NQ magazine, November 2013

NOVEMBER 2013

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CARBON ACCOUNTING Steve Priddy looks at carbon disclosure CIMA SALARY SURVEY 2013 United Kingdom

ALL THE NEWS YOU NEED Pages 4 and 7

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COMPETITION IS KEY: THE COMPETITION COMMISSION ISSUES P9 FINAL REPORT ON THE STATE OF THE AUDIT THE EU why we need to MARKET P16

be part of the union

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THE AUDIT ASSURANCE JOURNEY Page 22

ETHICAL BEHAVIOUR protecting the brand

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NQ Magazine Spring 2013

COMMENT

EDITOR’S COMMENTS Your regular update is here This is the fifth issue since we relaunched NQ as an e-magazine, and we hope you are enjoying what you signed up for! We really are trying to provide you with information that you can’t find anywhere else, and that gives you an edge.

You will notice that we have lots of articles where we don’t sit on the fence either.

I really don’t believe accountancy is a passive profession, and in this issue we have the ACCA’s Sarah Hathaway clearly stating the case for the UK staying in the Europe.

Then there is expert Steve Priddy (he is going to be a regular contributor) cutting a swathe through the government’s approach to carbon accounting. We would love to get some entries from you for the PQ awards. Ok, you are now qualified, but what harm can owning a PQ statute do? Being an NQ of the Year will make any CV stand out, we promise (see page 10).

My desk is currently buried under new reports. We have ‘The Role and Expectations of a CFO’, ‘The DNA of a Finance Director – the makings of a finance leader’, PwC’s ‘Finance Effectiveness Benchmark Study’, and the ACCA’s ‘Digital Darwinism: thriving in the face of technology change’. What these all show is that you must be ready to embrace change at every turn. If you want to become a CFO or FD you really are going to have to step outside the comfort of figures. Your DNA needs to change and you must start to search out the other operations in your company.

Entrepreneurship could also become increasingly important if you decide the route to partner and FD is not for you. We have, of course, a feature on that in this issue, too.

So we have most bases covered. Your next issue of NQ will come to you in the New Year. Have a good one until then, and be safe out there.

Graham Hambly, Editor (graham@pqaccountant.com)

THIS ISSUE We are looking for the NQ of the Year 2014 – it could be you!

See page 10 for details.

Enter via the pq magazine website – www.pqmagazine.co.uk

NEWS

I don’t believe it! Salaries on the up… for CIMAs UK companies need to overhaul their finance functions or suffer competitive disadvantage as the economy recovers and growth opportunities return, says PwC’s Finance Effectiveness Benchmark study. But, worryingly, the annual review shows less than half of financial professionals (45%) believe their company’s financial forecasts are reliable.

PwC’s Andrew McCorkell said: “Technology and management advances of recent years have enabled the best finance functions to become real-time sources of insight to the business, and more are on a mission to achieve this.”

The report stresses that many financial professionals also need to change their mindset about how they work. You will need to give advice on some of the mega-trends such as moving into new markets, disruptive technologies and the demands of a new generation of digital customers. That will mean focusing your CPD spend in these areas.

The report also revealed that companies spend 0.93% of their revenues on finance costs, a slight drop from the 1.02 a year ago.

A qualified CIMA earns on average £66,710 a year, says the latest survey from CIMA, with a basic salary of £60,655 plus bonus payments of another £6,055.

Compared with the 2012 average basic salary figures this is a 13% increase.

Meanwhile, PQ CIMAs in the UK are earning on average £34,309 (basic) with CIMA SALARY SURVEY 2013 another £1,836 in bonuses. That is a United Kingdo m rise year-on-year of a healthy 9%.

The key motivators at work for both members and PQs are: flexibility and work-life balances (49%); a good working environment (47%); financial reward (43%); and a challenging workload (39%).

Skills qualified CIMAs most want to develop over the next 12 months include leadership, strategic planning and influencing.

Just 7% of members and PQs see themselves in the same role in three years’ time. Some one in four plans to find another job in six months and a total of 57% expect to move job within the next two years.

Shining a light on audit reports For many, the current audit report is just “shadows on the walls of caves”, explains leading commentator Paul Lee. That means they have been invisible to investors and the lack of ‘action’ on the part of the accountants to bring them into the light has done the profession a massive disservice.

Lee was giving his views in a panel discussion about the IAASB’s proposals to make the audit report more informative in London recently. Also on hand was Professor Arnold Schilder, the current IAASB chair. He felt that there is little doubt that things needed to change, saying that a couple of years ago the Treasury Select Committee ruled it had not found any evidence of audit failure in these turbulent time.

And right there is your problem, he stressed. If auditors did what they are supposed to do but didn’t change what happened then the big question is, what is the point of them?

The relevance to stakeholders was non-existent, and now the IAASB’s exposure draft on auditor reporting hopes to change all that. Schilder outlined the five key proposals in the draft: ● Opinion preferably first. ● New section to address ‘Key Audit Matter’ – required for listed entities.

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● New section to address ‘Going Concern’. ● New section to address ‘Other Information’, when such information is presented with the audited financial statements. ● Other suggested improvements to enhance transparency or clarify responsibilities.

The Making Audit Report’s More Informative symposium was supported by the ACCA and FRC.

NQ Magazine November 2013

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ACHIEVE MORE. BECOME MORE. NQ Magazine Spring 2013

NEWS

CORNER

Electronic filing The FRC wants to enable the electronic filing of accounts based on its new financial reporting standards. To this end it has announced a project to improve the quality of electronic ‘tagging’ of accounts. Financial information in corporate reports is now often electronically tagged, so that users of the data can more easily pull out the information they want and analyse it more efficiently.

XBRL is a technology that enables this to be done in a standradised way. Following transfer of responsibility to the FRC, the XBRL tagging convention – taxonomies – will be updated to reflect the new financial reporting standards (FRS100, 101 and 102).

Competition report The FRC said it was pleased that the Competition Commission has listened to its concerns over the appropriate period within which FTSE 350 companies should tender their audits (every 10 years). This has brought them in its line with the time period in the Corporate Governance Code, and the emphasis on audit committee reporting builds on the changes introduced to the Code in October 2012.

Improving disclosure The FRC is calling on preparers and auditors to improve the quality of disclosures in annual reports. The FRC said that in line with the Corporate Governance Code the guiding principle for annual reports as a whole is that they are fair, balanced and understandable. Among the recommendations it wants boilerplate language to be avoided and a focus instead on entity specific disclosure.

Immaterial information should also be excluded.

Darwinism rules The UK accountancy profession must adapt to thrive in the face of technology advancements, says a new report from the ACCA’s Accountancy Futures Academy.

‘Digital Darwinism: thriving in the face of technology change’ found that 75% of UK respondents say mobile technologies will impact business in the years ahead, compared with a massive 95% in Australia (the highest score).

It would appear that the UK is one of the least clued up about the impact of big data on business, with only 52% saying it will be impactful in the years ahead, alongside Ireland, which scored the lowest at 47%. Again, Australia scored the highest, at 91%.

Just over a half of UK respondents also seemed worried about the risks associated with cybercrime, compared to 74% in Africa.

Faye Chua, head of futures research at ACCA said: “UK NQ Magazine November 2013

The expectations of a proper CFO The International Federation of Accountants has outlined what it sees as the principles guiding the role and expectations of a CFO in its latest discussion document.

Interestingly, the IFAC points out that the number of professional THE ROLE AN D EXPECTATI ONS OF A CFO accountants in the CFO role has actually declined in some jurisdictions, particularly in larger organisations.

The most common level of education for a CFO is a degree in finance (29%), followed by a chartered accountancy qualification (27%) and an MBA (27%), according to a 2010 EY survey of 699 CFOs in Europe, the Middle East, India, and Africa.

It appears there is a growing voice for the education and training of accountants to incorporate broader managerial capabilities and skills.

The discussion document, ‘The Role and Expectations of a CFO’, starts by saying what the CFO should be able to: 1) Be an effective organisational leader and a key member of senior management.

2) Balance the responsibilities of stewardship with business partnership.

3) Act as the integrator and navigator for the organisation.

4) Be an effective leader of the finance and accounting function.

5) Bring professional qualities to the role and the organisation.

A Global Deb ate on Preparin Finance Lead g Accountants ersh for Discussion Pape ip r

accountants need to flex their influence more within their own businesses and practices and with their clients, as the UK scores among the lowest for tech influences – only 45% of accountants and financial professionals in the UK said they influence technology decisions with their clients, and only 66% within the organisations where they work.”

The top 10 technologies with the potential to reshape the accountancy profession and business landscape are: mobile; big data; artificial intelligence and robotics; cyber security; education; cloud; payment systems; virtual and augmented reality; digital service delivery; and social media.

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EUROPE

Why we must stay in the EU It’s not too late to halt the ‘suicide mission’, says Sarah Hathaway

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embership of the European Union is an issue the accountancy profession has made little noise about, and it’s viewed as a political issue.

However, EU membership is an economic matter, which is why here at ACCA we feel an obligation to take a view on membership.

The Deputy Prime Minister Nick Clegg MP described leaving the EU as “economic suicide”. He is right. But why do we care? Because accountants, perhaps now more than ever as we emerge from a global recession, have an important role to play in the recovery, future growth and in guarding against future risk to the UK’s economy.

Accountants traditionally look at the numbers, and they paint a convincing picture of why the UK should not back out of the EU. However, the profession is seeing its role and remit broadening into a much more strategic, forward-looking one in business. From that perspective too, giving up on the economic European Union would be bad news for UK plc.

ACCA sees staying in Europe as a no-brainer, and we aren’t alone. Nissan’s chief operating officer Toshiyuki Shiga has pointed to the major benefits for foreign investors in the UK being part of the EU. As Nissan owns the biggest car factory in Sunderland, employing 6,100 people, and is supported by UK supply chains that employ even more, Shiga’s comments should not be ignored.

Leaving the EU is also bad for the smaller businesses further down the supply chain. SMEs would actually benefit greatly from an even more integrated European Union. SMEs could increase export trade by 45% if the remaining barriers in the Union are lifted.

But this issue isn’t just about trade. It’s about people.

Chief finance officers tell us that overseas experience will be a vital skill for tomorrow’s finance leaders. That sentiment fits with ACCA’s qualification – an exportable asset. You can study it in the UK and take the qualification to the Czech Republic or other markets (and vice versa). In the EU, that mobility is made easier by free movement of people laws.

The UK benefits from being able to access talent from across Europe – employees bring with them market knowledge and close links with clients, customers and other stakeholders. This cultural connection is vital in a global business world.

The EU is also a vehicle for social mobility. ACCA is guilty of repeating the same messages around social mobility, but can you blame us? Since our infancy in 1904, social mobility has been the central principle of our qualification. Who you are and where you come from is no obstacle to the ACCA qualification.

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That social mobility principle also applies in the EU. Social mobility can include upward progression across Europe in finance and beyond, as well as within the UK. Cutting that continental option off and confining social mobility to within the UK’s shores is strangling that upward mobility.

This isn’t just about the current workforce, either.

Opportunities for Britain’s younger generation won’t be there if major employers have to leave the UK. Where will they get work – Europe? That won’t be so easy if the UK throws in the towel with the Union.

And if jobs and social mobility aren’t concerns for some, perhaps the numbers – more familiar territory for the accountancy profession – can paint a more convincing picture as to why a UK out of Europe is a bleak place.

The EU is the largest economy in world, worth £11 trillion, ahead of the US (£10.3 trillion) and China (£5.4 trillion).

NQ Magazine November 2013

EUROPE

Nearly 34 per cent of world trade originates in Europe, worth around £3.5 trillion annually. The EU is also the top trading partner for 80 countries.

UK companies benefit by £500m a year, while 50% of foreign direct investment to the UK comes from other EU member states. Over 40% of UK exports go to the EU and they are tariff-free. More than 300,000 UK companies operate in the EU. The EU-US trade deal is expected to generate $80bn (£67.7bn) worth of benefits for the EU and create 2m NQ Magazine November 2013

jobs. The EU-South Korea Free Trade Agreement saves EU exporters £1.35bn annually in tariffs.

Amid the emotional scaremongering about the EU’s threat to British culture, the figures paint a clear picture that big business, overseas investors, small business and UK employment stand to lose if we drop out of the EU. It’s difficult to ignore the arguments for staying in Europe.

The consequences of leaving will hit the UK hard.

Sarah Hathaway, head of ACCA UK

NQ 9

NQ OF THE YEAR

Time to nominate

Do you know someone who could be our next NQ of the Year?

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o how do you make your CV stand out from all the other hundreds, nay thousands, of other newly qualified accountants? Well, what about becoming the 2013 NQ of the Year, awarded each year by our sister publication PQ magazine?

It couldn’t be easier to nominate (yes you can nominate yourself!). All we need is 250 words on why your nominee deserves to be the NQ of the Year. All those short-listed will be invited to a fun-packed awards night at London’s famous Quaglino’s.

You may have left PQ magazine behind (or soon will be), but it can still give you a big boost up the career ladder. Remember, there are lots of other categories up for grabs, including Training Manager of the Year and Accounting Team of the Year.

Deadline for entries is Friday 13th December 2013.

How to enter: You can download an application form directly from our website – click on the ‘pqawards’ button at the top of the page. You can email your 250-word entry direct to awards@pqmagazine,com, or you can write to the editor at PQ magazine, 4th Floor, Central House, 142 Central Street, London EC1V 8AR.

Jonathan Simons

Meet our NQs of the Year 2013 JONATHAN SIMONS (JOINT WINNER) This Grant Thornton newly qualified recently won the ACCA prize for the highest global score in the Advanced & Assurance exam. It is at work where he really adds value, the attribute that won him this coveted prize. He wrote a national database covering professional scepticism and was ‘driving forward national audit methodology’.

Consistently taking on roles for colleagues at a higher level, he became a firm ‘champion’ for the firms audit software.

2013 SAAD MIR (JOINT WINNER) Saad Mir was a winner in waiting. He had already won the Deloitte Pakistan Trainee of the Year award in 2011 – and now has a NQ of the Year award to go with it! At only 22 years old he has extensive work experience and held a key financial role at the Big 4 firm.

2012 VICTORIA HITCHCOCK Victoria Hitchcock is not your usual ACA; instead of going to university she decided to leave school at the tender age of 16.

Soon after completing her GCSEs in 2005 she joined an accountancy firm as an AAT trainee, becoming a fullqualified member in 2008. She then began her ACA training and completed the qualification at the tender age of 22.

Victoria saw herself as an ethical accountant with a social conscious. While training for her ACA qualification she was involved with numerous charitable and voluntary projects, at both a national and local level. She served as a trustee for the British Youth Council, a national charity with a budget of over £1m. Her other volunteering activities centred on fundraising and event management for a small local charities in Bedford, as part for the Rotaract Club.

For six years now she has worked for George Hay chartered accountants.

2011 KHURRUM BEG CIMA-qualified Khurrum Beg worked for RBS, and despite his four-hour commute to work he took on the role of the division’s study co-ordinator, giving support to students studying across a range of accountancy qualifications. He also looked after the accounts of a family business, even working for them at weekends.

2010 DANNY TAYLOR Danny Taylor was our 2010 winner. He ran a football team and youth club, and worked as a management accountant.

He wasn’t bad at passing his exams, either. He scored 79% for P4 and 65% for P5. He finished off with 71% for TOPCIMA. PREVIOUS WINNERS 2009 Mike Nelson, Armstrong Watson 2008 Nathan Conduit, Sky 2007 Niki Riley, Blackpool City Council 2006 Kevin Wall, Kroll

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NQ Magazine November 2013

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ETHICAL BEHAVIOUR

Protect your CIMA launches a pioneering ethics tool to help organisations manage risk and protect the reputation of their brand

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lthough the old adage “all publicity is good publicity” may have been true in the past, it has become increasingly evident in the past few years, thanks to the global economic crisis and a change in public perception, that the financial value of a company can be directly linked to its brand value.

From multinational corporations such as Google and Starbucks lawfully (yet some say, amorally) avoiding tax, to the recent horsemeat scandal in multiple European countries, the reputation of an organisation with its consumers is now more important than ever.

In light of this, CIMA has created a new pioneering ethics tool to help guide people in understanding and complying with professional and ethical conduct in the workplace. CIMA and its members are committed to upholding and instilling the highest code of ethics possible in the corporate arena, and the institute believes that the introduction of this online 12

tool can guide ethical decision-making in today’s complex business environment.

Created with input from members globally, it takes the user through a series of challenges in areas such as conflict of interest, the supply chain, bribery and data protection. Its ultimate goal is to challenge users on their own perceptions of ethical actions and to gauge, via the use of seven real-life scenarios, whether their actions are in keeping with both regulatory law and CIMA’s Code of Ethics. After using the tool, people can reflect on their answers and ask themselves, “Did I do the right thing?”

Tanya Barman, CIMA’s Head of Ethics, said: “Ethical challenges are part of working life, and often there is no perfect answer. But if they are not dealt with appropriately, there may be severe consequences when they come to light – both for the individuals and for the companies they work for.

“Unfortunately it is still common for employees, be they NQ Magazine November 2013

ETHICAL BEHAVIOUR

r good name in finance or in other parts of the business, to face pressure to compromise their ethical standards, and the standards of their company.

It is vital to act ethically; to build long-term business success and avoid the shortcuts that can turn into tomorrow’s scandal.”

This reflects the findings of a recent Charted Global Management Accountant (CGMA) survey conducted earlier this year. The survey revealed that three quarters (76%) of respondents – finance professionals and CFOs from around the world – would be prepared to risk losing profit in the short term for the sake of protecting its reputation in the long term. Just 8% of those surveyed opined the opposite. Out of all the responses gathered, it emerged that 25% had suffered some type of reputational risk in their organisation. In the UK, this rose to a third (33%) – perhaps reflecting the number of recent NQ Magazine November 2013

cases across the banking and retail sectors.

The rise in social media in the past decade and the platform that this has given consumers has also significantly contributed to a sharpened awareness of reputation. Over half of the respondents (52%) advised that their organisation use feedback from sites such as Facebook and Twitter to help them anticipate and manage reputational risk. Barman said that the “widespread use of the internet and social media casts a harsher spotlight than before”, reflecting the fact that a single negative Tweet can cast a shadow over the reputation of a company.

These statistics underscore the importance of understanding ethical decision-making. Barman said: “All companies, wherever they operate and whatever their size, must increase their focus on the long-term, minimising risk and maximising opportunity. This is vital for robust performance management but also long-term corporate sustainability. After all, if there is something you’d rather the public didn’t know how will you cope when they do?

Transparency counters a ticking timebomb.”

The tool can be found at www.cimaglobal. com/ethicstool

NQ 13

CARBON ACCOUNTING

Sustainability, accounting, language and law

Steve Priddy outlines what he sees as an anomaly in the government’s approach to carbon accounting

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nglish, the global language of business and finance, sometimes offers us irreconcilable paradoxes. For many years I used to deliver workshops on finance for non-financial executives. We would regularly allude to the idea of ‘windfall’ gains. On many occasions I would ask my audience to tell me, if they could, what is the opposite of a windfall. To this day I have never discovered the correct word. It is another reminder that we are optimistically wired to see only the delight of an unexpected bonus rather than the misery of an unexpected deficiency.

It recently dawned on me that our legislators are doing something similar in their early, tentative attempts to move corporations towards carbon accounting. I have the privilege of being a member of the Technical Working Group advising the Climate Disclosure Standards Board, itself an offshoot of the Carbon Disclosure Project. Part of our work has been the establishment of a Climate Change Reporting Framework to help financial statement preparers and investors disclose their carbon impact. Readers of NQ may be aware that the UK government has introduced new regulations to make greenhouse gas (GHG) emissions reporting mandatory for quoted companies. The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations came into force on 1 October 2013. The regulations require the replacement of a business review with a strategic review, and a requirement for quoted companies to disclose their GHG emissions in their Directors’ Report or, if of strategic importance, in the Strategic Report.

What is telling in these new regulations is that the draftspeople responsible for the wording have omitted the opposite of GHG emissions, namely GHG sequestration or removal.

In my view this is unhelpful. Increasingly, entrepreneurs are entering the GHG removal space with a range of innovations and technologies from smart metering through to carbon capture and storage which, if deployed at scale, will result in absolute or relative reductions of GHG emissions.

Three random examples support my argument: 14

The Eff Box: “Effbox is a retrofit control device for minimising the energy consumption of industrial and commercial refrigeration and chiller plants. It controls the condenser fans intelligently according to ambient conditions and plant load; reducing overall power use at the compressor & condenser” (Eff Box website) .

Washing Machines in the Circular Economy: Ellen Macarthur’s charitable foundation of the same name demonstrates how by changing the business model of the industry from a purchase to a leasing arrangement it becomes possible for both the user and the manufacturer to supply high end machines with longer economic lives and mutually beneficial financial outcomes in terms of reduced cost for customers, and increased profit for manufacturers (Towards The Circular Economy: Economic and business rationale for an accelerated transition (2012)).

The London Array: The world’s largest offshore windfarm is now fully operational. Apart from generating renewable electricity for nearly half a million UK homes it will effectively remove 900,000 tonnes per annum of carbon dioxide emissions (The London Array website).

These examples represent the other side of the carbon economy. If GHG emissions represent current liabilities to the health of our planet, GHG removals point towards future assets in the transition to a cleaner, more sustainable future.

Pushing that argument towards an accounting conclusion, if we accept that GHG emissions must be taxed or capped and traded, then surely by the same logic those practices and technologies which lead to GHG removals should be financially rewarded.

Legislation versus self-regulation is always a controversial topic. Once in law in the UK, it may take a decade to reform it. The UK government’s insistence on the GHG emission liability and its overlooking of the GHG removal asset is, in my view, an unfortunate mistake.

Dr Steve Priddy is Director of of Research at the London School of Business and Finance (LSBF) NQ NQ Magazine November 2013

CARBON ACCOUNTING

NQ Magazine November 2013

15

THE AUDIT MARKET

Ten is the new five The final Competition Commission report on the state of the UK audit market has hit the streets. So who won?

C

ompetition in the UK statutory audit service is undoubted ‘restricted’, according to the Competition Commission. In its recently published final report, the CC said that the current market inhibits companies

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from switching auditors and, perhaps more worryingly, auditors focus on satisfying management rather than shareholder needs.

A package of remedies in response to the findings should improve the bargaining power of companies and encourage rivalry between audit firms. There are also new measurers to enhance the influence of the Audit Committee, and measures to promote audit quality and shareholder engagement in the audit process.

NQ Magazine November 2013

THE AUDIT MARKET

The CC’s main measures are: ● FTSE 350 companies must put their statutory audit engagement out to tender at least every 10 years. This differs from the guidance introduced by the Financial Reporting Council (FRC) in 2012, which encouraged companies to go to tender on a ‘comply or explain’ basis. No company will be able to delay beyond 10 years, and the CC believes that many companies would still benefit from going out to tender more frequently at every five years. If companies choose not to go out to tender this frequently, the Audit Committee will be required to report in which financial year it plans to put the audit engagement out to tender and why this is in the best interests of shareholders. ● The FRC’s Audit Quality Review (AQR) team should review every audit engagement in the FTSE 350 on average every five years. The Audit Committee should then report to shareholders on the findings of any AQR report concluded on the company’s audit engagement. ● A prohibition of Big 4 only clauses in loan agreements (namely, clauses that limit a company’s choice of auditor to be preselected list or category), although it will be possible to specify that any auditor should satisfy objective criteria. ● There must be a shareholders’ vote at the AGM on whether Audit Committee Reports in company annual reports are satisfactory. ● Measures to strengthen the accountability of the external auditor to the Audit Committee and reduce the influence of management, including a stipulation that only the Audit Committee is permitted to negotiate audit fees and influence the scope of audit work, initiate tender processes, make recommendations for appointment of auditors and authorise the external audit firm to carry out non-audit services.

BDO’S RESPONSE: SENIOR AUDIT PARTNER JAMES ROBERTS “We are pleased that the CC has confirmed its findings that the audit market is fundamentally flawed and has largely confirmed the provisional decision on remedies it published in July.

“The final report does not, of course, reflect the five year tendering proposals in the provisional remedies, instead opting for a maximum 10-year period.

But while some may regard the outcome of the investigation as being less radical than many would have hoped, the real importance of the investigation has been to shine a spotlight on a previously dark recess of corporate governance. That’s the real victory here.”

KPMG’S RESPONSE: UK CHAIRMAN OF KPMG SIMON COLLINS “We welcome the CC inquiry, which has brought to a head the long running arguments and discussions over the structure of the UK audit market. We are already seeing a shift in the audit market as large companies seek to implement the FRC’s 10 year ‘comply or explain’ tendering process, announced last year, in support of the overarching principle of increasing investor engagement in corporate stewardship, including the appointment of auditors.”

● The FRC should amend its articles of association to include an object to have due regard to competition Chairman of the Audit Market Investigation group, Laura Carstensen, said: “Our measures will deliver lasting change in a market where currently a major company putting its audit out to tender remains unusual enough to be a news story.”

Instead, this business will be open to competition on a regular basis. That means putting to an end long unchallenged tenures, which can reduce the appearance of objectivity and scepticism essential to an effect audit, and open up the process to greater transparency and scrutiny.

Carstensen hope the measures will also open the door to other auditors who will now have the chance to compete regularly for business and show they are up to the mark.

She said that the CC had listened before deciding that 10 years was the appropriate backstop period for mandating that the audit engagement be put out to tender.

CBI’S RESPONSE: CHIEF POLICY DIRECTOR KATJA HALL “We have argued that any reform to the audit market should seek to improve quality, independence and choice of audit. A 10 year tendering framework will prompt companies to test the market and consider a new auditor – it’s a sensible shift from the initial five-year proposal.

After a long period of uncertainty, companies now need clarity on how and when the proposed remedies will be implemented.”

NQ

NQ Magazine November 2013

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ow you are qualified how will you keep up your professional development?

You have a responsibility to not just keep yourself up-to-date technically, but to also keep developing your other skills. However, it can be tricky to find the time to attend training, especially if you do not live or work close to a training centre.

There are many training options out there and remote or distance learning, particularly online, is a growth business. But what makes online training good? How do you select from the thousands of YouTube videos on accountancy, and hundreds of webinar offers, often free, and focus on the ones which will really make a difference to your career?

Let’s start with what makes good online training.

This really depends on what you are looking for. If you want to tick a box, or just absorb some knowledge, then webinars are not a bad option; there are many cheap or free ones out there that cover a wide range of topics. The downside is that all you are really doing is listening to someone talk. Better webinars encourage some interactivity such as the opportunity to ask questions or use polls, these can help you stay engaged, but the communication is still pretty one-sided.

If I were to ask you for how much of a one-hour webinar you were actually concentrating for, the real answer would be quite low. A quick review of webinar stats shows that attendees are only engaged with the software for about 50% of the time. That is not to say one is not still listening, but multi-tasking significantly reduces our ability to really absorb and process information.

So if you really want to learn something online what are your options? Some of you may be familiar with Live Online from Kaplan’s exam training, and we use the same technology but approach things a little differently.

NQ Magazine November 2013

The easiest way to describe Professional Development Live Online is as a virtual classroom. In the sessions a small group of participants (usually about 12) remotely attend an interactive and live training session, just like a face-to-face session. There are many similarities with a face-toface session: microphones are open so there is free discussion within the group; the software allows the trainer to pass control to any of the participants who can then screen share, etc; and the sessions are designed around discussions and exercises.

At Kaplan we understand the importance of designing each learning

solution carefully. Our trainers are qualified, certified online facilitators and are experienced in designing training that achieves the learning outcomes within a virtual environment.

Special offer: We are currently offering four sessions for £450+VAT or 10 sessions for £1,000+VAT. Find out more here (please use link below)

http://financial.kaplan. co.uk/trainingandquals/ professionaldevelopment/ pages/default.aspx?utm_ source=NQMagazine&utm_ medium=article&utm_ campaign=LiveOnlineAdNQ NQ 19

ENTREPRENEURSHIP

Your time is now!

The Accountant Entrepreneur’s time has come, says LSBF’s Aaron Etingen

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ast week I took part in an online debate, organised by The Guardian, which centred on the benefits of investments for small businesses. Alongside others who had started their own businesses – in industries as diverse as law, telecommunications, accounting and retail – I discussed company growth, the double-edged sword of equity investment, and entrepreneurship.

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I made the point that we need to give entrepreneurs more credit – and more encouragement – in the UK. In my opinion, they should attract as much attention and as many column inches as footballers or rock stars. And, more importantly, they should attract much more assistance (both in terms of finance and advice), particularly as the government rightly highlights the integral role that SMEs play in

economic recovery.

The good news for you is this: you already have a massive advantage.

You cannot overestimate the headstart in business that being a qualified accountant gives you. Whether setting up your own organisation, or contributing to the growth of an employer, you’re already halfway to success, because you know how to make the numbers add up. With your NQ Magazine November 2013

ENTREPRENEURSHIP

Accountant Julie Deane worked for Deloitte before she set up the highly successful Cambridge Satchel Company

sound knowledge of finance, business analysis and risk, you possess the tools required to ensure a firm runs efficiently and cost-effectively. You stand ready to make well-informed business decisions and form long-term strategies, making you a vital cog – or the whole wheel – of an organisation.

Now all you need is an outlet, a project that you can apply your insight to. And there are countless options available to you on that score.

The need for accountants is universal. That need is as ancient as civilization itself, with evidence of basic accounting practices found amongst the remains of Mesopotamian society, and hieroglyphs depicting accounting adorning the walls of early Egyptian temples.

Of course, those practices have moved on slightly, but the everpresent demand for high standards of accounting has never been greater – or more diverse. From NQ Magazine November 2013

shipwreck salvaging to microwaveable cushions, and video game testing to chicken rentals, the dizzying range of companies out there is now stranger than fiction. And all these companies, assuming they want to develop or last any time at all, must have accountants.

My own business idea wasn’t as outlandish as some – it was simply to teach others the invaluable lessons that studying for my ACCA had taught me. I began this venture in 2003, and I am proud to say that London School of Business & Finance (LSBF) is now one of the foremost providers of business education in the UK, with a growing international presence and students from all over the world.

This has required years of hard work, but I firmly believe that my ACCA training was pivotal in helping me get the business started. Not only did it give me a solid base of financial knowledge, but also the confidence to take the leap, because I knew I

had the requisite skills to make the venture profitable and sustainable.

Of course, studying ACCA gave me considerable inside knowledge – I was in the perfect position to package together what ACCA students want and need – but the skills it supplies fuel entrepreneurship in any industry or field.

Not everyone needs to build their own business, but as a newly qualified accountant, you will certainly be better placed than most. And with the UK economic recovery gathering pace, now is the ideal time to take that leap and put into practice everything you’ve learnt.

So go on, make it happen! If anyone can make a new business work, it’s you!

• Aaron Etingen is Founder & Executive Chairman of the London School of Business & Finance NQ 21

ICAEW REPORT

When will the audit report be replaced by an assurance one?

The assurance Robert Hodgkinson explains how new ICAEW proposals could impact on the audit report

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ne day the audit report could be replaced with a single assurance report covering the whole of the annual report and accounts. That’s the conclusion of a new ICAEW Audit and Assurance Faculty paper, called ‘The Journey: Assuring all of the Annual Report? ’ The current audit report covers the financial statements.

Auditors only have a responsibility to consider the contents 22

of the rest of the annual report for consistency with the financial statements. That certainly doesn’t give the same level of comfort over the information in the front half of the document as the audit opinion gives over the back half.

Audit has evolved over time and been shaped by the history of company reporting. Once upon a time companies had to strain every sinew just to gather together the NQ Magazine November 2013

ICAEW REPORT

We need courage to do it!

journey information they needed to report on an annual basis. Now computers allow a business to gather internal information throughout the year, and the internet allows a constant stream of information to be published. Investors can draw on vast seas of data, but only a small part of that data is covered by the audit.

Common misconceptions compound this problem. Most casual readers of annual reports are likely to assume that the audit report covers far more than just the financial statements. For example, FTSE 100 firms are now required to disclose their carbon emissions in the annual report.

Greenhouse gas numbers are not mentioned in the financial NQ Magazine November 2013

statements, so no consistency check will provide assurance over this disclosure. If it turns out that a big company has made a significant error in its carbon reporting disclose, however, one of the first questions that is likely to be asked is: “Where were the auditors?”

Chartered accountants can apply the toolkit used for audit to add assurance to other business information, but there are challenges. How do you find evidence to support an assessment of a prediction about the future? What about subjective content, such as the CEO’s opinion that her team is the best in the world? Do chartered accountants really have the expertise to provide assurance over specialist areas such as oil and gas reserves? Will investors and shareholders benefit from assurance over everything?

We can already see demand for assurance over some elements of the annual report. Two case studies are mentioned in ‘The journey’, one involving KPIs at Channel 4, with the other involving sustainability reporting at BP. In each case the company, looking to give investors comfort, took on a separate assurance report to cover some business information that was of specific interest.

All of the technical challenges can be addressed, given time, and the ICAEW Narrative Assurance Working Group is keen to start doing so. Our paper sets out a potential journey from the current ad hoc assurance approach to assurance over the whole of the front half of the annual report. This could then be combined with the audit to create a single engagement covering the whole document.

A theoretical solution, developed on a drawing board in a back office and parachuted into the field, is unlikely to be really useful. Best practice will need to emerge over time, from the experience of those carrying out these engagements. After all, that is how the first audit standards were developed.

Financial reporting is changing, and audit and assurance are already changing with it. Under the UK Corporate Governance Code directors are now required to state that “they consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy”.

Could this suggest the wording for an assurance opinion over the annual report and accounts, taken as a whole?

Without demand from investors, however, there is no market for additional assurance. Just because it is possible to imagine this kind of assurance reporting doesn’t mean it is inevitable, or even desirable. Chartered accountants need to listen to companies and investors, and learn how we can best help meet their needs. The future is another NQ country, and we will do things differently there.

Robert Hodgkinson, ICAEW executive director 23

Your jobs board I need to find pqjobs.co.uk now!

PQ jobs pqjobs.co.uk 24

NQ Magazine Spring 2013