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Prem Sikka Honesty is the best approach for the UK’s auditors
PREM SIKKA
Audit sector needs a more honest approach
The auditing industry has long used the ‘expectations gap’ as a political tool to dilute auditor responsibilities, especially for detecting and reporting fraud. It consigns challengers to negative spaces with the claim that intelligent people somehow don’t understand the purpose of an audit.
Auditor duties are clear enough. In the case of Fomento (Sterling Area) Ltd. v Selsdon Fountain Pen Co Ltd [1958] 1 All ER11 at 23, judges said that an auditor’s “task is to take care to see that errors are not made, be they errors of computation, or errors of omission or commission, or downright untruths. To perform his task properly, he must come to it with an inquiring mind – not suspicious of dishonestly, I agree – but suspecting that someone may have made a mistake somewhere and that a check must be made to ensure that there has been none.”
In the case of Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150, the High Court awarded damages against auditors for failure to detect and report fraud. The judge said the auditor “breaches of duty included a failure to exercise proper scepticism which would have led to detection and prevention of fraud including representations and assumptions made by management”. On 28 August 2020, the Court of Appeal confirmed the judgment about auditor duties but reduced the damages from £29.8m to £20.8m for contributory negligence.
Rather than mocking people for expecting robust audits, the audit industry needs to put its house in order and deliver meaningful audits.
Prem Sikka is Professor of Accounting at the University of Sheffield
Taxwatch
Passing on the tax
Google plans to pass on the entire cost of a new UK 2% digital services tax to advertisers. It has written to its clients to tell them that from 1 November they will be paying a new 2% charge on their adverts served in the UK. Where the charge is higher – like in Austria and Turkey – the increase in charge will reflect the tax (in these cases 5%). Agencies have told Campaign magazine that the 2% UK levy will apply to media spend on Google Ads, but will not
Time for professionally qualified tax advisors?
All tax advisers should be professionally qualified, says the Chartered Institute of Taxation.
It has given a cautious welcome to a government proposal for an ultimate legal requirement for anyone who wants to provide tax advice on a commercial basis to belong to a recognised professional body. There is another alternative on the table – a new government regulator of tax advisers – but the CIOT says this would be costly and
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Robin Hood Energy (RHE) is shutting up shop with the loss of 230 jobs. This is despite the millions of pounds pumped into the venue by Nottingham City Council.
British Gas owner Centrica is taking over the customer base of thousands of homes (112,000) and businesses (2,600).
It has been suggested that the council has lost up to £38 million on the venture. The true lost will become clearer when the transfer of customers to British Gas is done.
RHE was set up in 2015 with the idea of help tackle fuel poverty, with the additional claim of being the apply to spend on DV360 Google’s demand-side platform, where programmatic ads are bought via an online auction. Amazon said it too would be passing on the cost of the tax to its marketplace sellers, and Facebook and Microsoft are expected to follow suit. eBay have bucked the trend, saying they will absorb the tax rather than pass the cost on to its buyers and sellers.
Pap‘Household tax’ mooted
The TV licence fee could be replaced by a compulsory
ineffective.
HMRC is calling for evidence on options to raise standards in the market for tax advice to benefit taxpayers and to better protect the public purse.
CIOT supports the idea that the work of professional bodies (like itself) is properly recognised, and
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Auditor Grant Thornton explained that RHE had lost money every year in its existence, and was struggling to find new customers, and had become dependent on council monies. British Gas has said it is ‘household tax’ that would mean richer people pay more, says the outgoing director-general at the BBC, Lord Hall. He believes more progressive alternatives to the TV licence have to be looked at. Collection of the licence and tracking down evaders would be streamlined if the tax was collected with council tax (as used in Germany). The current set-up is guaranteed until 2027, but the government believes there is a need for a fee that works in a digital world.
so there should be a legal requirement for those who provide tax advice on a commercial basis to belong to a recognised professional body.
The CIOT’s John Cullinane, admitted that there is a risk of excessive disruption to the system if agents and advisers who are not members of a recognised professional body are outlawed overnight. He went on: “We suggest a transitional period –which might involve a possible escalating level of requirements common to professional body members being applied to this population – to allow unaffiliated agents to adapt.”
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230 jobs go as Robin Hood Energy collapses
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buying the customer base, but not the rest of the company.
Following the launch of Robin Hood Energy, Bristol City Council launched its own venture. Bristol Energy went up for sale in June, after the council invested some
£35m into the company.
Where to tax avoiders live?
Towns commonly associated with city workers have the biggest concentration of people who admit to tax avoidance. A study by UHY Hacker Young found Windsor leads the UK for the highest concentration of ‘avoiders’. In the Berkshire town there were 23 disclosures of unpaid tax per 100,000 population last year. The UK average is seven disclosures per 100,000 people. Affluent towns in the Home Counties dominate the Top 20 areas for disclosures.
ICAEW forced to offer early resits
ICAEW was forced to offer a resit to ‘a small number of students’ who had their Corporate Reporting exam sitting disrupted by technical errors.
Some advanced level students have expressed surprise that the ICAEW made the concession without making a public announcement. One twitter account holder, ‘Aug20 CR victim’, asked: “Where is the transparency?”
The fear is some students who were affected have not been offered the resit option.
Disrupted students were given a resit in mid-September. It was up to students to decide whether they resat the exam, based on how they felt they performed with the reduced time. However, if disrupted students decided to resit they will be awarded the highest mark out of new Corporate Reporting paper the two Corporate Reporting exam after they experienced technical attempts. Both their exams will be issues in exam centres which marked. meant they couldn’t sit or complete
An ICAEW spokesperson said: the assessment. We have contacted "We’ve offered a small number of these students directly and we students the opportunity to sit a apologise for any distress caused.”
Kaplan centres reopening
Kaplan has said from September it will be running its normal array of computer-based exams, including ICAEW certificate, ACCA OnDemand CBEs, and CIMA, and it will continue to run AAT.
Capacities are still reduced due to social distancing measures, but Kaplan is hosting as many exam sessions as possible to keep PQs progressing in the coming months.
When it comes to classroom courses, Kaplan said student safety is a priority. “With reduced class sizes and extra social distancing measures we’re able to safely run selected ACCA, CIMA and AAT courses from many of our training locations for new courses starting from 7 September,” it said.
For CBEs, Kaplan’s primary focus has been supporting the needs of its AAT students who did not have a remote proctoring solution to be able to sit exams.
Initially opening eight centres in July, it is now successfully running computer-based exams across all of its normal CBE locations (with the exception of Grimsby and Sheffield where students are advised to use the Hull and Leeds centres).
