8–9.30am
Wellington
7/2/12
9am–4pm
Wellington
8/2/12
Recruitment demystified
9am–noon
Wellington
10/2/12
Business essentials
14/2/12
17/2/12
The outperforming finance function
9am–1pm
Wellington
20/2/12
Fraud – has it changed?
9am–noon
Wellington
23/2/12
Performance essentials series: team strategy
8.30–
10.30am
Wellington
9am–1pm
Palmerston North
27/2/12
28/2/12
NFPs
NFPs
28/2/12
A hitchhiker’s guide to economics
1&
2/3/12
2012 Public sector conference
8–10am
Wellington
9am–4pm
Palmerston North
8.30am–
12.30pm
9am–
12.30pm
Thurs 1–5pm
& Fri 9am–
4.30pm
Wellington
Wellington
• CFO and CEO
Breakfast Panel
27 April 2012,
Wellington
Wellington
SOUTHERN REGION JANUARY 2012 - FEBRUARY 2012
DATE
NAME
TIME
LOCATION
25/1/12
9am–4pm
Christchurch
8/2/12
9am–4pm
Christchurch
14/2/12
9am–4pm
Dunedin
22/2/12
9am–4pm
Christchurch
24/2/12
Brook Waimarama Sanctuary site visit
29/2/12
MARK
YOUR
DIARIES
5pm
Nelson
9am–1pm
Christchurch
• Business conference
2012
21 June, Hamilton
E-LEARNING FEBRUARY 2012
DATE
NAME
TIME
FORMAT
8/2/12
Westpac economic update
10–11am
Live webinar
15/2/12
Online library catalogue
10–11am
Live webinar
16/2/12
Business technology update
10–11.30am
Live webinar
21/2/12
Stop reacting, start responding
Live webinar
23/2/12
Insolvency series: pre-insolvency assessments by Chartered Accountants
11am–
12.30pm
10–11am
Live webinar
28/2/12
IFRS series: consolidation – a new single control model
10–11.30am
Live webinar
WIN an iPad 2.
Enter promo code
B0112
when
J
registering for any
course or event and
go into the draw.
Design so you can learn in your own time at your own pace, our On-Demand courses come in two formats - online modules
and recorded webinars. Below are a selection of the latest courses. The full range can be found at nzica.com/ondemand
Ethics in action series
On-demand
modules
Update on Holidays Act 2003 & payroll
Recorded webinar
Growth beyond competition, out-strategising your competitors
Recorded webinar
Understanding the impact of social media on business
Recorded webinar
Changes to the Financial Reporting Framework
Recorded webinar
Benchmarking in the not-for-profit and charities sector
Recorded webinar
NZ IFRS Update
Recorded webinar
75
FOREIGN INVESTMENT FUNDS
- your questions answered…
This presentation follows on from two
previous Foreign investment funds
(FIF) roadshows that highlighted FIF
fundamentals and common mistakes. It will
answer your questions about current FIF
issues and aspects of offshore income and
migrants. Send your questions in advance to
[email protected].
This is
an area
fraught with
opportunities
for error
The presentation will address:
• foreign superannuation schemes and how
these are taxed in New Zealand
• advantages/disadvantages of the transfer/
non transfer of pension schemes to New
Zealand
• certain type of migrants, residents and
their correct New Zealand tax position
• impact of the Double Taxation Treaties
• calculation methods pre/post 1 April 2012
• different types of overseas income
• Inland Revenue's Compliance Focus
document
• common errors from the 2011 year.
WHY ATTEND?
This is an area fraught with opportunities
for error – invest half a day and keep on top
of the rules.
WHO SHOULD ATTEND?
Practitioners who have clients with foreign
investments, particularly those with
interests in foreign equities and debt.
PRESENTERS
Craig Macalister, NZICA’s Tax Director, who
has been with the company since May 2005.
Peter Loerscher, Principal Advisor at Inland
Revenue (IR). He joined IR in January 2005.
This roadshow will be running across New
Zealand from 5 March to 13 April 2012.
LEARNING OUTCOMES
• Q&A session - your questions answered.
• Tax treatment of foreign superannuation,
foreign pension, foreign lump sum or
foreign annuity.
• Other foreign income.
0800 223 729
Ace Payroll
for New Zealand
employers.
Try it for free
Take control on pay day with easy low
cost software and great help desk support.
76
www.acepay.co.nz
CLASSIFIEDS
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CONNECT ACCOUNTING
be seen here
The Chartered Accountants Journal reaches around 25,000 business professionals in NZ and 4,000 worldwide
To book classified advertising space please contact
Rosie Payne
[email protected]
09-917 5931
77
CLASSIFIEDS
PRACTICE/FEES
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Chartered Accountant with
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South Auckland is preferred but
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MARTIN WAKEFIELD
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Christchurch, Canterbury Area
Advertising available in
the Journal online
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Rosie Payne
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features a variety of rooms available for hire. All rooms have natural lighting and have been
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is ideal for a variety of corporate events, from small meetings to all-day workshops, seminars and
after-work cocktail functions.
78
CONTACT:
The Conference Centre Manager
on 04 474 7896 or [email protected]
or complete a booking request online at
www.nzica.com/wellingtonconferencecentre
CLASSIFIEDS
PRACTITIONER LOOKING TO EXPAND
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The Chartered Accountants Journal reaches around 25,000 business
professionals in NZ and 4,000 worldwide
To book classified advertising space please contact
Rosie Payne
[email protected]
09-917 5931
PKF
79
NEWS
opinion
BOOK REVIEW
The power of bookkeeping
Double Entry, Jane Gleeson-White, Allen
and Unwin, 2011
by ROGER HOPKINS FACA
T
his
book is essential reading
for those who cringe
when they see portrayals of
accountants as bumbling idiots
on our television screens.
Readers may not want to
accept fully the comment quoted
in the preface that accountants
may be “the one last hope for
life on earth” but there is no
doubt there is a powerful story to be told
of the heritage of double entry bookkeeping
and its subsequent power for good and
ill. Gleeson-White has provided us with a
timely reminder that we ignore that power
at our peril.
Building on research into Renaissance art
and economics in Venice, the author traces
with assurance the fascinating story of Luca
Pacioli, born in 1464 in the small market
town of Sansepolcro in Italy.
It was in 1494 that this Fransiscan
monk and professor of mathematics, the
greatest mathematical encyclopaedist of
the Renaissance and tutor of Leonardo da
Vinci, published his 615-page Summa de
arithmetica including his now famous 27page bookkeeping treatise.
The world was never to be the same again.
In the first five chapters the saga is traced
from the Dark Ages and through the
years of the Renaissance with deft touches
under such eyecatching chapter headings
as “Venetian Double Entry goes Viral”.
The author skilfully blends in more recent
incidents like the escape of Sansepolcro from
destruction by the 8th Army in 1944 because
of the presence in the town of the Piero’s
Ressurection of Christ, the “best painting in
the world” (Aldous Huxley).
Religious overtones abounded at the time
80
The saga is
traced from
the Dark
Ages and
through the
years of the
Renaissance
with deft
touches
under such
eyecatching
chapter
headings as
“Venetian
Double Entry
goes Viral”
of the early development of bookkeeping.
Gleeson-White comments (p96), “the use
of double entry itself was like the Catholic
confession: if a merchant confessed – or
accounted for – all his worldly activities
before God, then perhaps his sins would be
abolished.”
For those seeking a better understanding of
the current dilemmas facing accountants the
issues covered in chapters six through nine
are significant as the power of the double
entry technique has permeated deeply into
our social fabric.
The canvas is broad as the author considers
arenas such as the industrial revolution and
the rise of capitalism, the emergence of the
limited liability corporation, the development
of an accounting profession with its audit
function, the introduction of national
income accounting and measurement of
GDP, and finally, the seemingly neverending
plethora of corporate financial crashes.
Perhaps there is not always the assured
touch of the earlier chapters but in the
epilogue the author “cuts to the chase”
as to a fundamental challenge currently
facing accounting and those who attempt to
regulate (p252): “…once you can measure
something, then you have a quantitative or
numerical representation of your subject
which you can manipulate and experiment
with, no matter how great the errors
and omissions. Such data can acquire an
apparent independence from its human
creators and, when fed into a 21st century
computer model, an authority which appears
irrefutable.”
The author has shown how history can
help in an appreciation of the risk associated
with a reliance on single figure indicators
and user-driven accounting constructs
buried in complex general purpose financial
statements.
The quoted report of the Stiglitz-SenFitoussi Commission (2009) shows a way
forward. It is now for the undoubted skills
of accountants to be harnessed to develop a
range of measures to assist in the preservation
of our complex world. Accountants may yet
prove to be saviours!
Roger Hopkins FACA (Hon Retired) is an
Emeritus Professor at Victoria University of
Wellington.
The joy of tax
Revenue officers the world over are
celebrating the discovery of happy
taxpayers.
by NURY VITTACHI
W
oohoo!
Now there
are two of
us. Watch out, world.
Another
enthusiastic
taxpayer has been found.
Inland revenue officers
everywhere will jump for
joy. Two down, only seven
billion to go.
What am I talking
about? Happy taxpayers.
During a recent question and answer period
after a speech by President Barack Obama, a
nerdy guy put up his hand and asked: “Would
you please raise my taxes?” He got a big laugh
and a round of applause.
Reporters grabbed the guy afterwards to ask
who he was. Doug Edwards explained that he
was a Google staffer who had retired early with
plenty of money. His request made headlines,
since the economic debates filling the media in
the United States (and pretty much everywhere
else) assume that no one likes paying taxes.
Regular readers may recall that this
columnist got a flurry of amazed letters when
my neighbour offered to get me into a scheme
to legally avoid paying taxes, and I rebuffed
her, saying that I liked paying taxes.
A colleague once commented on the size
of the government hospital close to my home
and I said: “Yes, it cost billions, but there’s
an amazing team of financiers behind it –
including yours truly. I also helped finance the
school down the road.”
He was mightily impressed. On the
downside, he now makes me pay for drinks
every time we go out, so that was a gross
strategic error on my part.
A few days ago, a reader emailed me a quote
from Oliver Wendell Holmes Jr, an early 20th
century US Supreme Court judge, who, I guess,
I told him
that there
was no way
accountants
would burn
my house to
the ground.
“They have
interns to
do that sort
of thing”
should be dubbed the spiritual founder of the
happy taxpayers movement. A fellow judge,
Felix Frankfurter, once reported Holmes as
declaring: “I like paying taxes. With them I
buy civilization.”
Deep stuff.
Wait. I’m hitting the pause button on my
frontal lobe and taking my hands off the
keyboard. Someone just read the paragraphs
above over my shoulder and shook his head.
“You can’t write this in a magazine for
accountants,” he said. “They make their living
helping people avoid taxes. They’ll burn your
house to the ground.”
I told him that there was no way accountants
would burn my house to the ground. “They
have interns to do that sort of thing,” I said.
Besides, some people have a big need to
contribute to society, while others don’t, and
accountants help both groups.
The Economist once calculated that my
former employer Rupert Murdoch managed in
one particular period to legally avoid paying
enough tax to finance seven new hospitals or
300 primary schools. I felt really sorry for him.
Just imagine if you had enough spare cash to
pay for all that and you chose not to do it.
What could be worse? Poor guy.
Murdoch’s News Corporation does pay
some tax. Some billionaires earn unimaginably
huge sums of money and hide the lot, paying
no taxes at all. But I’m not going to let them
upset my equilibrium. I refuse to pass judgment
on these people, other than to say that they are
bottom-feeding scum who should die, die, die!
Now if anyone from Inland Revenue is
reading this, you can make the number of
happy taxpayers grow from two of us (Doug
and I) to a larger number quite easily, I reckon.
Just send people thank you notes when we pay
our taxes. Instead of calling us taxpayers, call
us… I don’t know… “philanthropist citizens”,
or something.
Mine could say: “Cheers, mate, you just
financed two and a half bricks in the hospital’s
new basement toilet. We really appreciate it.”
Filled with pride, I might even bring my
friends around to have a look.
Nury Vittachi is a bestselling author, columnist,
lecturer and TV host. He writes a regular humour
column at mrjam.org. This column first appeared
in A Plus, the official magazine of the Hong Kong
Institute of CPAs.
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82
QBE-047 MM Rapport

Journal Online December 2011

Transcription

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