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They are outside but still inside.

You don’t have to be working inside a company to be charged with insider dealing.

Insider dealing is where a person uses information which is not in the public domain to make money out of share price movements.

A typical example of insider dealing would be where an individual works for a company whose shares are quoted on a stock exchange. The individual becomes aware that the financial results of the company which are about to be released to the public are better than expected. Before this information is made public though the individual buys shares so that he or she can sell them for a profit when the unexpected good news about the financial results is made public and the share price increases.

In other words, the individual is making a financial gain by “dealing” in shares using information which is “inside” the company and not available outside of the company. Hence the name “insider dealing”.

Insider dealing is illegal and action taken by the authorities against individuals involved in insider dealing is normally taken against employees of the company in question who are undertaking the insider dealing and / or their friends or associates who may have been involved in the insider dealing activities.

Recently though there was an unusual case where it was announced that federal investigators in the US had broken an insider trading gang who had a rather different approach.

Their unusual approach was that rather than working for the organisation who were about to release their results the gang instead hacked into the systems of financial newswire services to get hold of press releases of companies who were about to release their financial results.

The key thing though was that by hacking into the systems of the newswire services they got hold of these press releases before they were made public and used the information in the press release to purchase shares before these shares increased in value once the results were made public by the press release.

This was a pretty sophisticated criminal activity as it was reported that more than 100,000 press releases were stolen and as a result over $100 million of illegal profits were made by the gang.

The gang was said to have been run from Ukraine and 32 people have been charged in connection with the offence.

In conclusion therefore, you can be outside the company and still be charged with insider trading.

Dancing towards a big mistake.

When you’re at work it’s always worth taking a step back and doing a reality check every now and then to check that everything is ok.

Steve Pallet, a Jersey politician is no doubt a busy man but he should have taken a step back to review things a couple of weeks ago.

Earlier this month, in what was probably one of the simpler tasks on his to-do list, he needed to fly from the UK to Bucharest, the capital of Romania to be present at the handover of the Dance World Cup.

This year’s Dance World Cup took place in Bucharest where nearly 3,000 competitors from 32 countries took place in the annual dance event.

Jersey is hosting next year’s Dance World Cup and Mr Pallet was flying to Bucharest to attend the official handover where he was due to make a speech and receive a special flag from his Romanian hosts marking the fact that Jersey will be hosting the next World Cup.

You’re probably thinking that there’s nothing particularly difficult about flying from one country to another to give a short speech, receive a flag, shake a few hands and no doubt have a nice meal and a couple of drinks.

Whilst most people would probably agree with the assumption that it was a fairly simple exercise, Mr Pallet decided to prove everyone wrong. Instead of flying to Bucharest in Romania he flew to Budapest, the capital of Hungary which is about 500 miles (800 km) short of where he should have been.

Mr Pallet only realised his mistake as his plane was coming in to land in Budapest. It was too late for him to arrange transport from Budapest to Bucharest and as a result he was unable to accept the official handover of the World Cup flag.

When the news of his error broke he pointed out that the flight booking had been made by a colleague of his but this isn’t really a particularly good excuse as it was him personally who got on a plane flying to the capital of Hungary expecting to land in Romania.

He did apologise though and said “It is really disappointing, I have to apologise for wasting taxpayers’ money and for letting down the Dance World Cup. I don’t know the exact cost as I’ve still got some figures to come back, but it won’t be less than £1,000. All I can do is apologise for what is a schoolboy error.”

He mentioned it was a “schoolboy error” but given Mr Pallet’s geographical knowledge (or rather, his lack of geographical knowledge), then I guess he probably made plenty of schoolboy errors in his geography lessons at school.

Who audits the auditors?

It’s a great life being an auditor. You visit your clients and can ask as many questions as you like.

After all, your job is to confirm the accounts are showing a “true and fair view” or to be more precise, your job according to “International Standard on Auditing (ISA) 700, Forming an Opinion and Reporting on Financial Statements”, is to “form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.”

So, that’s the job of the auditors.

Who checks the quality of the audits though?

In the UK, the Financial Reporting Council (FRC) undertakes annual quality inspections of the largest auditing firms in the UK including Deloitte, EY, KPMG, pwc and a number of mid tier firms.

The latest annual report has been released and whilst there has been an improvement in the performance compared to previous years with 67% of all audits inspected in 2014/15 being assessed as either good or only requiring limited improvements, 33% of the audits inspected fell below the highest standards set by the accounting regulator and were classified as either requiring improvements or significant improvements.

Let’s just pause there for a moment.

What this is saying is that one in every three audits undertaken by the leading accounting companies in the UK have been classified as needing improvements or even worse, needing significant improvements.

Three of the more common issues identified in the report were:

  • Insufficient scepticism in challenging the appropriateness of assumptions in key areas of audit judgement such as impairment testing and property valuations.
  • Insufficient or inappropriate procedures being performed. This is common to many areas including revenue recognition.
  • The failure to adequately identify the threats and related safeguards to auditor independence and to appropriately communicate these to audit committees.

The FRC do however appear to be trying to improve things and have introduced various initiatives.

For example, they now “require firms to develop action plans to address the weaknesses identified in individual audit engagements and firm-wide procedures”. In conjunction with the development of these action plans they now require firms to undertake a detailed rootcause analysis of the factors contributing to the issues arising from the inspections and those action plans together with the related analyses will then be subject to follow-up inspections.

A copy of the report can be found here.

The FRC also prepared individual reports for the Big 4 and they can be found on the following links:

Deloitte

EY

KPMG

pwc

Not the brightest individual.

Be honest now – have you ever thought that it would be nice to be able to cheat in your exams and get away with it? Have you ever thought it would be great to be able to pass your exams with ease without putting in any real effort?

blog-exam-cheat-man-275x275Well, if the thought has crossed your mind you are not the only one. The girlfriend of Ayan Zhademov thought it would be a good idea to cheat in her exams and she managed to persuade 20 year old Mr Zhademov to help her cheat.

Unfortunately for the lady (but fortunately for all the hard-working honest students who were sitting the exam) the plan wasn’t the smartest and her boyfriend didn’t look much like a woman.

“Didn’t look much like a woman” – why does it matter whether or not he looked like a woman I hear you say?

Well, the plan was for Mr Zhademov to pretend that he was his girlfriend and to sit her exam for her.

When the day of the exam came around, he wore her clothes together with a wig and lots of make-up.

It was reported that despite his efforts to dress up as a woman he simply look like a man wearing a dress and make-up which had been put on badly. The exam invigilators noticed something was wrong and became even more suspicious when he spoke as he had an extremely deep manly voice.

The end result was that he was caught out, his girlfriend failed her exam and he was fined £1,400.

The morale of the story is that it doesn’t pay to cheat and no matter how tempting it may appear to be, just don’t do it. Not even if your girlfriend or boyfriend is a genius and looks exactly like you.

ACCA exam tips released. Will you have a great escape or a rubbish escape?

Those of you that are attempting the June 2015 ACCA exams will no doubt be feeling a mixture of emotions.

blog-June-2015-ACCA-exam-tipsSome of you will be fully confident of passing although probably the majority of you are only hopeful of passing at this stage and are frantically trying to cram as much knowledge into your heads as possible by undertaking some last minute revision before the exams next month.

One of my students at a recent session was unfortunately ill during the run up to the exams and wasn’t feeling at all confident entering the exam hall. Pleasingly he managed to pass his exams and when he told me he the good news he referred to it as his “great escape”.

Hopefully you’ll be successful in your exams and won’t be relying on a “great escape” when you sit your papers but we’ve now released our ACCA exam tips for the June 2015 ACCA exams and the link to them is at the bottom of this blog post.

For those of you interested in seeing an example of a “rubbish escape” as opposed to a “great escape” the video below of two prisoners trying to escape from a New Zealand court makes nice viewing.

Good luck with your final revision and here are the June 2015 ACCA exam tips (after selecting this link, click on the paper you are interested in and the exam tips are on the right of that paper’s page).

The Vatican Bank releases their results.

The Institute for Religious Works, or as it’s more commonly known “the Vatican Bank”, has just released its latest set of accounts and they show a sharp increase in profits.

blog-vatican-262x275The bank has just reported net profits of €69.3 million for 2014 which compares very favourably with the corresponding figure of €2.9 million in 2013.

So what has caused the turnaround?

The bank has reported that the improved figures were as a result of a fall in operating expenses together with higher income from trading in securities.

Last year, the management of the bank was replaced as part of a clean up ordered by the Pope to remove corruption in the bank. The reforms also involved the bank bringing in anti-money laundering experts to screen all the accounts to ensure they comply with international laws governing the banking sector and the bank’s new standards for clients. Over 4,000 accounts have now been closed since 2013 and whilst the majority were dormant accounts, 554 accounts were closed because they did not meeting the bank’s new standards.

President of the Board of Superintendence, Jean-Baptiste de Franssu said that “The long-term, strategic plan of the Institute revolves around two key objectives: putting the interests of the clients first by offering appropriate and improved services and by de-risking the activities of the Institute”.

In summary, the bank seems to be doing much better now. If you are interested in opening an account with the bank though it’s worth noting that the use of the bank is limited to clergy, Vatican employees and staff at its embassies. There are now reportedly over 15,000 clients on the banks books.

More details on the Vatican bank’s accounts can be found here.

Your phone – a communication or translation device?

English is often considered to be the international language of business.

Whilst you’re (or is that your?) not expected to speak 100% perfect English to pass your professional exams you are however expected to be able to understand English to such a level that you can effectively communicate business concepts to other business professionals around the world.

professional examsThe global professional bodies such as ACCA and CIMA are certainly international. ACCA for example has over 162,000 members and 428,000 students in 173 countries and it’s a fair guess that the majority of ACCA students and members speak another language other than English as their first language.

Whilst the number of English speakers in the world has been steadily increasing there is an interesting debate as to whether technology will result in fewer people speaking English and instead other languages taking off.

Most of us have heard of or used Google translate which translates written text from one language to another on the internet but Skype has recently announced a novel approach to translation.

Skype offers VOIP (Voice Over Internet Protocol) calls and enables people to speak to each other free of charge over the internet.

They have just announced a beta version (a test version) of Skype which will provide near instantaneous VOICE translation between Spanish and English.

In other words, I can call a Spanish friend who doesn’t speak English, I speak in English on Skype and my Spanish friend will hear the words in Spanish rather than English.

Ignoring the question of how we became friends if neither of us speaks the other person’s language, this is a pretty impressive bit of technology.

Whilst it is still very much a test version and a lot of the initial calls may well be translating English and Spanish swear words, there are some interesting potential uses in the not too distant future.

Will we for example all have our own mini voice translation device with us in 10 years which will enable us to understand 50 different languages (or swear in 50 different languages)?

Will some lesser spoken languages become more popular than they are now?

Only time will tell or should that be only technology will tell?

December 2014 ACCA exam tips released but don’t do this…

Professional exams are tough. It’s not easy passing them but to be honest they should be difficult as if they are too easy then everybody could become a Chartered Accountant and the value of the qualification would be downgraded.

december-2014-acca-exam-tipsThat’s easy for me to say now that I’m qualified but in the run-up to my exams I can vividly remember wishing they were a lot easier!

It’s important in the final run-up to the exam to remain focused and concentrate on practicing exam standard questions.

There’s a lot of pressure when it comes to sitting professional exams. All your hard work is compressed into a few hours where you try to prove to the markers that you know what you’re talking about.

We’ve just released our December 2014 ACCA exam tips and whilst it’s only the examiners who know what’s in the exams, our tips show areas of the syllabus that we would pay particular attention to if we were sitting the exams ourselves.

Our ACCA exam tips are below but one thing you should definitely do during the exam is to remain calm. Whilst some of the topics in a number of the exams can be relatively predictable, there will always be surprises that can crop up.

The gentleman in the video below showed a remarkable level of calmness even though there were early signs that things were starting to go wrong. Let’s just hope that nothing like this happens to you in your exams and that you can remain as composed as the interviewer.

If you’re after any last-minute exam tips for the ACCA exams then here are our December 2014 ACCA exam tips (follow the link, choose the paper you are interested in and the exam tips can be downloaded on the right hand side of the page).

You’re not an auditor, you’re a financial detective…

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I’m an accountant and I’m proud of it.

I think the education and knowledge that you acquire both during your studies and continuing professional education are fantastic.

At the start of my career when I worked for one of the Big 4 I spent several years in the Audit department and this was a great opportunity to find out how a variety of different companies worked.

Sometimes though it has to be said that the term “auditor” doesn’t always have the most exciting of images to the general public. People may think that an auditor is merely somebody who checks other people’s work.

To be honest though a simple piece of rebranding whereby “auditors” were known as “financial detectives” would go a long way to removing some of the negative perceptions that some people have in terms of the excitement of the profession and could create a whole new generation who want to become auditors financial detectives.

Now, whilst most people have heard of the term “auditor” a lot of people don’t really fully appreciate how it works.

The Institute of Chartered Accountants in England and Wales (ICAEW) have got a website called “True and Fair” which in their own words aims to “help you find out anything you would like to know about the process known as audit – or to use its full title “Audit of Financial Statements”.”

I think it’s an excellent site and if you are an auditor and want friends or family to find out what your job entails then you should direct them to it (although admittedly if you’re on a first date with somebody and they ask you what you do then maybe say you’re a financial detective).

For any of you that are attempting an ACCA or CIMA paper with an auditing content it also makes for very good background reading.

The site can be found at www.trueandfair.org.uk

An easy mistake to make?

You may laugh but would you really be able to spot the difference between a fully grown 180 kg gorilla and a middle aged man dressed in a gorilla suit?

gorillaNow, whilst most of you are probably thinking to yourself that yes, you would be able to tell the difference, unfortunately for an employee of Loro Parque Zoo on the Spanish Island of Tenerife, the Zoo vet didn’t spot the difference.

Any business should ensure that procedures are in place to minimise danger to members of the public. In the case of zoos this includes having practice drills to ensure that if an animal escapes the staff know what to do and have practiced it beforehand.

The zoo started a practice drill where a 35 year old zoo employee was dressed as a gorilla. He then “escaped” from an area of the zoo and the alarms were raised. Unfortunately for the “man dressed in a gorilla costume” the zoo had told all the people involved in the emergency drill that it was a practice except the zoo vet who as soon as he heard the alarm sounds grabbed his tranquiliser gun and proceeded to shoot the zoo employee with a tranquiliser which had been designed to knock out a 180 kg gorilla.

The zoo employee was rushed to hospital where he was treated and fortunately made a full recovery.

Somehow I doubt whether he will volunteer to dress as a gorilla at the next practice.