It may seem obvious that auditors sell audit opinions. But that’s like saying top restaurants only sell calories.

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I was having an interesting discussion with a group of students on Friday about a previous blog entry concerning “truth and fairness”.

It’s important to remember that an auditor does not make an absolute promise of accuracy.

The existence of audit risk means that a competent auditor will occasionally issue an audit opinion that proves to be inappropriate; most frequently because an unqualified opinion has been given when a qualified opinion would have been more appropriate.

We stake our reputation as a profession on perceived failures being very rare.  This means that we need to make sure we’re using tools that are up to the task.

In order to state whether financial statements give a true and fair view, it is necessary to have a system of GAAP that adequately defines truth and fairness.  It appears that the spectacular failure of Lehman Brothers in the USA happened as a result of window dressing financial statements, but which complied with US GAAP.

In a highly globalised market for audit services, perhaps we need to more explicitly state true and fair as true and fair (EU) and true and fair (USA)?  This is attempted already within ISA 700 by stating “..true and fair view in accordance with…[insert system of GAAP]”.

However, reputational damage happens to the profession globally as a result of perceived weaknesses in one nation’s system of GAAP.

Maybe we need to amend the wording of the audit opinion to make this clearer?

Do you ever feel tired at work? If so, then maybe you should…

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…wear a tie.

Japan is famous for the long hours that some of their office workers undertake but there is now an invention that will maybe ease things a little bit for hardworking office staff.

A new tie called “Nemuri Tie” is now on sale in Japan.

Nemuri Tie means pillow tie in Japanese and if the advertising is anything to go by it will enable hard pressed office workers to grab a quick sleep at their desk.

It’s a relatively simple design in that it’s a normal looking tie but it’s got an inflatable pillow in it which can be blown up to provide a handy place to rest your head when you fancy a nap.

It can be inflated when the user is wearing it so there’s no need to keep on taking your tie off and putting it back on every time you fancy a sleep.

The Sleep Tie is currently on sale for just under £20.

It’s not clear whether the tie is stain proof for anyone that dribbles in their sleep.

Look on the bright side. At least it smells nice…

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Have you ever dropped a cup of coffee at work? What about spilling a glass of water?

Maybe a more interesting question to ask a forklift truck driver that (currently) works for the Kerry Logistics in Australia is “have you ever dropped a container full of 462 cases of a customer’s wine that were worth £664,000 and all the bottles were smashed?”

Unfortunately for this unlucky forklift truck driver the answer is yes.

The container held 2010 Mollydooker Velvet Glove Shiraz bottles of wine produced by winemaker Sparky Marquis which sell for £122 each.

Mr Marquis told reporters that he was “gut wrenched” that the wine bottles had been smashed. The container held one third of his winery’s annual production and was destined for delivery to the United States.

There are two important business lessons to be learnt from this.

Firstly, always make sure that valuable items are insured. Sensibly the wine was insured so the winemaker won’t be out of pocket.

Secondly, there’s no harm in having a sense of humour.

Mr Marquis was quoted as saying that when the logistics company opened up the container “they said it was like a murder scene.” With a touch of classic Australian humour he added “but it smelled phenomenal”

Author Robert Louis Stevenson once wrote “Wine is bottled poetry”.

I can imagine the words that came out of the forklift driver’s mouth when the container was dropped were anything but poetry.

He could beat vampires but he couldn’t beat the tax man…

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It doesn’t matter if you’re a famous film star or not. If you don’t pay your taxes you could get into a lot of trouble.

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Wesley Snipes, the famous star of films such as the Blade Trilogy and White Men Can’t Jump hasn’t starred in any films during the last 3 years.

And the reason why?

Well, the reason is that he’s been in jail since 2010 after not paying tax on $37 million of earnings.

Despite being able to defeat terrorists and vampires in his films he was unable to beat the US tax authorities and was convicted of federal tax evasion. The photo of Mr Snipes above is his mug shot courtesy of the United States Marshals Service.

For the last 3 years he has had to swap film premieres and glamorous parties for the confinement of a US prison cell.

It’s an interesting point but people often get the terms “tax evasion” and “tax avoidance” confused and think they are the same thing.

In fact the two phrases mean different things and in the UK for example tax evasion is where a person evades paying tax by illegal ways such as non declaration of income. Tax avoidance on the other hand is where a person minimises his or her tax liability in a legal way (whether or not it is in an ethical way though is a different matter altogether!).

Mr Snipes was convicted of tax evasion back in 2010 and has just been released from prison although he remains under house arrest until July when he will be free to start his film career again.

One thing he should probably do first though before he starts his film career again is to find a good tax accountant to make sure that he settles all his tax liabilities correctly on any of his future earnings and doesn’t evade any tax.

When is a foot not a foot?

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Fast food is big business but for Subway, the world’s largest restaurant chain with 38,000 restaurants in 100 countries, something isn’t quite big enough.

Subway is famous for their “Footlong” sandwiches whose name implies should be a foot long (12 inches / 30 cm).

Their “Footlong” has been the backbone of their advertising for a number of years and any company’s advertising should be accurate and shouldn’t be misleading.

Well up step Australian Subway customer Matt Corby who purchased a Footlong and measured it before eating it. He then took a photo and posted it on Subway’s Facebook page with the request “subway pls respond”.

The photo is shown above and as can clearly be seen the Footlong isn’t in fact a foot but is 1 inch short at 11 inches.

Was this evidence that Subway had been deliberately misleading their customers by calling it a Footlong when it should have been called an “11 inch long”?

Does the extra inch matter?

Well, things took off quickly on Facebook and there were soon more than 100,000 likes and over 5,000 comments to Matt’s post. The shock discovery that the Footlong was an inch short of bread soon spread around the world.

Subway quickly supplied the following statement to the Chicago Tribune newspaper:

“We have redoubled our efforts to ensure consistency and correct length in every sandwich we serve. Our commitment remains steadfast to ensure that every Subway Footlong sandwich is 12 inches at each location worldwide.”

Is this going to be a good enough solution to the problem of the missing inch of bread?

Unfortunately for Subway within hours a number of lawsuits were filed in America in connection with the missing inch.

One of the lawsuits filed by Mr Buren from Chicago for example is claiming that the Footlong sandwich product is false advertising and as a result he is suing the company for $5 million.

Now, I’m an accountant and not a lawyer but if he’s successful the $5 million will buy an awful lot of 1 inch pieces of bread…

Selling a hotel that you don’t own – what could possibly go wrong?

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One of the general duties of company directors is to exercise reasonable skill, care and diligence.

Three directors by the name of Robin Reichelt, Stephen Nathan and John Gibbs were clearly not exercising any of these attributes though.

Whilst on the face of it their plan to reclaim VAT on the purchase of a hotel sounded ok, in reality there were a number of things which didn’t quite work or to put it more bluntly, a couple of things which were completely illegal.

The background to the situation was that one of their group companies sold a lease to a central London hotel to another of their group companies.

The company that “sold” the hotel went into liquidation after selling it and the company that bought the hotel then submitted a claim for a refund of over £200,000 of related VAT.

The whole thing was completely illegal however as not only did they not pay the VAT in the first place (so had nothing to claim back) but the hotel didn’t even belong to the group company that had claimed it had sold it!

So, in summary they claimed to have sold a hotel that they didn’t even own to another group company and claimed back VAT that had never been paid. What could possibly go wrong??

Well, they will have several years in jail to contemplate what went wrong and to plan their next great money making idea…

What type of fine do you get for cheating?

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McLaren are one of the top Formula One motor racing teams. They are not only experts at ensuring cars are driven fast around racing circuits but they are also experts at ensuring that £34m fines are tax deductible…

Back in 2007 McLaren were fined £34 million pounds because it “had possessed and in some way used proprietary information belonging to Ferrari, and had thereby breached the rules of the FIA’s International Sporting Code to which McLaren was contractually bound”.

Or to put it another way, they had cheated by photocopying an 800 page technical document belonging to Ferrari that detailed the designs of the 2007 Ferrari cars.

Formula One’s governing body, the Federation Internationale de L’Automobile (FIA), weren’t happy about McLaren taking this approach and ordered McLaren to pay a £34m fine which they duly did.

The interesting thing though is that in their UK company tax return McLaren claimed a tax deduction for the fine.

In the UK as well as most countries around the world, fines are not tax deductible. This means that the expense does not reduce the level of profits on which tax is calculated.

McLaren argued though that this particular fine was tax deductible (i.e. the expense could be used to reduce the level of profits on which tax was applied). They said that it wasn’t a statutory fine for breaking the law (which would be non tax deductible) but instead was a fine imposed by their governing body and as such was a genuine business expense incurred in their trade which should be tax deductible.

The UK tax authorities understandably didn’t agree with this viewpoint and the argument went to an independent tax tribunal who surprisingly agreed with McLaren and said that the fine was tax deductible.

A surprising decision and there’s no truth in the rumour that the head of the independent tax tribunal is currently driving around in a McLaren…

Is this the best or worst resignation letter ever?

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Here’s an interesting question. If you resign from your job, what should your resignation letter look like?

Should it be simple, brief and straight to the point or should it be sent to the whole office and include various accusations about your boss including a certain, how shall we say it but, adult liaison in a meeting room with a colleague?

Well if your name is Kieran Allen then the second option appears to be the correct answer.

Mr Allen used to work for MEC, one of the leading media agencies in London. Yesterday he resigned and his resignation letter contains some pretty juicy accusations.

Now whilst this isn’t the first resignation letter that contains some juicy accusations it is the first resignation letter with juicy accusations that has gone viral on the Internet and as a result has been seen by millions around the world.

To avoid a knock at the door from some lawyers, I’ll keep the manager’s name anonymous (although if anyone wants to see the full letter then a simple search on the Internet will reveal it!) but Mr Allen claimed that he left MEC after 2 1/2 years of “loyal service” because of the treatment he received from his manager.

Mr Allen claimed he was forced to take time off work due to stress after being overloaded with work by the manager and he claimed the manager made him feel like a complete outsider on his return.

We’ve all been overloaded with work at some stage or other so this is initial claim isn’t that exciting.

The more interesting accusations though were when he claimed in his letter that the manager “regularly made sexist and other bigoted remarks” and “took a female colleague out for a drink on the day he interviewed her, then took her back to the MEC offices that night and had sexual relations with her in the meeting room on the 3rd floor”.

Mr Allen then went on to say that all of these allegations were “common knowledge throughout the team”.

Some people will applaud Mr Allen for his resignation letter whilst others (no doubt including his manager) will say that he should have kept his issues to himself.

Either way there are some serious lessons to be learnt from all of this. For example, it’s probably advisable to make sure you knock on the door of the meeting room on the 3rd floor at MEC before opening it…

Should this former Deloitte accountant become a doctor?

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One of the key attributes of finance and business people should be ethical behaviour. Note that I say “should be” as not everyone seems to agree with this approach.

Former Deloitte UK employee Nahied Kabir seems to have a slightly different view of what is acceptable in terms of ethical behavior.

Here’s a quick multiple choice question for you to see how ethical you are compared to Mr. Kabir.

Question – You’re struggling a bit with your professional exams and your employer’s policy is that if you don’t pass your exam within 2 attempts you’ll lose your job. Do you:

a) Focus your efforts on passing your exams. Or,

b) Focus your efforts on forging two doctor’s certificate.

Now, in my opinion (and hopefully in your opinion as well!) the correct answer is (b) (a).

Alas for former Deloitte employee Mr. Kabir he chose option (b).

In summary, Mr. Kabir failed an exam twice and at a meeting to discuss terminating his employment contract with Deloitte he produced a forged doctor’s note.

Deloitte let him sit the exam again and he passed this time. He then had a further 3 exams to sit and you guessed it he failed all 3.

At the next meeting to discuss things with Deloitte he claimed that he failed due to the ill health of his mother. He then produced a second forged doctor’s note from another doctor claiming his mother was suffering from ill health.

Proving that as well as being a pretty rubbish accountant he was also pretty bad at forging letters, the forged letter from the second doctor was exactly the same as the forged letter from the first doctor with the exception of only 4 words!

It’s probably no surprise to you that Mr. Kabir is now no longer working with Deloitte and the accounting body he was sitting his exams with (ICAEW) have published their report on the disciplinary action they took against him.

Again, it’s probably no surprise that he was “declared unfit to become a member of ICAEW”.

There’s no news yet whether Mr. Kabir is planning a successful career as a bank note forger…

Will we ever see true global accounting rules?

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Anyone that works within the international arena of accounting will be aware of the discussions over the years about the convergence between IFRS (International Financial Reporting Standards) and US GAAP (US Generally Accepted Accounting Principles).

Whilst there are similarities between the two sets of accounting rules, importantly there are also differences.

The majority of the G20 (in effect, the 20 largest economies in the world) already use IFRS but over in America they are pretty attached to the US GAAP rules.

The IASB (International Accounting Standards Board) has been working closely over the years with its US counterpart, the FASB (Financial Accounting Standards Board) to minimise the difference between the two sets of rules.

Following an announcement last week by the US Securities and Exchange Commission which failed to include a clear action plan about adopting international accounting rules, it looks like the IFRS supporters may be losing a bit of patience.

Michael Prada, the chairman of the trustees that oversee the IASB was critical of this lack of an action plan and was quoted as saying:

“While recognising the right of the SEC to determine the method and timing for incorporation of IFRSs in the United States, we regret that the staff report is not accompanied by a recommended action plan for the SEC. Given the achievements of the convergence programme inspired by repeated calls of the G20 for global accounting standards, a clear action plan would be welcome.

For the benefit of both US and international stakeholders, the Trustees look forward to the SEC resolving the continued uncertainty regarding the US’s commitment to global accounting standards.”

Or to put it in less diplomatic wording, “for goodness sake can you please get on with it”.

In summary it looks like there’s not going to be true global accounting standards in the immediate future.

One thing for sure though is that IFRSs seemed to be going from strength to strength. In the words of Hans Hoogervorst, the Chairman of the IASB:

“IFRSs have already achieved critical mass as international standards and with more than two thirds of the G20 now on board, the momentum behind them becoming global accounting standards is irreversible. We are confident in our mission to achieve a single set of high quality global accounting standards and we continue to work to serve investors and other users of IFRSs across the world.”

So all that hard work in learning the various IFRSs in your professional exams looks like it will be worth it.

ACCA or CIMA – who’s in the driving seat?

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ACCA and CIMA are both great professional qualifications which are respected and admired around the world. I came across a surprising fact recently though which I bet the majority of ACCA and CIMA members and students never knew.

Nissan Motor Co. Ltd is one of the world’s leading car manufacturers and a couple of months ago over in Japan they launched a new car.

Quoting some of Nissan’s promotional material about the car, some of the key features include:

– Styling expressing a premium class image

– Hybrid system with optimally balanced driving and environmental performance

– Spacious and comfortable rear seats

As the picture shows it’s a handsome looking car and I’d personally be more than happy to drive it around.

What about Helen Brand (the Chief Executive of ACCA) or Charles Tilley (the Chief Executive of CIMA) though?

Do you think they would be happy to be seen driving the car?

Well, my guess is that one of them will be happier than the other as the name of the new Nissan car is none other than the Nissan Cima.

Yes, that’s right – one of the leading car manufacturers in the world has just launched the Cima car.

Nissan has not produced a car aimed at accountants in Japan but instead the Cima car name is derived from the Spanish for “summit”.

It raises an interesting question though – does this mean that there’s no need to study for your exams to become a CIMA member as all you’ll need to do is to buy a Cima car and then you can add Cima (driver) to your CV?

Oh, and one final thing but I don’t think there’s any truth to the rumours that ACCA are currently in discussions with Toyota to produce a new car called the Toyota Acca.

Good and bad news for PwC…

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If you work for one of the top firms of accountants in the world and you’re an audit partner it must be [a refreshing change/really annoying – delete as appropriate] when you yourself are audited.

Well in the UK this has just happened for some of the major accounting companies.

The Professional Oversight Board is one of the bodies that works towards improving the quality of audit work and audit firms. They have just published their 2011/12 inspection reports and there were some interesting findings.

Their public report on their inspection of PwC for example commented on a number of items including PwC’s “audit transformation programme”.

The POB said that

“During the year, the firm launched its Audit Transformation programme, the stated objective of which is to enable audit teams to focus on key judgment areas, standardise the firm’s approach and improve audit quality. However, the guides issued to date under the programme appear to focus on improving audit efficiency by reducing audit hours.”

The Report then went on to say that

“The programme also includes increasing the use of the firm’s off-shoring capability, now through two overseas centres, one in India and the other in Poland. Work performed in 2011 by these centres accounted for about 4% of the firm’s core audit hours and is expected to increase to 6% in 2012.”

The POB work was quite thorough as they also looked at PwC’s “staff performance evaluation” forms where interestingly they found that “approximately a quarter of the appraisal forms and objectives for the following year were signed off after the due date.”

The good news for PwC was that the vast majority of the 14 audits that were examined by the POB were either performed to a “good standard” or an “acceptable overall standard”.

Unfortunately for them though there was one audit which was singled out as requiring “significant improvement”.

In case any of you are interested in reading the reports on PwC and some of the other major accounting companies, they can all be found here.

Somehow though I don’t think the partner responsible for the “significant improvement required audit” will be showing all his friends a copy of the report.

It doesn’t matter how good your answer is, if the markers can’t……

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It doesn’t matter how good your answer is, if the markers can’t read your handwriting you won’t get the marks. It’s as simple as that.

As well as having the requisite technical knowledge students must have the necessary exam technique to ensure a pass. One of the more common complaints from markers is that sometimes the handwriting on exam scripts is so bad that they simply cannot read the answers. If they cannot read the answers then they cannot give you any marks.

Whilst it’s probably a bit late now to radically change your handwriting style, there are some simple steps you can take to make your script more readable. An easy one is to leave a gap between each paragraph. This breaks up the text on the page so that it doesn’t look too cluttered and will be easier for the marker to read.

Another point is to practice writing answers under exam conditions. Some of the papers are “written style” papers rather than a numerical one so you must get used to writing under exam conditions. The last time you probably wrote for 3 hours was at the last exam session! Everybody tends to use computers more and more these days and it’s relatively unusual to be writing significant amounts by hand. Practice writing answers under exam conditions and then give your answer to a friend or family member and see if they can understand it!

This was brought home to me the other day when I was talking to my niece. When I mentioned that as a child I used to write notes to fellow students and pass them around the class, she looked at me as though I was a dinosaur. Nowadays they don’t handwrite them but instead send phone text messages to their fellow students. Writing by hand will soon become a thing of the past…

Should a PwC partner blame the junior staff?

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If something goes wrong on an audit, whose fault is it? Is it the partner’s fault or the junior member of staff’s fault?

Over in Australia, the Sydney Morning Herald newspaper has provided some interesting commentary on a legal case that is currently taking place concerning an audit undertaken by PricewaterhouseCoopers (PwC).

The background to the case is that shareholders in a company called Centro are claiming that PwC misled and deceived them by failing to properly disclose that the Centro group had billions of dollars of short-term debt that needed to be refinanced in 2006 – 2007.

The lead PwC partner on the audit, a gentleman by the name of Stephen Cougle, is facing a bit of a grilling in court at the moment.

Under cross-examination yesterday in the Australian Federal Court, Mr Cougle denied trying to “bury” one of the errors by putting it in the small print notes at the back of the accounts.

According to reports, he said “when one of his PwC colleagues told him in late August that a $1.1 billion bridging loan had been wrongly classified as a long-term debt in the unaudited, preliminary accounts, he suggested Centro might need to disclose it publicly. When Centro declined this idea, he decided one option was to point to the discrepancy in a note to the final accounts”

According to Mr Cougle though he did not try to “bury it”.

Whether or not it was satisfactorily disclosed will be a decision for the court and that decision is not expected until the end of May

However, one thing for sure is that a number of the junior PwC staff members who were on the audit are probably not currently the best of friends with Mr Cougle.

Despite being the lead partner on the audit, he has already “declined to accept any responsibility for the accounting debacle” and has “blamed junior staff.”

Now blaming junior staff for an error in the accounts that you signed off on is in itself an interesting point to debate. After all, there is a well-known saying that you “can delegate work but you can’t delegate responsibility”.

The outcome of this case will be very interesting for auditors around the world. Not least for guidance on who is the best person to blame if there is an error on your audit…

Does it matter if your food is hot or cold?

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Now I’m not talking about the nutritional benefits of food. No, I’m talking about the cost to you of purchasing food.

The recent tax budget in the UK has caused a bit of a debate.

The background to matters is that, as is the case in a lot of countries, when food is sold in the UK it is zero rated for VAT purposes. In other words, there is no VAT charged on it.

The exception to this is any food which is sold as a “supply in the course of catering”. This means that whilst “food” bought at a supermarket does not have VAT added to it, food bought at a restaurant or at a takeaway does have VAT applied to it as it is a “supply in the course of catering”. The adding of the VAT to the cost obviously makes it more expensive to the individual customer.

So far it’s all fairly clear with in general terms, food having VAT added to it if it is to be consumed immediately whilst food purchased to eat later doesn’t have VAT added to it.

There have however been certain types of food which have had a somewhat “confused” existence.

“Pasties” for example are in effect meat and vegetable filled types of pie which originate from the south-west part of England. People would often buy pasties from bakeries just as they had been baked and the question was whether these items were food to be taken home to be eaten later (VAT zero rated) or food that was to be consumed immediately (VAT standard rated).

To date, the treatment has been one of zero rating but in the recent budget the government announced a proposal that any food sold above the ambient air temperature would be liable to VAT at the standard rate.

This would mean that if people bought a pasty that had just been cooked they would have to pay the VAT even if they were going to eat it several hours later at home after it had cooled down.

Whilst the additional tax revenue that would be generated by this approach would be relatively small, the amount of publicity that this is getting in the UK is significant.

The tax authorities issued a consultative document on budget day called “VAT: addressing borderline anomalies” and within this was the topic of hot take away food.

Because it’s a consultative document it’s not actually law at the moment. Instead, people can comment on the issue prior to it becoming law and there may well be some changes.

The closing date for comments on this is 4 May 2012 and no doubt there will be lots of pasty lovers closely watching the outcome.

Hello and goodbye to the CEO of Deloitte Netherlands…

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It’s been a mixed year for Piet Hein Meeter the (former) chief executive of Deloitte in the Netherlands.

It started well for him as he was appointed as the new CEO of the Dutch operations of Deloitte on the 1st of January this year.

However within a few months his fortunes have changed dramatically.

Deloitte recently announced that Mr Meeter had resigned from his position due to “infringement of independence rules which surfaced following a routine internal compliance review arranged by Deloitte”.

The background to this is all about auditor independence.

In order for auditors to be able to do their job of “checking the books” of clients they have to be independent. After all, if an auditor is not independent from the company he is checking then there’s a risk that he or she may give a biased or incorrect opinion on matters.

In the case of Mr Meeter it seems that he had shareholdings in some of the clients of Deloitte Netherlands and hence broke independence rules (i.e. he headed up an audit company that checked the accounts of a company which he part owned).

It does seem rather strange that Mr Meeter held these shares as it’s a fundamental independence issue for senior staff and partners within accounting firms not to hold shares in clients.

It may well have been a simple but extreme case of oversight by him as there was no evidence of him benefiting from his shareholding and position (the investigation by Deloitte pointed out that “Meeter had no involvement in any of the audits of the applicable companies and that Deloitte’s independence as audit firm of these clients has not been impacted).

Deloitte quite rightly acted quickly though to avoid any potential problems and Mr Meeter is now no longer with Deloitte.

We wish his successor, Mr Peter Bommel, the best of luck in his new role.

Mr Bommel is currently the interim CEO of Deloitte Netherlands and no doubt has recently reviewed his personal investments very carefully to ensure that there is no repeat of Mr Meeter’s error.

Not the best way to start a presentation…

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The IT guys I’ve met in my career have all been very nice people. Admittedly they all seem to be slightly mad and do tend to talk in a strange language with lots of mentions of “coding this and coding that”.

To be fair though they all probably think I’m slightly mad when I talk to fellow finance people in my strange language about “SOCI this and SOFP that”.

If you talk to your IT colleagues though one thing that they tend to take very seriously is the level of security.

Now whilst there are lots of higher level security precautions present such as firewalls and anti-virus programmes there are also some more simple precautions that you should take.

Memory sticks (or USB or flash drives as they are sometime known) can all contain confidential documents and most memory sticks are not password protected.

It pays to double check what’s on the memory stick you’re carrying around with you in case it contains confidential documents and you lose it.

In a similar vein it’s always worth checking what other files are on your flash drive if you’re about to make a presentation.

Unfortunately for Father Martin McVeigh, a Catholic priest in Northern Ireland, he didn’t check what other files were on the flash drive he was going to use when he recently did a presentation to some parents of children at a local primary school.

According to media reports, whilst loading up his presentation for the parents, Father McVeigh inadvertently showed a slideshow of indecent pornographic images onto a screen.

The x-rated slideshow was on the memory stick that Father McVeigh had put into the computer to load up his intended presentation.

Father McVeigh was understandably a bit shocked at seeing the naked pictures on the screen (although to be fair probably not as shocked as the parents in the audience were) and according to the BBC website he was “visibly shaken” and “bolted out of the room”.

He later stated that he didn’t know how the images got onto the memory stick.

And the morale of the story?

Well, I guess that IT security is not just the higher level technical areas but also the more simple areas such as making sure you know what else is on your memory stick…

Not the best day in the office for this lady…

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Winning the lottery is a life changing experience.

The recent Euromillions lottery had a first prize of £38 million.

In a lot of companies, groups of individuals get together to form a syndicate and they combine their money and enter into a lottery.

The idea is that by combining your money you have more entries and you’re more likely to win. To be honest though anyone with a basic understanding of maths will realise that the chances of winning are still infinitesimally small.

When colleagues from an organisation set up such a syndicate to enter the lottery it’s advisable to have a written record of what was agreed (for example what happens if someone is away and can’t pay their share of the lottery money).

A group of 13 bus drivers working for the Stagecoach company in the UK formed a lottery syndicate and agreed to put in £2 per week to enter the lottery.

Six months ago one of the syndicate, a lady by the name of Miss Loveday (or Miss Unlucky as she will soon no doubt become known) decided to withdraw from the syndicate as she reportedly couldn’t afford to pay the £2 to enter each week.

Fast forward to last week and the winning lottery numbers matched those chosen by the syndicate.

Their winnings? A rather pleasant £38 million which works out at over £3 million each.

Having withdrawn from the office syndicate 6 months ago Miss Loveday doesn’t get anything from the lottery win.

Now, we’ve all had bad days at the office but finding out that you’re not an instant multi millionaire because you stopped paying your weekly £2 entry fee 6 months ago probably ranks up there as being “a really bad day at the office”.

One of the winning drivers wasn’t overly sympathetic about her plight though as he was reported as saying “You’ve got to be in it to win it”.

The one piece of good news for the unlucky Miss Loveday is that she doesn’t have to listen to any of the winners celebrating their win as all of them resigned immediately from their £17,000 a year jobs and didn’t bother going into work the day after winning…

CIMA and AICPA. Who made the first move?

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Life can be difficult if you’re a man. You fall in love and decide to get married. The challenge is that you have to ask the love of your life to get married and what happens if she says no?

It’s a leap year this year and today is the 29th February. This means that today is the day where tradition says that ladies can ask men if they would marry them.

Ignoring jokes about there being no men on the streets today as they are all hiding, what has all this got to do with the world of finance?

Well, what about CIMA and AICPA?

They have recently announced a joint venture or if we’re feeling romantic let’s call it a marriage.

They have launched the Chartered Global Management Accountant (CGMA) designation and I have to say that I think it makes a great joint venture marriage. They are both leading professional bodies and the marriage will increase the recognition of management accounting worldwide.

Further details of the marriage can be found at the CGMA website but with all this talk of wedding proposals it got me thinking about who made the first move in the relationship between CIMA and AICPA?

Who proposed to whom? Was it love at first sight? Was it a case of “I like you, do you like me?”

Whatever was the story behind the first signs of romance between the two bodies it was certainly more successful than the poor guy below.

Now, let me think. What can be more romantic than proposing in a shopping mall with your friend strumming away on his guitar…

Over 1 million people now have to…

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What have 1.1 million people in the UK got in common as at 1 February 2012?

Well unfortunately for these people the answer is that they owe the UK tax authorities £100.

The deadline for submitting the individual tax return for the tax year ended 5 April 2011 was 31 January 2012 (in case you’re wondering, here’s why the tax year ends on 5th April).

1.1 million people missed the 31 January deadline and were late in submitting their tax return. As a result they will be fined £100 each. This means a rather nice £110 million in extra revenue for the government.

This year the penalty system was different for people that submitted their returns late.

In previous years the fine was £100 but this fine was in fact limited to the amount of tax that was owed. So if somebody had a zero tax liability then there was no real incentive to submit the tax return by 31 January as the fine was restricted to zero.

This year the fine is £100 even if the individual’s tax liability is less than £100.

The fine gets worse as well though with an additional fine of £10 per day being applied if the return is 3 months late. The maximum fine for late submission could be as high as £1,600.

If you are a UK tax resident that has to submit a return but have yet to do so then it’s looking like you’ll be £100 worse off unless you’ve got a reasonable excuse for not submitting your return on time.

There’s no set definition of what is meant by reasonable excuse but it generally includes such things as the death of a close relative (or even your own death but that does seem an extreme way to avoid a £100 penalty), serious illness, loss of documents due to fire, or lack of time to complete the return as you were playing around on facebook.

Finally, for those of you that didn’t spot the mistake in the previous paragraph and are about to attempt one of the UK tax exams then don’t hold your breath expecting a great result…

Just forge the signature and it will be fine…

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Direct Line and Churchill are two of the UK’s largest and best known insurance brands.

Unfortunately though, despite being in the “premier League” of insurance companies they have been a bit naughty and were recently fined £2.2 million.

The Financial Services Authority (FSA), which amongst other things oversees the insurance industry, told the companies that they would be undertaking a review of their closed complaint cases.

These were files where customers of Direct Line and Churchill had complained and the aim of the FSA was to ensure that the procedures for dealing with these complaints were adhered to.

In preparation for the FSA review the two firms asked a major accountancy firm to do a sample review which found that 28 per cent of the 110 files reviewed failed the assessment.

It seems though that Direct Line and Churchill decided to do their own spot of cleaning up after receiving the accountants report as when the FSA subsequently visited the Firms’ offices at short notice they found that “27 of the 50 files had been altered before they were sent to the FSA, and seven internal documents were found to contain staff signatures forged by one member of staff”.

Not very good is it? The review by the accountancy firm identified the errors and then more than 50% of the files that were sent to the FSA were amended before they were sent and seven documents had forged signatures!

For those of you in the UK that have seen the Churchill TV adverts with Churchill the dog, then I guess the adverts need changing to include the question “Churchill, do you forge signatures?”

The answer of course is “Oh yesssssss”.

Paper or plastic – which is best?

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Money makes the world go around but does it matter if it’s paper or plastic money?

A few years ago if you looked in your wallet or purse you would probably have seen paper banknotes. Dollars, Euros, pound sterling and other currencies had paper notes of various denominations.

Today though there are 23 countries around the world that use plastic banknotes instead of paper notes.

Canada recently joined the list of plastic note countries and has just launched a plastic $100 note.

Why the switch to plastic notes though as after all the world has managed with paper notes for plenty of time. There are a few reasons for the switch.

Durability is perhaps the major one. The usable life of plastic banknotes for example can be up to 2.5 times longer than the traditional paper note.

There are also better security features on the plastic notes. Sophisticated holograms on plastic banknotes make it more difficult for counterfeit notes to be made.

So with all these benefits why don’t more countries use plastic notes?

On the downside of things, whilst the useful life is longer the initial upfront cost of production can be quite a bit higher with more complex banknote production facilities required.

Some people have also said that plastic notes are more slippery and therefore more difficult to count large amounts of money. To me though this wouldn’t necessarily be a major problem if the large amounts of banknotes that were being counted were mine!

Whichever way you look at it the chances are that over the next few years more and more notes will be plastic rather than paper and for any of you that have pulled a pair of trousers out of the washing machine and found a soggy broken paper banknote in the pocket this can only be a good thing.

The Big 4 don’t appear to be happy about this…

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We blogged earlier this year about Michel Barnier, the EU internal market commissioner announcing plans to issue new laws which would dramatically impact the “Big 4” (namely Deloitte, Ernst & Young, KPMG and PwC.)

Well, these changes have now got a bit closer as the draft law has just been released.

In an attempt to reduce conflict of interest and to introduce more competition into the industry the main proposal of the draft law includes the requirement for the Big 4 firms to separate their auditing and consulting divisions in the EU.

This is a pretty big issue as in simple terms if the law becomes final it could prevent the Big 4 “audit firms” from providing any non audit related services such as consulting, providing tax advice or running training courses.

This could see a major restructuring of the audit profession.

Other provisions in the draft law include banks being banned from insisting that a company uses a Big 4 firm if they are to be lent money by the bank (at the moment a number of banks make it a requirement for a company to be audited by a Big 4 firm before they will release significant loans.)

There is also a proposed requirement for audit firms to be rotated every 6 to 12 years.

Perhaps unsurprisingly the Big 4 are reported to be against any changes to the current rules (after all as the saying goes, “how many turkeys would vote for Christmas?”).

I’m pretty sure though that the “mid tier group” of auditing firms that are below the Big 4 in terms of size such as BDO, Grant Thornton and Mazars would maybe take a different view to the Big 4 and be in favour of Mr Barnier’s views as this could open up a number of opportunities for them.

Before everyone that works at a Big 4 company starts rushing to rearrange the office furniture though it’s worth noting that the law at the moment is only draft and the EU states and the European Parliament have to provide the final sign off before the law becomes a reality.

Will passing your ACCA or CIMA exams make you slimmer?

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According to a report released yesterday by Eurostat, if you’re in the UK and you’re speaking to a woman then there is a 24% chance that she is obese (or to use less technical terminology, she is very fat).

At the other end of the “fat scale” are ladies from Romania who have the privilege of being the “slimmest nation” in the EU with only 7% of Romanian ladies being classified as obese.

So nearly 1 in 4 ladies in the UK are obese. From an environmental analysis point of view this increase in the number of fat people over recent years is a classic movement in the “Social” part of PESTEL analysis.

As well as having serious implications for the health of those individuals that are overweight the movement towards “fat nations” can have serious implications for businesses over the medium to long term.

In the private sector, Airlines for example will need to invest in bigger seats and spend more on fuel costs to move all this heavier weight around the world.

The public sector will also be impacted with for example hospitals needing to have stronger and bigger beds.

One interesting thing I noticed within the Eurostat report though was the following statement:

The share of obese persons also varies according to the educational level. For women, the pattern is again clear: the proportion of women who are obese falls as the educational level rises in all Member States.

Wow – this is interesting as surely it means that the cleverer you are, the less likely you are to be fat?

So does this means that all your hard work spent improving your educational levels by studying for ACCA and CIMA not only helps your career but also reduces your chances of being obese??

This must be an additional incentive for studying and it also provides a great excuse for any gentlemen that are reading this.

After all, if your wife or girlfriend happens to catch you looking at a slim lady then all you have to say is that you were simply “admiring her intellectual ability”…

Was this as easy as 1,2,… (now what was the next one)?

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There’s a well known technique in public speaking of batching topics in groups of three.

The general idea is that it helps with the flow of the presentation and it’s easier for the audience to remember.

Unfortunately for US presidential hopeful Rick Perry, three topics were one too many when he spoke last night at the live presidential nomination debate for the US Republican candidate.

The speakers at the debate were all candidates to lead the Republican Party in next year’s US Presidential election against President Obama.

Mr Perry was in the process of listing the three US government departments he would abolish if he was elected president when he forgot what the third one would be.

His exact words were:

“I will tell you: It’s three agencies of government, when I get there, that are gone: Commerce, Education and the….. what’s the third one there? Let’s see….. OK. So Commerce, Education and the…..the third agency of government I would…..I would do away with the Education, the….. Commerce and…..let’s see….. I can’t. The third one, I can’t. Sorry. Oops.”

Now, we all make mistakes at one stage or another when speaking in public so is this really something for Mr Perry to worry about?

After all, the debates are only seen as one of the key deciders in whether somebody will win the nomination or not and they were only seen live on primetime TV across America. The press and TV in American are also only talking about it all the time.

Now, any of you studying professional exams will appreciate that two out of three is 66.67% and I’m sure that if you got 67% in your exams you’d see that as a success.

A potential future president of America only being able to remember 2 out of 3 of his proposed policies though probably isn’t so good.

The video of Mr Perry’s performance can be found here and get ready to cringe with embarrassment.

Which companies do you think are most likely to bribe?

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Here’s a quick question for you:

Companies from which of the following countries are most likely to bribe when doing business abroad?

Is it China, Netherlands, Russia or Switzerland?

My feeling is that a lot of you will probably be able to guess the correct answer but in case you’re struggling to identify which ones are most likely to make illegal payments then according to a survey of 3,000 business executives undertaken by Transparency International, companies from Russia and China are the most likely to pay bribes when doing business abroad.

Transparency International Chair, Huguette Labelle said “It is clear that bribery remains a routine business practice for too many companies and runs throughout their business dealings, not just those with public officials. And companies that fail to prevent bribery in their supply chains run the risk of being prosecuted for the actions of employees and business partners.”

At the other end of the honesty scale are companies from the Netherlands and Switzerland. Companies from these two countries were found to be the most ethical when it came to bribes, or rather not making bribes.

It’s not just the countries that the companies are from that can have an impact on the likelihood of bribing but also the industry sector that they are working in.

Bribery was most likely to happen when public sector works and construction contracts were involved.

Agriculture was reported as being the least likely industry to find bribes.

So in summary, the purchases of unmarked brown envelopes which would fit a wad of cash in are likely to be significantly higher by a Russian construction company than a Dutch agricultural company.

Was this the deal of the day?

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Last Friday Groupon raised $700 million in its initial public offering (IPO).

Some of you may have heard of Groupon. It’s done remarkably well in the 3 years since it started in 2008 and now has over 100 million users.

It’s a daily deal site whereby people sign up to get daily “special offers”. The business model of Groupon is such that when people buy a “special offer voucher” to use on a deal, Groupon shares the revenue with the service provider that is providing the special offer.

Interestingly enough their arrangement is such that if somebody buys a special offer voucher but then subsequently doesn’t use the voucher then Groupon keep all the revenue.

In simple terms an IPO is where the owners of a private unquoted company offer a proportion of their shares to the general public.

Let’s look at some of the figures.

A relatively small proportion of the company was offered in the IPO (just over 5%) but $700 million was raised. This values the company at nearly $13 billion. Not bad for a business that started just over 1,000 days ago.

In the past, other tech companies that have undertaken an IPO include Google who raised an impressive $1.7 billion back in 2004. Since then Google has gone on to become a $200 billion company but will Groupon grow to such heady heights?

To me it seems that whilst the Groupon business model has so far been successful it’s a fairly limited business model.

After all, it’s simply offering discount vouchers and the business model would surely be easy to copy and if one of the tech big boys such as Google or Facebook decided to really push a similar voucher scheme Groupon could have real problems.

One of the challenges the Groupon business model has is that the suppliers that sign up to offer discounts on Groupon are doing so in the hope that their classic their discount voucher will be a classic “loss leader” and will result in repeat purchases by the bargain hunter customers.

Figures are not available as to how many of these bargain hunters do more than simply purchase the discount voucher and then never undertake a second purchase from the supplier but my guess is that it could be a fairly significant number.

So, in summary, a business model that is relatively easy to copy and has limited barriers to entry combined with a customer base who are always looking for the next bargain (which may well be with another discount voucher company). This seems to me to be a risky investment.

Luckily for Groupon a lot of investors took a different view to me and at the close of the first day of trading the share price had risen to $26 from a launch price of $20.

Only time will tell though whether the IPO was indeed a great daily deal…

Surely this is the best “out of office notification” ever?

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I recently visited Cardiff for a few days of work. Cardiff is the capital of Wales and one thing you notice as soon as you enter Wales is that the road signs are written in both English and Welsh.

This reminded me of a production error which was reported a while ago which to me must rank as one of the funniest results of an out of office notification.

If used properly the out of office notification is a great tool as it lets the sender of the message know if you’re away for a while and who to contact in your absence.

The error here though involved Swansea Council in Wales who required a road sign saying:

“No entry for heavy goods vehicles. Residential site only”

They emailed their in-house translation service with a request for a translation of this phrase into Welsh and a reply came back with:

“Nid wyf yn y swyddfa ar hyn o bryd. Anfonwch unrhyw waith i’w gyfieithu”

They then produced the sign with both the English and Welsh text on it and put it in the required place by the side of the road.

It was a while later that some Welsh speakers noticed the road sign and it turned out that instead of telling drivers of heavy goods vehicles that they couldn’t drive down that particular road the Welsh text on the road sign actually said:

“I am not in the office at the moment. Send any work to be translated”

It’s just not tennis to leave your phone on at work is it?

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We’ve all been there. Sat in a meeting when suddenly somebody’s mobile phone starts ringing and there’s a mad rush by that person to grab the ringing phone and turn it off.

It’s often the case that the person with the “cheesiest” ring tone is the one that forgets to put their phone on silent.

When the phone rings there’s usually a mumbled apology along with a slightly embarrassed look but then the meeting carries on.

Whilst half the people at the meeting may well be thinking something along the lines of “what an idiot”, the meeting will normally continue with the ring tone soon becoming a distant memory.

There are certain jobs though where it really isn’t advisable to take your phone with you to work. For example, I’m not sure that a surgeon or classical musician should really have their phone with them when they’re working.

The video below shoes an interesting situation when top tennis player Caroline Wozniacki is about to serve against her opponent, the French tennis player Alize Kornet.

As a professional tennis player you need to remain focussed and concentrated at all times. Miss Wozniacki’s concentration though is broken by the ring tone of a phone belonging to none other than her opponent…

It doesn’t make a good photo if you’re fired does it?

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30 years ago he joined the British subsidiary of Olympus, the Japanese camera and optical giant, as a salesman. He slowly worked his way up through the ranks of the company until last month he became the first western CEO of the Olympus group.

Unfortunately for Mr Michael Woodford his new position lasted for only 2 weeks before he was fired from his position as CEO and according to media reports was told by the Olympus board to “get a bus to the airport”.

A western CEO of a Japanese company is extremely rare and a CEO being fired after only 2 weeks is probably even rarer.

According to the Olympus board, Mr Woodford was fired for “causing problems for decision-making”.

Mr Woodford didn’t hold back from giving his version of the story and he claimed that he was fired for in effect being a high level “whistle blower”.

After his appointment as CEO he started asking questions about payments Olympus had made to financial advisers for Olympus’s acquisition of Gyrus, a British medical equipment company, for $2bn.

The interesting thing was that advisory fees of nearly $700m were paid to a Cayman Islands registered company called AXAM whose owners were not identified by Olympus.

The really interesting thing though was that the advisory fees paid were equal to nearly 33% of the total acquisition price. This figure of 33% seems a tad high when compared to the industry average for such acquisitions of between 1% and 5%.

The really, really interesting thing though was that AXAM disappeared from the trade register 3 months after receiving their final payment from Olympus.

Now, I’m not a detective but there are some fairly chunky corporate governance issues in this one and a payment of $700m to an “anonymous” Cayman Islands company which has since disappeared probably does warrant a bit of a debate to say the least.

Mr Woodford won’t be involved in those debates though as his position as CEO was abruptly ended after 2 weeks.

The Olympus share price fell nearly 50% in the days immediately after the announcements.

Olympus has denied any wrongdoing.

Is it easier to become a partner if you’re a man or a woman?

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Not so long ago the finance profession was predominantly a male one.

At the risk of showing my age, when I first entered the world of work the senior roles in the company I worked for were completely dominated by men.

Things are rightly changing though and in most countries around the world the younger generation that are now entering all business functions appear to be more evenly balanced between the two sexes.

This opening up of opportunities to both men and women can only be a good thing. Any form of discrimination whether it’s discriminating on the basis of race, gender or religion is not only morally wrong but can also result in valuable parts of the working population being overlooked for jobs.

KPMG is one of the top firms in the world and they appear to be getting their gender equality sorted out.

Despite being in the finance and consulting industry which in previous generations was dominated by men, their latest set of promotions indicate that woman are “fighting back”.

KPMG in the UK has just announced the appointment of 29 new partners and 88 new directors.

Prior to their announcement the proportion of female partners working for KPMG in the UK was 14%. Out of the new promotions though, 24% of the new partners and 30% of the new directors are women.

Richard Bennison, CEO of KPMG in the UK, said:

“We are also very pleased to be able to improve the gender balance amongst our partners. We are genuinely committed to enabling more women to reach senior positions.”

So, whilst the number of female partners is still in the minority the percentage is starting to get more balanced.

Congratulations therefore to KPMG on this and it does of course raise the question of how long will it be before the balance is completely reversed and 14% of the total partners are men and 86% are women?

Goodbye to a visionary and creative genius.

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Born to an unmarried interracial couple, adopted at a young age, dropped out of college and fired from him first major job. Steve Jobs went on to build two billion dollar businesses.

Unfortunately, the iconic face behind Apple lost his battle with pancreatic cancer on Wednesday and the world lost one of the true business greats.

In terms of his impact on business as well as people’s everyday lives, his legacy will be right up there with the likes of other great visionaries who introduced “life changing technology” such as Henry Ford and the mass motor car.

Steve Jobs taught the world many things and whilst there have been, and no doubt will be, lots written on his business methodologies one particular approach of his stands out as far as I’m concerned.

His creations really encase the concept of providing great products but importantly offering real “value” for these great products.

By “value” I don’t mean that they are the cheapest. In fact, they are far from the cheapest but what Apple do provide are excellent products which customers will pay a premium for as they perceive that this additional value the products offer is worth paying for. In classic Michael Porter terminology this could be referred to as “differentiation”.

Steve Jobs had an uncanny ability to spot the next great thing that customers would want and then to develop a product which although relatively expensive would create such “value” that customers would purchase it instead of cheaper options.

If Apple had competed purely on price then there would always be another company which would come along and offer a similar product for a lower price.

As well as the innovative Apple products that have hit our shelves, Steve Jobs will also be associated with the black St. Croix Collection turtleneck sweater that he would wear at product launches.

Since his death there has been a run on people wanting to buy these sweaters and the company that manufactures them, US based Knitcraft Corp has reported a surge in orders in the last 24 hours. Despite a total order run of between 4,000 to 5,000 sweaters many St Croix stores have now run out of stock.

Rest in Peace, Steve Jobs.

Will the Big 4 firms be completely different next year?

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Michel Barnier, the European Union’s top financial services policymaker, has reportedly drafted a green paper which is expected to be presented to the European Parliament later this year.

If the proposals included within the paper are actually implemented it would mean a radical shake up of the Big 4 business models within the EU.

Mr Barnier has been quoted in the press this week as declaring that “auditors are the dog that did not bark during the crisis and their role has been put into question”.

His proposals are pretty significant and they include preventing the Big 4 from doing any non-audit services such as undertaking consulting work, providing legal advice, running training courses or performing bookkeeping services (or at least not providing these to their audit clients).

The argument behind this is that it would prevent potential conflicts of interest where for example, the auditors are reporting on some consulting work undertaken by their colleagues from their consulting division.

If the Big 4 were prevented from undertaking any non-audit work this would be pretty dramatic for them. It’s estimated that in the UK 67% of their revenue is from non-audit work with only 33% coming from audit work.

Mr Barnier’s proposals also include appointing two auditors for companies with balance sheets greater than €1 billion and at least one of these auditors would need to be a non-Big 4 company.

There is also a proposal to enforce a compulsory rotation of auditors if they have audited a company for a period of 9 years.

Perhaps unsurprisingly the Big 4 have rallied against the proposals (after all, “how many turkeys would vote for Christmas”) but there do appear to be some valid arguments against Mr Barnier’s proposals.

For example, having dual auditors would no doubt increase the cost of the audit significantly.

Whatever the outcome of the proposals when they are discussed at the European parliament later this year, this is a subject which will be debated for many years to come by people who hold opposing views on the matter.

How would you feel if you were called a liar on Oracle’s website?

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Meet two companies – Oracle and Autonomy.

A lot of you will probably have heard of Oracle but probably less of you have heard of Autonomy.

Oracle is a business software and hardware systems company whilst Autonomy develops search software.

Oracle’s Chief Executive is Larry Ellison and Autonomy’s Chief executive is Mike Lynch.

Interestingly enough Oracle’s CEO has recently accused Mr Lynch of lying or in his words of telling “whoppers”.

So, what’s the story behind all of this?

The story began a couple of weeks ago when Oracle’s Elison said that he thought Hewlett Packard had overpaid when they had paid £7bn to buy Autonomy and that Mike Lynch from Autonomy had earlier this year offered to sell Autonomy to Oracle but Oracle had turned it down as they felt it was too much.

Autonomy’s Lynch then said that any discussion of him talking to Oracle about them purchasing Autonomy was “inaccurate”.

Now the previous sentence is quite important as seeing that Autonomy was quoted on the London Stock Exchange, if there was any kind of sales process taking place then Autonomy were required to notify the Stock Exchange about it.

No such notification took place.

After Mr Lynch said that any talk of him discussing a potential sale to Oracle was inaccurate, Oracle responded in quite a dramatic way.

They posted a statement on their website (with the nice webpage address of Oracle.com/PleaseBuyAutonomy) and they didn’t hold back.

Amongst other things, they released PowerPoint slides of the meeting that Mr Lynch attended and the Oracle statement is entitled “Another Whopper from Autonomy CEO Mike Lynch”.

The statement then goes onto say amongst other things:

“Autonomy CEO Mike Lynch continues to insist that Autonomy was never ‘shopped’ to Oracle.  But now at least he remembers and admits to meeting with Oracle President Mark Hurd and Doug Kehring, Oracle’s head of M&A, this past April.  But CEO Lynch insists that it was a purely technical meeting, limited to a ‘lively discussion of database technologies.’  Interesting, but not true.  The slides Lynch showed Oracle’s Mark Hurd and Doug Kehring were all about Autonomy’s financial results, Autonomy’s stock price history, Autonomy’s Price/Earnings history and Autonomy’s stock market valuation.  Ably assisting Mike Lynch’s attempt to sell Autonomy to Oracle was Silicon Valley’s most famous shopper/seller of companies, the legendary investment banker Frank Quattrone.  After the sales pitch was over, Oracle refused to make an offer because Autonomy’s current market value of $6 billion was way too high.

We have put Mike Lynch’s PowerPoint slide sales-pitch up on the Oracle website – Oracle.com/PleaseBuyAutonomy – with the hope Mike Lynch will recognize his slides, his memory will be restored, and he will recall what he and Frank Quattrone discussed during their visit to Oracle last April. Yesterday, the Autonomy CEO did not remember having any meeting with Oracle.  Today, he remembers the April meeting and inaccurately describes how it came about and what was discussed.

The Statement continued but the key message appears to be that the two individuals are probably not the best of friends and somehow I don’t think the two CEOs will be sending each other Christmas cards this year.

Who earns the most out of a PwC or Deloitte partner and who’s suing Deloitte for $7.6bn?

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The Financial Times or FT as it is generally known, is a great newspaper.

First printed way back in 1888 by James Sheridan and Horatio Bottomley, the FT specialises in business and financial news.

You can find a lot of information in the FT.

Information ranging from share prices to the latest business activities can all be found within the paper’s famous light salmon coloured covers.

They have also recently highlighted some interesting figures about the average partner remuneration in the UK firms of PwC and Deloitte.

In the year to 30 June 2011 the average profit share for each PwC partner in the UK was a healthy £763,000.

In the previous year to 30 June 2010, Ian Powell, the Chairman of PwC, received £3.6 million. The latest figures show that he managed to increase this amount to £3.7 million in the year ended 30 June 2011.

But what about PwC’s fellow Big 4 partners from Deloitte?

Even though the Deloitte figures are not entirely comparable with PwC’s due to differences in the treatment of past pension obligations, the results are interesting and it’s not all good news for Deloitte partners in the UK.

This year saw their average profit share fall by 13%. They now have to scrape by with £758,000 per year compared to the £873,000 that they had the year before.

Whilst figures are available for the UK Deloitte partners they are not currently available for the Deloitte partners from over in the US.

My guess though is that the US Deloitte partner’s profit shares may well be reduced this year though as money may be held back for potential legal fees after it was announced today that Deloitte in the US are being sued for the princely sum of $7.6 billion.

They are accused of failing to detect fraud during their audits of a US mortgage firm which went out of business during the US housing crash.

A Deloitte spokesman was quoted in the press as saying the court claims were “utterly without merit”.

So, how well are Nike doing?

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You probably haven’t heard of the lady by her name but you have without a doubt seen her most famous piece of work.

40 years ago Carolyn Davidson was paid the princely sum of $35 for the design of a logo.

That logo was the Nike Swoosh and it has gone on to become one of the most famous logos in history.

Nike has just released their latest set of financial results and for the 3 months to 31 August 2011 they made an impressive net profit of $645 million. Despite a global recession Nike has increased profits by a healthy 15% on the same quarter last year.

Their revenues showed an even more impressive increase, rising 18% to a quarterly figure of $6.1 billion.

The fact that sales increased by 18% but profit only increased by 15% indicates that costs increased and Nike stated that costs had increased due to higher raw material prices.

Nike is the world’s largest sports shoe and clothing maker and the latest set of results emphasised its global business. Sales improved in nearly all the markets that they operate in. There were especially strong gains in the US, India and China.

North America is Nike’s biggest market with sales rising 16% to $2.2 billion but the emerging markets are quickly catching up with revenue from this area rising 35% to nearly $800 million.

So, what will the results look like for the corresponding quarter next year?

Well, with the 2012 Olympics taking place my guess is that the results for Nike will look pretty sporting.

Was it really that easy to lose £1.3 billion?

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I tell you what. I don’t really have insurance against anything going wrong but if I put a tick in this box and pretend that I do nobody will notice and it will be ok. Won’t it?

Mr Kweku Adoboli, a 31 year old banker with UBS in London, was working in his office in the early hours of Thursday when he was arrested on suspicion of fraud and false accounting.

In simple terms he is alleged to be a “Rogue Trader“ who undertook illegal transactions which cost the bank a serious amount of money.

£1,300,000,000 to be precise.

That’s a fairly significant figure and would represent the largest single fraud that has ever taken place in the City of London.

Not whilst there is the principle of “innocent until proven guilty” and Mr Adoboli hasn’t yet had an opportunity to defend himself, it’s not currently looking too good for him.

There are striking similarities to the case 3 years ago where trader Jerome Kerviel lost Societe Generale nearly €5bn through Rogue Trading activities.

A detailed investigation has just begun but the early reports indicate that the fraud involved setting up fictitious hedging transactions to trick the bank’s risk management systems into thinking that a trade or position had been hedged against to minimise risk and limit exposure.

A hedge is in effect a form of insurance to insure that if a particular trade goes wrong there is some offset present to mitigate the loss.

If setting up false hedging entries into the bank’s “computer risk system” turns out to be true then there will be some nervous (and possibly soon to be unemployed) people at the bank who were responsible for the risk management system.

Many thought that the days of individuals being able to lose significant amounts of money for banks through unauthorised transactions were a thing of the past. After all, banks have spent a considerable amount of time and money over recent years in ensuring their risk management systems were good enough.

Unfortunately for UBS though it looks suspiciously like their systems weren’t up to the job.

Do you know a male, aged 36 to 45 who works in a finance related function?

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Don’t panic whatever you do but by any chance do you work with a male who is 36 to 45 years old and whose job is in a finance related function?

If you do then look at him as discretely as you can.

Is he exhibiting any of the following characteristics?

– Volatility and being melodramatic, arrogant and confrontational, threatening or aggressive, when challenged.

– Performance or skills of new employees in their unit do not reflect past experiences detailed on resumes.

– Unreliability and prone to mistakes and poor performance, with a tendency to cut corners and/or bend the rules, but makes attempts to shift blame and responsibility for errors.

– Unhappy, apparently stressed and under pressure, while bullying and intimidating colleagues.

– Being surrounded by “favorites,” or people who do not challenge the fraudster, and micromanaging some employees, while keeping others at arm’s length.

– Vendors/suppliers will only deal with this individual, who also may accept generous gestures that are excessive or contrary to corporate rules.

– Persistent rumors or indications of personal bad habits, addictions or vices, possibly with a lifestyle that seems excessive for their income, or apparently personally over-extended in their finances.

– Self-interested and concerned with their own agenda, and who has opportunities to manipulate personal pay and rewards.

If he is then that may be a bit of a worry.

KPMG have announced that after an analysis of nearly 350 cases that they investigated for their clients across 69 countries from 2008 to 2010 a typical fraudster was a male, aged 36 to 45 who works in a finance related function and exhibits the above list of traits.

Now, strangely enough everyone in our office who is reading this is has now turned to look at me who just happens to be a male, aged 36 to 45 who works in a finance related function…

Your BlackBerry could save your life…

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Many of you will have a BlackBerry phone and a number of you may well be addicted to it. The red light flashes to tell you that you’ve got email and you’ll rush to check that all important message that comes in.

As well as emails they also have other uses and some photographs taken by this particular user on her BlackBerry possibly saved her life.

BlackBerry is commonly referred to in some countries as a “CrackBerry” on the basis that it is as addictive as Crack Cocaine but I’m sure that this lady will be carrying it with her where ever she goes from now on.

The unnamed lady was hiking in the picturesque mountainous Lake District region in the UK.

She was by herself and bad weather came in. She lost her bearings and didn’t know where she was.

The weather was worsening and on top of all of this it was starting to get dark.

The lady who was in her 50s contacted rescue services but they couldn’t initially get to her as she didn’t know where she was so couldn’t tell them her location.

They then remembered the camera that was built into the BlackBerry and the lady took some photos of the area where she was and sent them to the mountain rescuers phone.

The end result was that some of the rescuers recognised the location where the pictures were taken and went and found her and guided her to safety.

There was therefore a happy ending for this lady who no doubt cherishes her BlackBerry even more now.

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How much is your home worth? I guess it’s not as much as this one…

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There’s a new record in the UK. Britain’s most expensive home has just been sold for a rather nifty £140 million.

The average price of a house in the UK is £228,000 so that means that the anonymous Russian buyer that recently bought Park Place in the village of Remenham, near Henley-on-Thames, 35 miles outside of London could have instead bought over 600 “average homes”.

£140 million buys a lot of home though. The property is a 300 year old property in nearly 600 acres of land and includes stables and a boat house.

During the recent recession, the property development industry has taken a bit of a hammering.

Property developer Mike Spink however shows how it should be done.

He bought Park Place back in 2007 for a “mere” £42 million.

5 years later after reportedly spending several million on renovations he’s sold it for £98 million more than he paid for it. Not a bad return over 4 years.

Movie fans that saw the recent remake of the St. Trinians film would recognise the house as it was used as the school in the film.

Oh, and I forgot to mention but it’s also got its own golf course attached to it and a ghost by the name of Mary Blandy who was accused of poisoning her father in the 1700s is said to live there.

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The European Business Awards and our trumpet…

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We’re all feeling pretty pleased with ourselves here at ExP and apologies for “blowing our own trumpet” but we’ve just heard that the ExP Group were selected as a country representative in the 2011 European Business Awards, sponsored by HSBC.

This independent Awards programme is designed to recognise and promote excellence, best practice and innovation in the European business community.

The winners are selected by a 40 strong European Judging and Advisory Panel including leading politicians, academics, media owners and business luminaries.

The esteemed panel of judges were looking for organisations who exhibited innovation, business excellence and sustainability.

Thank you to the judges for selecting the ExP Group – we’re honoured (and very, very happy!)

John Casey, HSBC Head of Commercial Banking, Europe said “The European Business Awards provide a perfect opportunity to recognise the best of European business and their successes over the past twelve months. These companies have displayed an impressive ability to thrive despite challenging economic conditions, pursuing growth and creating prosperity. Their recognition is highly deserved, and through the European Business Awards their success – and the stories behind that – can be shared across the wider business community. We look forward to celebrating alongside these inspirational businesses.”

Petar Stoyanov, former President of Bulgaria, “This event inspires and stimulates European Business to reaching exacting criteria, where not only annual turnover and sales count, but also factors with high social importance – what we call business ethics.”

Many thanks to all our partners, clients, students as well as our wonderful team for their support in helping us to obtain such a prestigious achievement.

Now, where did we put that crate of champagne?

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Would you go to the gym and post this video on YouTube to get a job?

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Despite most economies around the world looking like they are coming out of the recession, it’s still a tough job market out there and there are challenges in getting the perfect job.

Owen Hargreaves, the former Manchester United player has been plagued by injury during his career. He has played at the very top of the game though having represented England but is currently looking for a job.

He’s no doubt got the skills to play for a leading club and at 30 is still very much at his peak in terms of age.

But what about his fitness levels. Are other top clubs going to pay serious money to employ somebody who may not be able to play if injury hits again?

The corporate equivalent would be asking whether you would pay a significant golden hello and high salary to an employee who may well not be able to work for you shortly after joining you.

“Hats off” to Owen though as he’s taken the unusual step of posting a series of workout videos on YouTube showing him undertaking strenuous exercise. This will hopefully convince prospective employers that he is fit enough to play football again at the top level.

There is one particularly impressive video of him shown below and that is of him undertaking what can only be described as freestyle aerobics on a treadmill.

Personally, I don’t think I’ll try this at the gym tonight though as somehow I feel I’d be unconscious at the back of the treadmill with the treadmill belt spinning around my head within a few seconds of trying to run backwards…

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Which is worse. A $3 billion fraud or taking $100 and giving it back the next day?

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Taylor Bean & Whitaker were one of the largest privately held mortgage lenders in the US.

Paul Allen was their CEO and involved in all the key areas of the business. Unfortunately for a lot of people Mr Allen also became involved in the fraud which led to the Taylor Bean business being closed down with 2,000 people losing their jobs.

The fraud also contributed to the collapse of Colonial Bank in the States after they purchased hundreds of millions of dollars of Taylor Bean mortgages.

Two major European banks also suffered as BNP Paribas and Deutsche Bank lost nearly $2 billion as a result of buying various corporate paper from Taylor Bean which was not suitably backed up by collateral.

A $3 billion fraud with thousands of people losing their jobs. Clearly a serious crime.

The end result was that Mr Allen was jailed for just over 3 years.

Meanwhile at the other end of the spectrum in terms of crime against financial institutions and the financial amount involved, a teller at Capital One bank in the States was approached by Roy Brown who put a hand under his jacket, claimed it was a gun and demanded money.

The teller handed Mr Brown 3 piles of money but he only took one $100 bill.

Mr Brown then had a change of heart and the next day handed himself into police and told them that his mother didn’t raise him that way.

He was homeless and told police that he needed the $100 to attend a detox centre.

Despite Mr Brown’s dramatic change of heart he was subsequently sentenced to 15 years in prison for the robbery.

So in summary, $3 billion and 3 years vs. $100 and 15 years…

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Would you consider this to be a bribe?

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The Wimbledon tennis championships are taking place this week and as well as the diehard tennis fans that have been lucky enough to get tickets there will be a number of corporate entertainment packages present.

Corporate entertaining is big business and typically involves companies inviting key contacts such as important clients to major sporting events where they are provided with excellent seats as well as wined and dined with some of the best food and drink available.

The argument behind this expense is that it helps maintain and build relationships.

The UK Bribery Act has just come into force and raises the question as to whether corporate entertaining could possibly fall under these new bribery provisions.

The Ministry of Justice defines bribery as “giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly”.

Does this mean therefore that free tickets to events such as Wimbledon could result in charges of bribery taking place and the people involved being liable to an unlimited fine or a jail sentence of up to 10 years?

Any of you at Wimbledon at the moment courtesy of corporate tickets can probably relax though as it all appears to be down to a matter of proportionality.

A recent announcement by Brent McDaniel, the UK head of Anti-bribery & Corruption at KPMG, said that “for those enjoying corporate hospitality this week, proportionality sits at the heart of this legislation. The SFO (Serious Fraud Office) are likely to have little interest in prosecuting over a bottle of wine or a day at the races. The mandate is to stamp out grand scale corruption in high risk countries, but evidence of companies undertaking thorough risk assessments and training is vital to evade prosecution.”

This all sounds ok then for anyone who is the lucky recipient of corporate entertaining.

It is worth noting as a conclusion though that if the company you work for is thinking of spending a lot of money on a high quality corporate entertaining programme at major sporting events around the world then please do bear in mind that I am personally available to attend these events, even at short notice.

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Bum Fries? Surely that’s not real…

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Picture the scene. You’re sat at home and suddenly you get that “eureka moment” where you think of an ingenious way to quickly make yourself nearly £7 million without too much effort.

It’s a great idea but unfortunately it’s completely illegal.

Still, with some cunning deception you may be able to get away with it and live the rest of your life in wealthy comfort.

Fortunately for the honest, hard working people amongst us 39 year old Mr Gregory Roberts wasn’t the brightest criminal out there.

Mr Roberts, who called himself “Lord Roberts”, attempted to obtain various tax refunds totalling £6.8 million. As part of his plan he forged a fake invoice (including fake VAT suffered).

Now, I’m not a tax inspector so I don’t know exactly what they would be looking for in terms of potentially fraudulent fake invoices but the fact that the invoice was for the pretty significant sum of £18 million and also didn’t have a date on it would probably have raised a few alarm bells.

However it was the address on the fake invoice that was particularly interesting.

If any of you have been lucky enough to visit Dumfries in Scotland you’ll know that it’s a lovely picturesque town.

Mr Roberts decided to print his fake, undated invoice with an address in Dumfries and whilst he managed to get the right post code he made the rather splendid typo of Bum Fries instead of Dumfries.

Genius! This man should be a comedy writer and not a fraudster.

“Lord Roberts” was subsequently arrested at his business premises (his one bed-roomed apartment) and admitted two charges of fraud.

He is currently in jail.

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Do auditors have friends and can they sing?

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“I’m an auditor so I really don’t have that many friends”.

This was one of the quotes from Steve Beguhn in the short movie below.

In case you haven’t heard of Steve he works for (or after the performance below it may now be “worked for”) pwc in America.

I’ll keep this blog entry short as the question is whether the Big 4 auditor did well or embarrassed himself during his recent performance on the reality TV show “American Idol”.

I’ll leave it up to you to decide but one thing for sure is that he’s a better singer than I am!

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Is it acceptable for a client to hold your audit files hostage?

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It seems that Deloitte has had a spot of bother in dealing with one of its Chinese clients.

When they initially won the audit for Longtop they were no doubt very pleased.

Longtop Financial Technologies Ltd., to give it its full name, is a Hong Kong-based maker of financial software. In 2007 it raised $210 million in a US IPO underwritten by Goldman Sachs and Deutsche Bank.

Things haven’t been going too well recently though. Their share price has plunged by 56% since last November reducing the company’s market value by more than $1 billion.

They have also just lost their auditors as Deloitte has just resigned.

Auditor resignations aren’t that unusual but in Deloitte’s resignation letter that was submitted to the U.S. Securities and Exchange Commission there are a few items which to put them in non technical language, sound “extremely dodgy”.

The full resignation letter submitted to the SEC can be found here but some extracts of the letter showing the highlights (or lowlights) of some items that Deloitte identified at Longtop are as follows (note that the bold emphasis on certain words was made by us):

[Start of extract from  resignation letter]

As part of the process for auditing the Company’s financial statements for the year ended 31 March 2011, we determined that, in regard to bank confirmations, it was appropriate to perform follow up visits to certain banks. These audit steps were recently performed and identified a number of very serious defects including: statements by bank staff that their bank had no record of certain transactions; confirmation replies previously received were said to be false; significant differences in deposit balances reported by the bank staff compared with the amounts identified in previously received confirmations (and in the books and records of the Group); and significant bank borrowings reported by bank staff not identified in previously received confirmations (and not recorded in the books and records of the Group).

In the light of this, a formal second round of bank confirmation was initiated on 17 May. Within hours however, as a result of intervention by the Company’s officials including the Chief Operating Officer, the confirmation process was stopped amid serious and troubling new developments including: calls to banks by the Company asserting that Deloitte was not their auditor; seizure by the Company’s staff of second round bank confirmation documentation on bank premises; threats to stop our staff leaving the Company premises unless they allowed the Company to retain our audit files then on the premises; and then seizure by the Company of certain of our working papers.

In that connection, we must insist that you promptly return our documents.

[End of extract of resignation letter]

I have to say that my initial observations are that Deloitte did the right thing in resigning!

Longtop however have released a press release in connection with the resignation and included the statement that they have “initiated a search for a new auditor.”

Somehow I’m not convinced that the other top auditing companies will be rushing out to win Longtop as a client.

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Are they really going to get their money’s worth for $8.5 billion?

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What was founded 8 years ago by 2 entrepreneurs and was last week bought by Microsoft for $8.5 billion?

Little did Swedish entrepreneur Niklas Zennstrom and his Danish colleague Janus Friis realise that the Skype product they introduced back in 2003 would be worth a mighty $8.5 billion 8 years later.

Skype, whose name comes from the abbreviation of the initial project name of “Sky peer-to-peer” has turned into the most successful online voice and video phone service.

It has over 650m users with the vast majority of users only use the free call facilities.

Even allowing for its success in terms of the numbers that use it, it’s still a pretty hefty amount that Microsoft paid for it.

If you look at the history of the company you’ll see that Zennstrom and Friis founded it in 2003, it was then purchased by eBay for $3.1 billion in 2005 in the anticipation that it would be integrated into their online auction site to help people negotiate over their purchases.

This wasn’t a huge success and eBay cut their losses when they sold it 4 years later to a group of investors with the company valued at $2.75 billion.

The investors that bought it from eBay though have done pretty well.

With Skype being valued at $2.75 billion in 2009 here we are 2 years later with Microsoft buying it for $8.5 billion – a pretty healthy return of approximately 300% over a couple of years.

If you look at the figures behind Skype then some people will argue that Microsoft have paid over the odds for Skype.

In summary, the latest reported annual figures for Skype are:

Sales: $860 million

Profit (eh, actually it’s a loss): ($7 million)

Amount Microsoft paid for it: $8.5 billion (or $ 8,500 million)

So, Microsoft paid $8,500 million for a company whose most recent reported annual results showed a loss of $7 million.

These figures clearly show that Microsoft are hoping to create a lot of value from the acquisition of Skype and possible integrations discussed include using Skype within Microsoft Outlook and their computer game XBox.

This is a big amount of money to recover though and only time will tell whether the largest acquisition in Microsoft’s history will turn out to be a good call or not.

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Should you be scared of the property next door to you?

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It’s Friday the 13th today and for a lot of people this is considered to be an unlucky day.

“Friggatriskaidekaphobia” is the medical term for the fear of Friday the 13th and although it looks like the type of word that you’d get if your cat walked across your computer keyboard it affects a number of people and in extreme cases these individuals will refuse to leave their home on Friday the 13th.

Another tricky to pronounce word is “triskaidekaphobia”.

This is a fear of the number 13 and could have interesting implications for the valuation of property.

A report released today highlights that if you’re thinking of buying a property in the UK then you may well be able to pick up a bargain if the property address has a number 13 in it.

According to a survey by property website Zoopla, the current average value of a house in the UK with the number 13 in it is £205,085.

This is nearly £4,000 less than the average value of £209,009 for properties with the neighbouring numbers 11, 12, 14 or 15 in their address.

They also found that more a quarter of UK streets don’t have a number 13 address as some local authorities have banned the use of number 13 in new housing developments.

So, whilst people who currently own properties with 13 in the address may feel a bit cheated, if you don’t suffer from triskaidekaphobia and are looking for a potential bargain then the £4,000 saving could be quite attractive.

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Would you have made this mistake?

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When did you last send an email?

I guess it was a few minutes or hours ago. Maybe at a stretch it was a couple of days ago.

What about when you last sent a letter?

My guess is that it may have been weeks or even months ago and therein lies one of the challenges faced by Post Offices around the world. Namely, more and more people are relying on emails, texts and phone calls to communicate as opposed to letters.

I must admit that if I decided to suddenly send a letter then it would be a bit of a hassle for me to go and buy a stamp. That in itself would put me off posting a letter.

I don’t want to sound lazy about this but after getting used to the convenience of emailing from my mobile device the thought of heading to a post office to buy a stamp and then posting the letter seems rather slow.

The Danish Post Office though has just launched a novel system to make it easier for people to send letters.

Instead of having to buy a stamp to put on the letter, people can send a text message from their phone to the post office and get back a unique code which they write on the envelope in the place of a stamp.

The cost of this is 8 DKK (£0.92p) and the charge for the code will be added to a mobile user’s phone bill.

This is a nice idea and it removes the hassle of having to go somewhere to buy a stamp.

Meanwhile on the other side of the Atlantic, there was a bit confusion with the designers at the United States Postal Service.

They recently launched a new design of postage stamps which had an image of the world famous Statue of Liberty.

The design was finalised and 3 billion copies of the stamp were printed.

All was well with the stamp until one eagle eyed stamp collector noticed that the image of the Statue of Liberty was not that of the famous statue in New York harbour but instead was a picture of the fibreglass and foam half sized replica which can be found outside the New York – New York hotel and casino in Las Vegas and can be seen in the photo above.

The stamps show a close up of the face and crown of the statue and the US Postal Service has said that they will leave the stamps in circulation.

Meanwhile, the owners of New York – New York in Las Vegas are no doubt extremely pleased to be the first Las Vegas casino to be featured on a US postal stamp.

In fact, they are probably so pleased that they have texted all of their friends.

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