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Would a good liar make a good accountant?

Do you have children? Have they ever told you a lie? Even a small teeny weeny lie?

Well, if they have then although you may not be particularly pleased with them, it may actually mean that they have good memories and excellent thinking skills.

Psychologists at the University of Sheffield tested 135 children and found that those children that lied performed much better than the honest children in the group.

The children in the study were aged between 6 and 7 years old and during the study they were given a trivia game. The answers to the trivia game were on the back of the card which they had been given. Initially, each child was in a room accompanied by one of the researchers but the researcher then left the child alone with the card with the answer on the back.

Before leaving the room the researcher told the children not to look at the answer but what the children didn’t know was that when they were alone in the room there were hidden cameras which were monitoring whether they would look at the answers on the back.

25% of the group subsequently cheated and looked at the answers on the back of their cards but claimed that they hadn’t cheated when the researcher returned to the room.

At a later stage, all of the children had to perform a separate memory test and the research found that the children who had lied performed significantly better than those children who didn’t lie.

Dr Tracy Alloway, project lead from the University of North Florida was also involved in the research and said that “this research shows that thought processes, specifically verbal working memory, are important to complex social interactions like lying because the children needed to juggle multiple pieces of information while keeping the researcher’s perspective in mind”.

This has got me thinking as a lot of the readers of this blog are accountants or studying to be accountants.

“Thought processes”, “verbal working memory”, “juggling multiple pieces of information” and “keeping other people’s perspective in mind” are all skills which many accountants need.

Does this mean that you would make a good accountant if you were a good liar when you were a child?

Whatever your answer is, I’m not sure I would believe you…

Would you do this with your job?

If a company outsources jobs, in some situations it can be seen as good business practice but if an individual outsources his own job then what is that seen as?

Outsourcing is where a company gets another organisation to undertake a job or business function that would have previously been completed in-house. This is often done for cost saving reasons and an illustration of outsourcing would for example be getting another organisation to maintain your payroll.

I’ve never heard of an individual outsourcing his own job though but that has just changed.

Verison is one of the leading telecoms companies in the US and their security team provided details of a case study where an employee by the name of “Bob” who was a top developer had actually outsourced his own job to China without his employers knowing about it.

In other words, he had received his salary from his employers but had personally paid for somebody else to do his job at a cheaper rate without his employer knowing about it!

He was paid in excess of USD 100,000 for his job and yet he was paying a Chinese consulting firm less than 20% of that to do the job for him.

According to Verison a typical day for Bob was:

9:00 a.m. – Arrive and surf Reddit for a couple of hours. Watch cat videos (!!)
11:30 a.m. – Take lunch
1:00 p.m. – Ebay time.
2:00 – ish p.m Facebook updates – LinkedIn
4:30 p.m. – End of day update e-mail to management.
5:00 p.m. – Go home

Despite not actually doing any of the work himself his performance reviews were excellent and he had been regarded as the best developer in the building.

So, in summary – he was paid a pretty good salary and all he did was play around on the internet.

All his real work was outsourced by him to a Chinese company. He paid them whilst his employer paid him 5 times the amount that he had paid the Chinese company.

Bob has now lost his job but it does raise an interesting debate as when a company outsources it’s seen as a clever move but when an individual outsources their own job they end up losing that job.

Anyway, whilst you’re thinking of that particular point I’d like to mention that the next blog article will be written by a Chinese company but please don’t tell my employer.

Meanwhile I’m off to watch some cat videos…

How much would you really take?

How much holiday would you take in a year if your boss said you could take as much as you liked?

If it were me, I’d become a virtual stranger in the office given the number of days I would be lounging about on holiday.

In reality though the few companies who are offering their staff unlimited time off are actually finding that their employees are taking fewer days holiday when they are given the option of taking as many days off as they like.

Bloomberg has reported that Grant Thornton, the 6th largest accounting firm in the US has just announced that they will be offering their US staff unlimited time off.

GT has launched a video of some of their staff being told the news and perhaps unsurprisingly they seem happy (possibly also, a little unsure as to whether the person behind the video camera had been drinking and was making the whole thing up…)

Bloomberg reports that When it comes to the Big 4 accounting firms in the US, KPMG LLP offers a maximum of 30 days, Deloitte LLP has a maximum 35 days and PwC has a maximum of 22 for management level staff, according to the companies. EY has a minimum of 15 days with additional days added with years of service.

GT though are no doubt hoping their new holiday policy will make them a more attractive employer and Pamela Harless, chief people and culture officer for GT said “This is a modern move for an industry where these types of benefits aren’t really common”. GT are “convinced it will help us to be far more attractive in retaining talent as well as attracting talent.”

What is perhaps surprising though is that for the very small percentage of companies who already offer their employees unlimited holiday entitlement, their experience has been that the number of days taken as holiday as actually fallen since unlimited time off was introduced!

Haje Jan Kamps, the founder of Triggertrap identified this problem and highlighted that “Because we weren’t explicitly tracking, people felt guilty about taking time off. It also turns out that there was a difference in the patterns for how people took time off: Some were taking a week here and a week there, but others were just taking the odd day.

The problem with the latter is that it seemed like they were always away. That’s OK, of course, but if other members of the team feel as if someone’s taking the piss, that’s bad for morale all around.”
In summary though, an interesting development for GT and well done to them for launching such an initiative with the aim of incentivising and motivating their staff.

One interesting final question though – if you could take as much time out of the office as holiday without it affecting your career prospects, how much would you take?

Is it a load of bear or a load of bull?

The major stock markets around the world have had a rough ride this last week. The drop in share prices has been driven by the heavy falls on the Chinese stock market. At the time of writing the Shanghai Composite index (a stock market index of all stocks that are traded at the Shanghai Stock Exchange) has fallen by nearly 16% over the last week.

If you read the financial press words such as “bear market”, “bull market” and “correction” are being used a lot.

What do these phrases mean and where do they come from?

A bear market is where share prices are falling and is commonly regarded as coming into existence when share indexes have fallen by 20% or more. A market correction is similar to a bear market but not as bad (a market correction is where there is a fall of 10% from a market’s peak).

A bull market on the other hand is where share prices are increasing.

So, where do the phrases bear market and bull market come from?

There are two main views on the origin of these terms.

The first view is based on the methods with which the two animals attack. A bear for example will swipe downwards on its target whilst a bull will thrust upwards with its horns. A bear market therefore is a downwards market with declining prices whilst a bull market is the opposite with rising prices.

The second view on the origin is based around the “short selling” of bearskins several hundred years ago by traders. Traders would sell bearskins before they actually owned them in the hope that the prices would fall by the time they bought them from the hunters and then transferred them to their customers. These traders became known as bears and the term stuck for a downwards market. Due to the once-popular blood sport of bull and bear fights, a bull was considered to be the opposite of a bear so the term bull market was born.

Whatever the actual origin of the terms though I’m sure most people will be hoping for a bull market rather than a bear market.

An impressive lady but competition is coming.

She’s an interesting lady.

Her full name is Barbara Millicent Roberts. She’s 56 years old and has had over 150 different careers including being a lifeguard, a doctor and a Spanish language teacher. Perhaps most impressively of all she travelled into space in 1965, four years before Neil Armstrong walked on the moon.

She’s managed to do all of this despite being only 29 cm tall.

The Barbie doll is the centrepiece of many a child’s toy cupboard and it’s been estimated that over a billion of them have been sold in more than 150 countries since they were first introduced in 1959.

There have been a number of business issues faced by Barbie recently. Even though there’s an Accountant Barbie, I should in fact clarify that and say that there have been a number of business issues faced by Mattel, the owner of the Barbie brand.

Some of you may have heard of Bratz dolls.

Bratz dolls were a competitor to Barbie dolls back in the early 2000s and they were pretty successful. They were so successful that by 2004 they had taken more than 40% of the UK toy doll market and had in fact also taken the top spot for sales of dolls which had been held by Barbie since records began 10 years earlier.

In 2006 Mattel sued MGA Entertainment, the owners of the Bratz brand as they claimed that the Bratz doll creator Carter Bryant was working for Mattel when he developed the idea behind Bratz.

In essence Mattel argued that as they were paying Mr Bryant to work on Mattel matters and not those of another venture the Bratz doll idea was Mattel’s and not MGAs.

Back in 2008 a Californian judge agreed with Mattel’s claim and told MGA to stop making and selling Bratz dolls and also ordered MGA Entertainment to pay Mattel $100 million in damages.

However, MGA weren’t happy with this decision and the case went back to court in 2011 where a federal jury delivered a verdict supporting MGA.

Now whilst the court cases between Mattel and MGA are all very interesting, if you’re a parent of a young daughter what is probably of more relevance is that the Bratz dolls are being relaunched onto the market this coming weekend.

So, if you’re queuing up with your daughter to buy a Bratz doll this weekend you can impress her with your background knowledge of who owns the brand as well as let her know that the UK doll market is the second largest and second fastest growing segment of the UK toy market and has grown 11% over the last year to reach £288m.

I’m sure she’ll be very impressed with your discussion and won’t at all be interested in the doll she’s about to get….

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

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.

This is one way to lose your job…

Let’s be honest now. Have you ever played around on the Internet whilst at work?

Most of us will probably have had a quick look at websites such as Facebook or news sites but it’s worth bearing in mind that most organisations have a policy which restricts looking at non-work related websites.

dog with computer2Some people will mistakenly think that if they delete the browser history it will remove all traces of what sites have been visited but the IT savvy people amongst you will realise that the history is stored on servers.

Three judges in the UK obviously didn’t realise their browsing history would be tracked and following an investigation they were fired as they had been viewing pornographic websites on court computers.

The court cases they were presiding over obviously weren’t exciting enough and they took matters into their own hands to liven up their days by viewing adult websites on the court computers.

One of the judges who was fired was called Timothy Bowles. In a bizarre coincidence there is in fact another judge in the UK with the same name.

You have to feel sorry for the innocent one of the two.

Imagine the scene, the innocent Timothy Bowles is sat at work when word goes around amongst his colleagues that Timothy Bowles has lost his job because he was looking at porn during working hours.

A frantic clarification was issued by the Judicial Conduct Investigations Office stating “that District Judge Timothy (Paul) Bowles who sat at Romford County Court and has been removed from office should not be mistaken for the High Court Chancery Master Timothy (John) Bowles. There is no connection between the two.”

So, in conclusion three judges have lost their job due to watching pornography on court computers.

There is an important lesson to be learnt from all of this and that is, if you’re going to look at pornographic websites in the office it’s best to do so using a colleague’s computer rather than your own…

Deloitte’s new US CEO used to make up stories to leave early.

Very many congratulations to Cathy Engelbert.

Cathy is the first female CEO of a major accounting firm in the US. She’s been appointed as the leader of Deloitte’s 65,000 US employees and it sends a great message about equal opportunities.

cathy_engelbertIt’s a fantastic achievement so many congratulations.

There’s an interesting interview with Cathy in the Washington Post.

The interview highlights some nice facts. For example, when Cathy first started at Deloitte in 1986 only 7% of Deloitte partners and principals were women. Fast forward to 2015 and women now make up about 25% of the partners in the firm. There is still a way to go until it’s 50% but it is certainly heading in the right direction.

However, probably the most interesting fact that came out of the interview was her admission that she made up stories so that she could get out of work to spend some time with her kids:

“I used to make up stories if I had to leave early for something related to my kids. I learned my lesson, because a woman who left the firm actually shared that she was leaving because she didn’t have kids yet, she wasn’t even married, but she saw people like me and didn’t want to be like that—always working.”

A very honest interview by Cathy and of course, she doesn’t make up stories any more. She’s the CEO so she can leave whenever she wants to…

Would you like to do this at lunchtime?

What do you normally do at lunchtime?

Do you grab a bite to eat and head back to your desk to continue working (or at least pretend to work whilst playing on the internet)?

cat in the officeDo you grab some fresh air outside the office to recharge your batteries?

A recent initiative between the app based taxi service Uber and an animal rescue organisation has resulted in what I think would be a fantastic way to spend your lunch break and also to recharge your batteries.

You can get a kitten delivered to your office for 15 minutes between midday and 4 pm.

Yes, a real live cute fluffy kitten!

What a great way to de-stress the office – adorable kittens arrive for 15 minutes of playtime in the office.

The kitten visit costs approximately £20 and they can be ordered vie Uber’s app. All the proceeds go to the animal rescue centre.

Everyone here in the office was getting excited when they heard the news but sadly the service isn’t currently available in the UK (at the moment it is only available in Australia and America).

I think it’s a brilliant idea though – it can help de-stress the office, the cat’s rescue centre gets additional revenue and if you happen to fall in love with the kitten the kitten may well find it’s new “forever home” rather than have to stay at the cat’s rescue centre.

It also has an added benefit if you happen to dislike a colleague in your office who is allergic to cats…