Posts

Cash is king but jewellery looks nicer…

Before cash came along, people used to barter. Somebody who had grown vegetables would exchange potatoes they’d grown with a baker who’d baked bread. A farmer would exchange a cow with someone who had grown rice. And so on…

This was all very well if you had lots of vegetables or lots of cows but exchanging 1,000 kg of potatoes for the latest Xbox or taking a cow with you to pay for cinema tickets was never going to work.

As a result, along came cash.

The Lydians (now part of Turkey) are widely believed to be the first Western culture to make coins and their first coins came in to existence way back around the time of 700 BC.

Since then things have developed.

Bills of Exchange were introduced in Italy in the 12th century (Bills of Exchange are paper documents which enable traders to buy and sell goods without having to carry cash).

The Bank of England introduced printed cheques in 1717.

The first credit card in the UK was issued in 1966.

Online banking was launched in the late 1990s.

Through all of this cash has remained and there are now 180 currencies recognised as legal tender by the United Nations member states.

Things are changing though and Apple, Samsung and Google all have contactless payment systems whereby money is loaded onto an app on your phone and payment can be made by scanning your phone at a contactless terminal.

The company Ringly have taken things a step further though and have a partnership with MasterCard which enables you to pay for items with the tap of a ring.

The rings that Ringly sell (including the ring shown in the photo above) cost between $195 and $260 and use technology to link the ring to your phone to access the Ringly app. The app will then enable payment to be made. This is pretty impressive given that all the technology has to be fitted onto the surface of the ring.

The end result is that you will be able to purchase items via a contactless terminal by simply tapping your ring without getting your wallet or purse out.

So, is this a genuinely useful idea or just a “gimmick”? After all, you’ll still need your phone with you to make a payment.

Either way, it’s a nice excuse if you were thinking of buying a new ring.

Laziness and intelligence.

Are you lazy? Do you know anyone who is lazy?

Whilst a lot of you won’t admit to being lazy (and I’m sure most of you aren’t in fact lazy!), some of you will know somebody who you feel is lazy.

Is it such a bad thing to be lazy though?

Perhaps not, as according to a study by scientists from Florida Gulf Coast University laziness could correlate with high intelligence.

The study found that people with a high IQ rarely got bored. As a result, they spent more time lost in thought. On the other hand, the study suggested that less intelligent people were more likely to be prone to boredom and consequently were more likely to do more physical activity.

The researchers worked with 2 types of students. The first group expressed a strong desire to think a lot whilst the second group were keen to avoid doing things which were mentally taxing.

The participants were then fitted with fitness trackers which monitored how much they exercised over a 7 day period. The study found that people who thought a lot were much less active than those individuals who avoided high-level thinking. Interestingly, this discrepancy in levels of activity only happened during the week and there was no difference during the weekend.

Before any of the lazy people out there start claiming that they are more intelligent, it’s worth noting that the sample size of the test was small and further tests will be needed to prove the correlation.

How to impress over a business lunch…

Picture the scene. You’ve got an important business lunch coming up. You want to make a good impression on the person you are meeting with. What should you eat for lunch?

A study published in the Journal of Consumer Psychology has some interesting findings which indicate that if you have an important business lunch, there are various benefits to ordering the same food as the person you are trying to impress.

Scientists from the University of Chicago studied nearly 500 people to identify whether eating the same food helped them agree in negotiations.

The researcher’s conclusion was that people who are served the same food are more likely to trust each other, smooth out problems and make deals.

As part of the study, participants in the research were told to imagine they were “investors” who had to decide whether to invest in funds operated by their “fund manager” eating partners. The researchers found that those people who were served similar food invested more money.

Another interesting finding in the study was the link between food consumption and the effectiveness of advertising. The authors said that “consumers are more trusting of information about non-food products – e.g. a software product – when the advertiser in the product testimonial eats similar food to them”.

Back to the business lunch though and although the research found that there are benefits to ordering the same food as the person you are trying to impress, I’m not sure that if you’re wearing a nice clean white shirt to the lunch meeting you should necessarily follow the other person in ordering that “tricky to eat tidily spaghetti with the sloppy tomato sauce”…

Would you stand for this?

Do you work in an office? Do you sit down at your desk most of the working day?

If you do, then it may be a good idea to ensure you stand up and move around a bit during the day.

Recent research has estimated that 1 in 9 deaths can be blamed on sitting down for at least 6 hours a day.

Let’s pause for a moment as that’s a shocking figure!

In the UK alone that would equate to thousands of people dying every year due to lack of movement and the cost to the National Health Service is estimated at £700 million annually.

Research published in the Journal of Epidemiology and Community Health estimated that 17% of diabetes, 5% of heart disease and 8% of lung cancer cases could be avoided with less sitting.

Leonie Heron from Queen’s University Belfast was the lead author of the study and said “You need to put your body under a little bit of stress to maintain a healthy heart and whole system”.

She went on to say that “It suggests that it is bad for our health how our working lives are structured for a lot of people. You can attenuate that risk by being more active in your leisure time, but it’s something employers can look at. Maybe they should be providing opportunities for employees to be active during the day, perhaps making sure people move every hour…or providing opportunities during lunch and coffee breaks.”

My guess is that a lot of you do sit down for at least 6 hours a day working at your computer. It’s probably a good idea therefore to remind yourself to get up and move a bit when you can as it will be good for your health.

Unless, that is of course, you’re getting up to walk out of the office to have a cigarette…

Superman helps hackers.

It’s a sign of the times that hackers are constantly on the lookout for weaknesses in people’s computer security systems.

Individuals can go a long way to making things more difficult for the hackers by ensuring they have up to date anti-virus software in place and that their passwords are good passwords.

But what is a good password?

Before answering that, let’s look at some bad passwords.

The National Cyber Security Centre (NCSC) released a report on some of the most hacked passwords. They analysed hacked accounts where details were being sold by hackers.

In one year alone an astonishing 23 million people around the world with the password “123456” were hacked.

You should really hang your head in shame if your password is 123456 as it’s very easy to hack into.

OK, what about the name of your favourite football team as your password. Would that provide you with more protection?

Alas not as football team names are very common passwords.

Roughly 280,000 accounts were breached in a year with the password “Liverpool”. 

“Chelsea” and “Man-Utd” passwords were breached 216,000 and 59,000 times respectively.

Using the names of your favourite music artist also isn’t a good idea.

The most popular passwords using the names of music artists are “blink182” and “50cent” (these are probably popular as they satisfy the need to have letters and numbers in a password).

If you’re a fan of superheroes then avoid Superman, which was the most common superhero inspired password.

So, onto good passwords.

According to Ian Levy, the Technical Director of NCSC, “Using hard to guess passwords is a strong first step and we recommend combining three random but memorable words. Be creative and use words memorable to you, so people can’t guess your password.”

There you go.

As easy as 123 or should that be, as easy as “123456”…

Exams for sale….

One of the five fundamental ethical principles is Integrity.

Being straightforward and honest is a vital characteristic of being a professional accountant.

Most people who are studying for their professional exams have one thing on their mind. Namely, to pass their exams but four students who were studying for their ACCA exams had other things on their minds and at the same time, were not the brightest individuals out there.

What they planned to do was to register for some Computer Based Exams (CBEs) and then whilst sitting the exams they would use their mobile phones to take photos of the computer screen showing the questions. They would then sell these photos with the questions on them via the internet.

The four individuals involved, Chen Yiyun, Hiujiao Ru, Zehui Gong and Ziying Wang decided to sell the questions on Taobao Marketplace, a Chinese shopping website.

They no doubt thought that this was an extremely clever way of making some money. What could possibly go wrong by taking photos of the questions and then selling them online?

One of the other fundamental ethical principles is that of Professional Competence.

Now, if these individuals had even a minuscule amount of Professional Competence, they would have reviewed the photos before selling them.

Alas for them they didn’t review them.

If they had reviewed them, they would have seen at the top of the computer screen in the photos their ACCA student registration number and the exam centre.

ACCA were made aware of the questions being for sale and made a test purchase on the Taobao Marketplace. Given the student registration numbers were on the screen, they didn’t need a team of top detectives to identify the individuals involved.

Unsurprisingly, the four individuals are now ex-students of ACCA having been found guilty of misconduct and they were ordered to pay costs ranging from £3,500 to £7,000.

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…

Remind me – what was I going to buy?

Do you wish you had a better memory? Perhaps you do but you can’t remember whether or not you do.

If this is the case then help may be at hand.

University researchers have suggested a simple technique which could improve your memory.

Dr Mark Moss from Northumbria University led a research study which found that students studying in a room with the smell of the herb rosemary (in the form of essential oils) achieved 5% to 7% better memory results than students undertaking similar studying in a room without the smell of rosemary.

Dr Moss reported that the sense of smell in humans is highly sensitive and sends messages to the brain which can set off reactions and responses.

In the case of rosemary, the smell could well result in a better memory.

This view isn’t new though as ancient Greek students used to wear garlands of rosemary in their exams and Ophelia, the young noblewoman in Shakespeare’s play Hamlet said “There’s rosemary, that’s for remembrance.”

So, in conclusion, the next time you are studying hard for an exam it may be an idea to buy some rosemary essential oils to help your memory.

That is of course, if you can remember to buy some in the first place…

(Details of some of the work done by Northumbria University can be found here).

Pass the doughnuts…

Does your weight affect the amount of money you earn?

That’s an interesting question and researchers from the universities of Strathclyde in Glasgow and Potsdam in Germany have come up with a potential answer.

They analysed data from nearly 15,000 working men and found that men within that the recommended Body Mass Index (BMI) health range earnt more than those who were outside of the range.

Individuals who were underweight on the body mass index were found to earn 8% less than those who were in the top end of the healthy bracket. They found that the effect was more prominent in manual jobs where no doubt the extra strength of the guys in the healthy weight bracket helped increase their earnings.

What was perhaps surprising though was that there was also a difference in earnings in white-collar office jobs. They found that in the more middle-class occupations the rewards peaked at a BMI of around 21.

It wasn’t just men who were impacted though. The study also looked at the weight and earnings of 15,000 German women and found that the slimmest earnt the most and the obese the least.

Jonny Gifford, of the Chartered Institute of Personnel and Development was quoted in the press as saying “it is depressing that, in this day and age, looks are in any way a factor in how much people are paid”.

I have to agree with him as organisations should employ people on the basis of their abilities as opposed to how heavy they weigh.

Anyway, best dash as I’ve got a doughnut to finish…

Start walking…

Do you sit at a desk when you’re at work?

If you do, how long do you spend sat there before you get up to move around?

If you sit at your desk and work on your computer without moving around then I’ve for some unfortunate news for you because a sedentary lifestyle where you sit at your desk without moving around is bad for you.

Researchers at the University of Utah examined the health, exercise and nutrition records of over 3,000 Americans over a 3 year period and on average they spent 34 minutes sitting or lying down per hour whilst working.

Ignoring the question as to what were they doing lying down it will come as no surprise that the more time they spent on sedentary activities the more likely they were to die during the study.

Swapping sitting with standing up appeared to make no difference to the risk of death but what did make a difference was replacing 2 minutes sitting with 2 minutes of walking around

2 minutes of walking around per hour instead of sitting down reduced the risk of death by 33%.

So, the trick is to make sure you walk around for a couple of minutes an hour whilst at the office.

Of course, if those 2 minutes are spent walking to the vending machine to stock up on crisps and chocolate to eat at your desk there may not be that much of a benefit…

I never emailed you…

Sometimes it’s the simple scams that can cause the most damage.

We hear all the time about ignoring scam phishing emails where fraudsters are pretending to be banks to get online bank account log in details but there’s a new scam involving email which is costing some people a lot of money.

The Art Newspaper reported that at least nine art galleries and art dealers have been caught up by the fraud. The amounts lost to the fraudsters have been significant with amounts ranging from £10,000 to £1 million.

The fraud itself is fairly simple.

The fraudsters hack into an organisation’s email system and look out for emails sending invoices to clients.

For example, if an art dealer has made a sale of a piece of art and then emails the invoice through to the customer for payment, the fraudsters send another email straight after the original email.

This second email looks like it’s come from the art dealer and includes an identical invoice with the only exception being it has a different bank account on it for payment of the invoice. Yes, you’ve guessed it but the bank details on the second invoice are not those of the art dealer but instead are details of a bank account in the name of the fraudsters.

The customer innocently pays the invoice as it looks genuine and as soon as the money is received the fraudsters withdraw the money, close the bank account and are never heard of again.

As far as the art dealer is concerned they are waiting for the payment to be made but the customer has already paid the money but to the fraudster. By the time the fraud is discovered it is too late.

There’s a fairly simple solution to this and ensuring that anti-virus programmes are up to date and email passwords are changed regularly will go a long way in preventing this sort of fraud.

Does this help you concentrate?

The Journal of Consumer Research published the results of five experiments into how the level of background noise can impact on performance when someone is working on creative tasks.

The  results are interesting and in simple terms found that a moderate level of ambient noise is better for enhancing performance on creative tasks than both low levels and high levels of ambient noise.

Or put another way, people are more likely to be able to work creatively if there is a medium level of ambient noise compared to where there is silence or loud noise in the background.

So, what lessons can we learn from this if we’re studying?

Whilst the optimum situation and level of background noise is very much a personal preference the science behind it could indicate that we should head somewhere with a mid level background noise.

Now, where could we find such a place?

Well, the local pub around the corner has a great mid level background noise as far as I’m concerned but there are some liquid distractions that will harm studying.

What about a coffee shop or cafe? Again, there would be some great mid levels of background noise but you’ve got to get there and what happens if you don’t find a seat. All of this will dig into your valuable study time.

Well, up step the fantastic website coffitivity.com which enables you to play background coffeeshop noise on your computer whilst you’re studying.

You can’t order a Cafe Latte or Cappuccino but in my opinion it’s a great tool for those who like to study with a non intrusive background noise.

It’s also excellent for people who don’t have any friends to go to the coffee shop with.

Standing up for productivity.

How would you feel if your chair was taken away from you at work? Probably not too happy I would guess.

A bit of research though may make your boss think otherwise.

Scientists from the Texas A&M Health Science Centre School of Public Health installed “standing desks” in a call centre employing over 150 people. The standing desks could be adjusted so that the employee could work at them either sitting down or standing up.

Half of the employees were given sit–stand desks to use whilst the other half were given traditional sitting desks. The performance of the employees was recorded over a period of 6 months and the results were surprising.

Despite the employees who had the sit–stand desks only using the desks in the standing position for a third of the time, their productivity increased by 50%. Productivity was measured by the number of successful calls that the employee made to the clients with “successful” being defined as being when the company earned revenue from that call.

Each employee typically made in the region of 400 to 500 calls every month and the company wanted them to achieve on average 2 successful calls per hour. Those with the sit–stand desks achieved the target whilst those with the traditional seated desks averaged 1.5 successful calls per hour.

Dr Gregory Garrett from the centre was quoted as saying that “having the ability to move throughout the day really makes a big difference”.

So, is it time to introduce standing chairs in your office?

Don’t sweat your exams

Most people enjoy it when the weather gets warmer. Sunny weather often makes people happier but some research indicates that a heatwave may not be good news if you’re taking an exam.

Researchers from Harvard Chan School of Public Health found that students who were exposed to hotter temperatures did significantly less well in cognitive tests than those students who lived in a temperature-controlled environment.

The research involved a group of students who had already been allocated accommodation on campus. Half of the rooms had air conditioning and half didn’t.

The students were followed during a 5-day heatwave where temperatures exceeded 26C.

Before, during and after the heatwave, the students had to perform a number of cognitive tests which measured the speed they processed matters as well as their working memory. The results showed that the scores of these students in the hotter accommodation fell by 13% compared to their colleagues in the air-conditioned temperature stable environment.

The researchers said that it was not clear what was behind the drop in performance during an increase in temperature. It could have been because the brain was working harder on maintaining critical body functions such as thermoregulation or it could have been due to a poorer quality of sleep due to the heat.

Either way, let’s hope it’s not a heatwave the next time you sit an exam…

Will auditors become more like Tom Cruise in the future?

Gone are the days when auditors were manually checking and ticking lots of pieces of paper. Today’s auditing techniques involve significant use of computers.

But how far can this computer use go? Will they be able to predict when accounting fraud is going to take place as opposed to tracking transactions that have already occurred?

The film Minority Report starring Tom Cruise was based around software that could predict when a crime was going to happen and the culprits would be arrested before they actually committed the crime. Although this film seemed well and truly within the realms of science fiction, IBM have worked in conjunction with the Memphis police department in America to develop a sophisticated computer software package which aims to predict where and when future crimes are likely to occur.

The software is known as Crush (Criminal Reduction Utilising Statistical History) and is used to identify potential crime hotspots based on a variety of data including crime reports, offender profiles and strangely enough even weather forecasts.

Once these upcoming crime hotspots have been identified then the police can allocate resources accordingly.

The rollout of this software reportedly resulted in a reduction of serious crime by 30%.

Back to auditing though and will the next step be predicting when a fraud is likely to occur using statistical analysis based on industry, profit movements, director’s personal life and spending habits (plus the weather of course)?

Given the reliability of some computers though, one thing for sure is that if you happen to live in a town called “Syntax Error” then you may have a surprise visit from a Tom Cruise lookalike with a briefcase and a calculator…

Best to take it back…

Most of you have probably had an interview. In fact, some of you may have had a number of interviews but a boss of one of the top companies in Australia has recently disclosed a pretty unusual way of deciding who not to offer a job to.

Trent Innes, who heads up Xero in Australia said that he will greet the person when he or she arrives for the interview and then take them to the kitchen to offer them a drink before heading to the meeting room with the drink. Even if they aren’t tea or coffee drinkers they will generally walk away with a glass of water.

He explained in the Venture Podcast with Lambros Photios that after taking the drink back for the interview “one of the things I’m always looking for at the end of the interview is, does the person doing the interview want to take that empty cup back to the kitchen?”

He explained that what “I was trying to find was what was the lowest level task I could find that regardless of what you did inside the organisation was still super important that would actually really drive a culture of ownership.”

He went on to say, “You can develop skills, you can gain knowledge and experience but it really does come down to attitude, and the attitude that we talk a lot about is the concept of ‘wash your own coffee cup’.”

That’s quite a smart move by Mr Innes as he said that attitude was the most important trait he looked for when hiring people.

He said that “Especially in a fast growth company or a start-up environment or scale up environment – you need people with a really strong growth mindset and that comes back to their attitude.”

So, how many interviewees do you think offered to take their cups back?

Perhaps surprisingly, the number of people who offered to take their cup back to the kitchen was pretty high. According to Mr Innes only 5 to 10 per cent of the interviewees didn’t offer to return their empty coffee cup back to the kitchen.

So there you go. If you’re attending an interview and you go to the kitchen with the boss to get a drink, it’s probably a good idea to offer to take the cup back.

An unexpected ending…

A lot of you may have been on business trips but I bet your trip wasn’t as exciting (and tragic) as this gentlemen’s trip was.

What was also surprising was that his employer was found liable for his death as it was classified as an industrial accident.

The exact cause of death was a cardiac arrest whilst he was having sex with a stranger he had met on the business trip.

Now, whilst having a heart attack during sex with a stranger probably wouldn’t meet most people’s definition of an “industrial accident” a French court found otherwise. The court stated that the employer was responsible for any accident occurring during a business trip and ruled that his family were entitled to compensation.

The man who died on the job, named as Xavier X, was working as an engineer for TSO, a railway services company based near Paris and his employer had perhaps quite reasonably argued that he was not carrying out professional duties when he got into an extra marital relationship with a total stranger in his hotel room.

This opinion though wasn’t accepted by the court and they upheld the view that sexual activity was normal, “like taking a shower or a meal”.

As a result of it being classified as a normal activity on a business trip, the death was considered to be an industrial accident and under French law, partners or children of industrial accident victims receive up to 80 per cent of their salary until what would have been the person’s retirement age, with pension contributions paid from then on.

I’m not kicking a ball, I’m being looked at.

Professional footballers must have a great life. Playing football and earning significant amounts of money. Oh, and using some very clever tax advisers…

There are serious amounts of money being paid to some of the top footballers. Payments of in excess of £200,000 per week are fairly common (over £10 million per year).

This income doesn’t simply go into the tax return as salary. No, there are far more sneaky/clever [delete as you feel appropriate] ways of minimising the tax liability (or should I say maximising the after-tax income).

One of the methods used to minimise the tax is to make two types of payments to the player.

One would be for playing football whilst the other would be for “image rights”.

“What are image rights?” I hear you say.

Well, the basic idea is that the player would agree to let the football club use his image in any sponsorship or TV deals that the club has.

Without going into too much technical detail, the key difference from a tax point of view is that the payments made to the player for playing football would be classified as employment income and would be taxed at 45%.

Payments for image rights on the other hand would in effect be rental payments for an intangible asset. Players would assign their image rights to a company (where they could be the 100% shareholder) and the company would only pay corporation tax of 19% on the income.

With the globalisation of the Premier League, there are now numerous players who are not tax domiciled in the UK and if their image rights were channelled through a non-UK company they could potentially escape tax altogether.

Given the size of the payments involved there’s a lot of tax at stake and no doubt the tax authorities will be looking closely at these schemes.

In the meantime, most of the readers of this blog are not professional footballers but instead undertake far more interesting finance and accounting activities in an office. Why not suggest to your boss at your next pay review that you’d like image rights instead of a pay rise so that you can receive more tax advantageous rental income from an intangible asset via your personal company…

KPMG partners cheated in exams.

Ethics are pretty important if you’re a partner in an accounting firm. Unfortunately for these guys though they weren’t the most ethical of people as they were involved in cheating in exams.

The cheating was uncovered by the SEC (Securities and Exchange Commission) in the US. They were initially investigating claims that KPMG had altered previously completed audit work after receiving stolen information about what inspections would be conducted by the Public Company Accounting Oversight Board.

During that investigation however they also found that numerous KPMG audit professionals cheated on internal training exams by sharing answers.

Cheating at exams by sharing answers? Surely that would be a junior member?

Actually, no.

The key people involved were (now former) KPMG audit partners.

The investigation stated that former partners Timothy Daly, Michael Bellach, and John Donovan were involved in the cheating.

They had obtained images of questions and answers to the tests from subordinates and then shared them with members of their team.

The tests which were taking place were in connection with ensuring that KPMG audit staff understood certain accounting and auditing principles.

KPMG themselves became aware of potential cheating on the exams and began an investigation. They sent a document preservation notice to all KPMG staff (this basically means not to delete or destroy any potential evidence).

The ex-partners however ignored this preservation notice. They deleted various text messages and denied any wrongdoing to KPMG investigators.

KPMG were obviously not happy with the situation when the truth emerged and the partners soon became ex-partners of KPMG.

The three individuals were also suspended from appearing or practicing as an accountant before the SEC (although they can apply for reinstatement in the future).

KPMG had a pretty bad time of it last year in terms of the stolen PCAOB information and the exam cheating and had to pay a penalty of $50 million.

Steven Peikin, co-director of the SEC’s division of enforcement, said: “Audit professionals play a critical role in the integrity of the financial reporting process and the protection of investors. These actions reflect our commitment to hold these gatekeepers responsible for breaches of their professional obligations.”

A KPMG spokesperson said “We are a stronger firm as a result of the actions we are taking to strengthen our culture, governance and compliance program.”

Manchester Utd and Deloitte

Deloitte has stated that Manchester United are better than Liverpool.

Now before anyone starts getting concerned that Deloitte are moving away from finance and becoming football pundits, I should stress that I’m referring to the Deloitte Football Money League.

Deloitte has been compiling the Football Money League since 1996/97 and the League lists the top 20 clubs in the world for revenue in a football season. They have recently released the figures relating to the 2018/19 season and a few records were broken.

The combined revenue for the 20 richest clubs in the world grew by 11% and reached a new high of €9.3bn (£8.2bn).

It’s a Spanish top two for the second consecutive year. This time though the positions are reversed with Barcelona taking top spot and Real Madrid dropping to second place.

In terms of the fortunes of the eight English Premier League clubs in the table, Manchester United remains in third with revenue of €712m.

United’s closest Premier League rivals, Manchester City and Liverpool, generated revenues of €611m and €605m respectively.

The Deloitte Football Money League measures a club’s earnings from match day revenue, broadcast rights and commercial sources, and ranks them on that basis. The study doesn’t include player transfer fees though.

More details on the report can be found here and the top 10 in the league are:

1 Barcelona €841m
2 Real Madrid €757m
3 Manchester United €712m
4 Bayern Munich €660m
5 Paris Saint-Germain €636m
6 Manchester City €611m
7 Liverpool €605m
8 Tottenham Hotspur €521m
9  Chelsea €513m
10 Juventus €460m

You can’t McFlurry Love

Until recently, Steve Easterbrook was the boss of McDonalds. He had been with them for a long time having started working for them back in 1993 as a manager in London.

Mr Easterbrook no doubt had a lot of affection for the company he ran but it turned out that he also had a lot of affection for a colleague as he had started dating a lady who also worked for McDonalds.

Although the relationship with his colleague was consensual, it didn’t go down too well with McDonalds.

According to the company, Mr Easterbrook had “violated company policy” and shown “poor judgement” (by “poor judgement” I assume that refers to him having the relationship rather than the choice of who he had the relationship with).

Now, whilst some people may say that it was a consensual relationship between two adults so let them get on with it, the key thing here is that it was against company policy and the two people involved had agreed to the company policy when they joined the firm so it’s a straight forward case of a breach of that policy.

More and more companies are having either outright bans on any relationships or are requiring individuals to disclose any relationships (I’m not a legal expert here but it does raise some interesting questions as to what is the definition of a relationship and how quickly after reaching that definition you need to notify your employer – is it minutes, hours, days…).

Mr Easterbrook won’t be short of funds to carry on wining and dining his new love as the termination package is pretty significant. He earned nearly $16m last year and will receive 26 weeks of pay on his departure.

Bloomberg estimate that his total leaving package which includes previously granted shares will be in excess of $37m.

That should buy a few romantic meals at Burger King for the two love birds.

Would you do this for a bit of chocolate?

What’s one way of increasing the chances of getting hold of someone’s password?

Does it involve the use of the very latest supercomputer? Does it involve some clever IT geeks hacking into a computer for you?

Or does it involve chocolate?

A bit of research published in the journal Computers in Human Behaviour attempted to find out how people are obligated by the kindness of others. Or in other words, if someone does something nice for a person, how likely is it that the person will be nice back to them?

The researchers in Luxembourg conducted a survey of random people in the street asking them about internet security including questions about passwords.

Some of the people interviewed were given chocolate and some weren’t.

30% of those that were not given chocolate revealed their passwords which to me is a surprisingly high percentage and just goes to show that quite often human stupidity is the weakest link in internet security.

For the people who were given chocolate at the beginning of the interview the figure rose to 44% and if the chocolate was given just before the question on passwords was asked an incredible 48% gave their passwords! Yes, nearly half of the people asked their passwords as part of a survey told a complete stranger their password if they had been given chocolate.

Andre Melzer, the author of the study said that “when someone does something nice for us we automatically feel obliged to return the favour”.

So, in conclusion, if someone walks up to you in the office and offers you a piece of chocolate be careful what you say…

You’re fired…

How many CEOs of top global companies were replaced last year?

Well, the answer may surprise you and what also may surprise you is the reason they lost their job.

PwC have been keeping track of the movements of the CEOs of the largest 2,500 global publicly listed companies since 2000 and the most recent data for 2018 has been released and it shows some interesting things.

In 2018 the number of departures of CEOs reached a record level with nearly 18% being replaced (up from 12% in 2010).

It was the reason for their departure though which raised some eyebrows.

CEOs can leave their jobs for a variety of reason and PwC categorised the reasons as planned (e.g. they were due to retire), forced (e.g. they did something a bit “naughty”) or M&A (e.g. they were no longer needed due to a merger or acquisition).

The latest split showed the 18% of departures as:

Planned – 12.0%

Forced – 3.6%

M&A – 2.0%

Digging a bit deeper though into the forced departures shows some worrying reasons.

Historically the main reason CEOs were forced out was due to poor results but for the first time the largest group of CEOs forced out was due to integrity reasons.

In 2018, 39% of those forced out were due to integrity reasons. Ten years ago in 2008 the corresponding figure was only 10%.

These integrity issues could include scandals such as improper conduct, fraud, bribery, insider trading, environmental disasters, misleading CVs, and sexual indiscretions, according to PwC.

So, in summary more CEOs are being fired and the main reason is integrity issues.

All in all, a pretty poor performance…

Dog seized to pay tax bill…

It’s always best to keep up to date with your tax affairs. Although most people don’t enjoy paying their taxes, it’s the law and if you don’t pay there can be serious consequences.

Over in Germany reports have emerged that make it fairly clear that you don’t mess with the German authorities when it comes to taxes.

An unnamed lady was behind in paying her taxes.

The authorities sent a debt collector around to collect whatever assets the family had to settle the tax liability.

According to the lady in question, two valuable items were identified.

One was the wheelchair of her paraplegic husband. Now, before even getting into the rights and wrongs of taking a disabled person’s wheelchair to settle debts, luckily for the family it was not an issue as it turned out that it was owned by a local association and was not the property of the family so the debt collectors couldn’t take it.

The authorities though have denied they tried to take the wheelchair and a spokesman said “Mobility aids for the disabled are absolutely exempt from being seized as collateral.”

One item though which was not exempt from being seized was the family pet.

Alas for Edda, the family dog, she was taken by the debt collector.

Edda is a pug and they are a pretty fashionable dog breed at the moment and the debt collector took the dog as settlement for the debt.

Edda was then listed on eBay and was sold to Michaela Jordan, a local police officer for €750 (approx. £650).

There’s a twist in the “tail” though in that the new owner has now sued the local authorities who sold Edda as apparently, she was advertised as being a healthy dog but has required veterinary treatment costing approximately €1,800.

We wish Edda well.

Would you send a selfie of your legs for a bonus?

I’m all for equal rights in the workplace. It doesn’t matter whether you’re male or female. It doesn’t matter what the colour of your skin is or your religious preferences. The only thing that does matter is whether or not you can do your job.

Not everyone shares the same view though and in Russia, aluminium manufacturing company Tatprof is offering a bonus to its female employees if they wear a skirt and makeup.

Oh, and to get the bonus they have to send a selfie of them showing their legs and make up to their (mostly male) bosses.

The bonus is 100 Russian Rubles (approx. £1.25) and it’s been reported that 60 people have so far sent in selfies to get the bonus.

Some may say that there are 2 sides to the argument.

The first, and probably most obvious, is that this is a step backwards in the workplace. A person should be judged by their ability to do their job rather than what their legs and make up look like. It’s 2019 for goodness sake and not the 1950s.

A counter argument though was put forward by Anasasia Kirillova, who works for the company’s department of corporate culture and internal communications who said that “Many women automatically put on trousers, so we hope that [the campaign] will increase our ladies’ awareness, allowing them to feel their femininity and charm when they make the choice of wearing a skirt or dress”.

It seems the message is coming from the top of the company.

According to Ms Kirillova, Tatprof’s male CEO Sergei Rachkov “really wants to maintain the female essence in every female employee of the company, so that young women do not have male haircuts, do not change into trousers, so that they engage themselves in handicraft, project all their warmth into raising children”.

Now, I’m personally not convinced by this counter argument but what about opening up the bonus option to everyone in the company?

What about offering the bonus to men as well as women who send a selfie of themselves wearing a skirt?

Would you drink this coffee?

Anyone that has studied hard for their exams will almost certainly at one time or another utilised the services of a strong coffee.

Whilst desperately trying to cram that last bit of knowledge into your brain before the exams there is often a temptation to grab a strong coffee late in the night to keep your mind awake.

For years students around the world have been utilising the caffeine in coffee to help get that extra mark or two.

Coffee is said to originate from East Africa where legend has it that a 9th century Ethiopian goat herder by the name of Starbucks Kaldi noticed that after his goats had ate some coffee beans they started bouncing around like teenagers at the local disco.

This started the journey of coffee and associated caffeine hits so loved by students around the world.

Over in Thailand though a new type of coffee has just been put on sale which has, how can I put it, but a pretty unusual processing method.

The key staff involved in the processing function are also unusual as they have massive heads and bodies, weigh on average 4,000 kg and are grey in colour.

Yes, that’s right. The key team members involved in processing coffee are 20 Thai elephants.

The new brew of coffee is “processed” by getting the elephants to eat some coffee beans and then stepping back (in fact stepping way back) and letting the natural digestive juices in their stomachs do the job of “processing” the beans before they are deposited naturally on the ground a day later.

The beans are then handpicked out of the elephant dung by people who probably don’t bite their nails before being dried and then ground into coffee.

The finished coffee is said to have a slight pooey taste smooth flavour without the bitterness of normal coffee and is some of the most expensive coffee in the world selling for nearly £150 per kilo.

It’s certainly an unusual production technique but it’s also for a good cause as 8% of the sales revenue goes towards the Golden Triangle Asian Elephant Foundation, a refuge for rescued elephants in Thailand.

Causing a bit of a stink…

There’s no room in the modern workplace for bullying and intimidating work colleagues.

Companies should have anti bullying practices in place and in most countries around the world there are laws to protect people who are being bullied.

The Oxford dictionary defines bullying as seeking to “harm, intimidate, or coerce someone perceived as vulnerable” but in some situations it’s difficult to decide whether or not an activity is actually bullying.

Over in Australia a worker claimed that he was bullied by a colleague who repeatedly broke wind at him.

David Hingst claimed that his ex-colleague Greg Short would “lift his bum and fart” on him up to 6 times a day.

Mr Hingst didn’t take this well and sued his former employer for A$1.8m (nearly £1m).

Now, let’s pause here for a moment and hold our breath.

Bullying in the workplace is clearly wrong but claiming damages of nearly £1 million when somebody breaks wind in front of you does seem a bit steep.

Mr Hingst was adamant though and last year took his case to the Supreme Court of Victoria.

The Court found that there was no bullying.

Mr Hingst didn’t agree with the decision and appealed against it and last week the appeal was heard by the Court of Appeal.

Mr Hingst reportedly told the Australian Associated Press that “I would be sitting with my face to the wall and he would come into the room, which was small and had no windows. He would fart behind me and walk away. He would do this five or six times a day”.

Mr Short, the alleged perpetrator of this “crime” had said that he may “have done it once or twice” but denied doing it with the intention of distressing or harassing Mr Hingst.

Alas for Mr Hingst, the Court of Appeal rejected his appeal and found there was no bullying.

Mr Hingst though isn’t taking this sitting down and reportedly has said that he plans to appeal to the High Court.

Room for improvement at the Big 4…

Oh dear. It certainly wasn’t a great performance by the Big 4 when it came to their annual inspections by the Financial Reporting Council (FRC) in the UK.

The quality of the audits performed had decreased and for KPMG in particular, according to the FRC “there has been an unacceptable deterioration in quality”.

The FRC is an independent body who check the quality of the audits undertaken by the 8 largest firms in the UK. Think of it as “auditing the auditors”.

They rate the quality of the audits undertaken using the following scale:

• Good (category 1)
• Limited improvements required (category 2A)
• Improvements required (category 2B)
• Significant improvements required (category 3)

Overall results from the most recent FRC inspections during 2017/18 show that 72% of audits required no more than limited improvements (compared to 78% in 2016/17). Or to put it another way, 28% of the audits reviewed required improvements (category 2B) or significant improvements (category 3).

For KPMG though things were particularly bad. When the FRC looked at their audits within the FTSE 350 (the largest 350 companies on the London stock exchange), they found that 50% required MORE than just limited improvements (compared to 35% in the previous year).

If you take a step back then this really isn’t very good is it. If you went to a restaurant where 50% of the meals served required more than limited improvements you’d be unlikely to go back to that restaurant again and I’m sure that restaurant wouldn’t be in business for much longer.

KPMG are going to face increased scrutiny by the FRC in the next round of inspections. 25% more KPMG audits will be examined over the 2018/19 cycle of work and the implementation of their Audit Quality Plan will be closely monitored.

So what went wrong?

The FRC noted that there were a number of factors. These included a failure to challenge management and show appropriate scepticism across their audits.

Stephen Haddrill, CEO of the FRC, said “At a time when public trust in business and in audit is in the spotlight, the Big 4 must improve the quality of their audits and do so quickly. They must address urgently several factors that are vital to audit, including the level of challenge and scepticism by auditors, in particular in their bank audits. We also expect improvements in group audits and in the audit of pension balances. Firms must strenuously renew their efforts to improve audit quality to meet the legitimate expectation of investors and other stakeholders.”

Whilst the level of quality found within the Big 4 audits fell, the performance of the mid tier companies improved. The FRC inspections on BDO, GT, Mazars and Moore Stephens showed general improvements in the quality of inspected audits.

The FRC’s Audit Quality Review is explained in more detail here and if you’re interested in reading the reports on the individual firms they can be found on the following links:

BDO LLP Public Report 2017/18 (PDF)

Deloitte LLP Public Report 2017/18 (PDF)

Ernst & Young LLP Public Report 2017/18 (PDF)

Grant Thornton LLP Public Report 2017/18 (PDF)

KPMG LLP Public Report 2017/18 (PDF)

Mazars LLP Public Report 2017/18 (PDF)

Moore Stephens LLP Public Report 2017/18 (PDF)

PwC LLP Public Reporting 2017/18 (PDF)

This is shocking…

A lot of our readers are accountants or are training to be accountants. It should arguably follow therefore that you are good with figures. You are good with numbers and can manage your finances.

Not everyone though may be as good at managing their own personal finances and for any of you who may have problems controlling your spending, a new product will shortly be hitting the market which could be of interest to you.

A British company by the name of Intelligent Environments has developed a wristband that will deliver an electric shock to the wearer when they exceed pre-set spending limits.

The Pavlok wristband links to an individual’s online bank account and when a pre-set limit is exceeded a 255-volt electric charge is delivered to the wearer. The wristband is named after the Russian scientist Ivan Pavlov whose research showed that the behaviour of dogs could be altered by the prospect of reward or punishment.

Submitting yourself to an electric shock to stop yourself spending money does seem a bit extreme and with a cost of £120 then the buyer may well end up having an electric shock earlier than anticipated…

EY confirm the women were real

Some of you may have heard of the website Ashley Madison.

For those of you who haven’t heard of Ashley Madison, it’s a website where married people can register to meet other married people without their respective husband or wife knowing and then have an affair.

In fact, some of you may be registered members of the site (this does raise the question that if you are a registered member of Ashley Madison and are reading this business blog then at the moment you are finding business stories more interesting than having an affair so well done on that).

Ignoring the rights or wrongs of a website facilitating affairs, Ashley Madison has had an up and down ride over recent years.

Back in 2015, they were hacked. As a result the personal details of their users were leaked and there were a lot of users. When I say “a lot”, there were 32 million users.

The situation got worse for Ashley Madison though.

As well as their systems being hacked and details of who had signed up being leaked, it turned out that the vast majority of users were men and of the women who had signed up a significant proportion were Bots (i.e. a piece of software) or prostitutes.

All in all, not great selling points when trying to encourage new members.

In an attempt to build up trust (if trust is a relevant word for people looking for affairs that is…), Ashley Madison commissioned Ernst & Young to cast an eye over the membership data and see if it stood up to scrutiny.

There were some interesting results including the fact that 15,542 new members signed up each day in 2017 (that’s nearly half a million new users per month).

There were also more active women on the site than men. Globally, the ratio of active males to active females was 1 to 1.13 but there were variations on a regional basis ranging from Australia where the male to female ratio was 1 to 0.78 and Columbia where the ratio was 1 to 2.39.

Ernst & Young also reported that “The Client had used Bot programs to generate message activity with paying customers in prior years. The Bot programs were decommissioned in 2015 and our procedures related to calendar 2017 found no evidence that the use of Bot programs previously operated had been reinstated.”

So, in theory the registrations are human and there’s no danger of falling in love with a bot.

The full Ernst & Young report can be found at www.ashleymadison.com/2017report but I would be careful as if you’re viewing this on a computer at home and your husband or wife finds you’ve been visiting ashleymadison.com then there could be some difficult questions to answer.

Then again, if you start typing in the website and your web browser recognises it from a previous visit to that site then maybe…

1-0 to the Premier League

If you’re a premier league footballer it’s kind of obvious that you’re going to make a lot of money.

Deloitte, the Big 4 accounting company, prepare annual reviews of the Premier League’s finances and has just released some figures from the 2016/17 season.

In total, Premier League footballers took home £2.5bn in wages. This was the highest figure on record and showed an increase of 9% on the previous season.

The increase in wages though was quite a bit lower than the increase in the clubs’ revenue.

Total revenue increased by nearly £1bn to £4.5bn in the 2016/17 season and this was also a new record.

Although revenue increased by a higher percentage than wages, the proportion of revenue spent on wages is still pretty significant with the wage to revenue ratio being 55%.

Collective pre-tax profit was also a new record high being £0.5bn. This was almost three times the previous record of £0.2bn from back in 2013/14.

Deloitte partner Dan Jones said “As predicted last year, the Premier League’s three year broadcast deals which came into effect in the 2016/17 season helped drive revenue to record levels.

“Despite wages increasing by 9% to £2.5bn, this increase is nowhere near the level of revenue growth noted. This relative restraint from Premier League clubs reflects both the extent of their financial advantage over other leagues and the impact of domestic and European cost control measures.”

The financial success was spread across all clubs with all 20 Premier League teams making an operating profit.

Deloitte’s full report on the Premier Leagues finances will be available in June.

She did what for a living?

Businesses can pay significant amounts of money for celebrities to endorse their products.

For example, the American singer and actress Selena Gomez is reportedly paid USD 550,000 per post that she promotes to her 133 million Instagram followers. Cristiano Ronaldo, the Portuguese footballer on the other hand “only” receives USD 400,000 per promoted post to his 120 million followers.

But not everyone is happy for famous people to be associated with a product.

Charles de Cazanove is a Champagne house that was founded by Charles de Bigault de Cazanove way back in 1811.

The Cazanove brand is now owned by the GH Martel Group and they have launched their latest Champagne vintage in a promotion with Clara Morgane. The champagne is imaginatively called “Le Champagne by Clara Morgane” and sells for €50 a bottle.

So, do you know who Clara Morgan is?

If you don’t and you’re a lady then ask your husband or boyfriend if he knows who Clara Morgan is.

If he does know who she is then there is probably another question you should ask him as Ms Morgan is famous as an adult movie actress.

Although Ms Morgan now performs with her clothes on (she’s a singer), it’s not good enough for a descendant of the founder of the Cazanove brand.

Count Loic Chiroussot de Bigault de Cazanove, who apart from needing a very long business card, isn’t happy that his family’s name is being associated with an adult movie star.

He reportedly said that “I am truly shocked. It’s simply scandalous. How could anyone associate the name of my illustrious family to that of Clara Morgane? It’s inconceivable.”

Although the family sold the brand back in 1958, the Count has been reportedly getting lawyers to try to remove his family’s name from the Clara Morgane vintage.

Either way, with all this publicity I’m sure the GH Martel Group are drinking to the success…

How much do Big 4 partners get paid?

KPMG UK released their results last month for their most recent accounting period and they showed a fall of 10% in pay for the KPMG partners when compared to the previous year.

Although the firm’s revenue rose by 5% to £2.2 billion, it’s profit fell to £301 million.

The firm wrote off a number of technology investments.

KPMG, like the rest of the Big 4, have invested heavily in technology companies in an attempt to stay at the forefront of technology.

Unfortunately for KPMG, not all of their investments were successful. Bill Michael, the Chairman of KPMG, highlighted one investment that hadn’t done so well – KPMG had committed £3 million to Flexeye, a tech company that analyses large amounts of data and it hadn’t proved to be the wisest investment.

Whilst profits fell, it hasn’t all been bad news for KPMG as their audit practice grew by 10%.

Back to the average pay of the KPMG partners though and although their average pay fell by 10% I’m sure that the partners will still be able to afford to buy a sandwich for lunch.

The average pay for the KPMG partners was £519,000 each.

That’s not too bad is it?

But how does it compare with the average pay from the partners of the remaining Big 4.

The most recent reported results show the following average pay per partner:

Deloitte – £865,000

EY – £677,000

pwc – £652,000

It looks like Deloitte partners will be having the more expensive sandwiches for lunch.

Gin and whose tonic?

Drinking a lot of gin may not be good for you but it looks as though it is good for the tax authorities.

There’s been a change in the drinking habits of people in the UK.

Gin is suddenly very fashionable, especially the flavoured gin made by smaller distilleries. Last year 40 new gin distilleries opened up in the UK bringing the total distilleries crafting gin to 273.

This has made the tax man very happy. The reason he is happy is that there is a very high rate of VAT and Duty on hard spirits such as Gin compared to less alcoholic drinks such as beer and cider. VAT and Duty on a bottle of Gin accounts for more than 75% of the cost of that bottle and with designer gins such as Death’s Door gin retailing at £55 then that’s a pretty good return for the tax authorities.

This increase in demand for gin has resulted in duty receipts from spirit sales overtaking duty receipt from beer sales last year for the first time.

In 2016 the tax authorities collected over £11 billion from alcohol sales which is an equivalent amount to what a 2p increase in income tax would create.

So, they you go, the next time you wake up in the morning with a hang over from drinking too much gin at least you’ll know that the money you spent has proved a tonic for the government and helped increase their tax receipts.

The battery is going on my phone…

Do you have a phone?

My guess is that most of you own a mobile phone.

Now, if you look at your phone is it a Vertu branded phone?

Probably not.

Most of you will own a Samsung, Apple or Nokia. Some of these phones aren’t cheap – the latest top of the range Apple iPhone for example retails at over £900.

But if you’re holding a Vertu branded phone then the chances are that it cost a lot more than the top of the range iPhone.

Some of the Vertu range of phones were on sale for £40,000 a few years ago. That’s a lot of money for a phone. It was a luxury brand aimed at ultra-high net worth individuals who would be willing to spend more than the cost of a new Porsche Cayman sports car on a phone.

Perhaps surprisingly it did rather well a few years ago. In 2007, it generated £150 million of sales.

Perhaps unsurprisingly though, there weren’t that many individuals with “more money than sense” who were willing to pay that amount of money for a phone. The company has had a rough ride over recent years as it’s hard to justify paying £40,000 for a phone that has been criticised in a number of areas. The Financial Times were quoted for example as saying the Vertu phones were “technologically modest”.

After originally being set up by Nokia in the 1990s with the strategic aim of building a niche market of hand made luxury phones it was sold to a Hong Kong hedge fund manager for €45 million in 2015.

In March of this year it was then sold to a Turkish businessman for €1 (he agreed to take on the company’s debt of €13 million as part of the deal).

Unfortunately though things have got worse and the company has recently gone into receivership after running out of money to pay staff and suppliers.

An interesting case study which appears to prove that being expensive by itself isn’t sufficient to make a differentiation strategy successful.

KPMG fires unethical partners

Picture the scene – you’re the senior auditing partner of KPMG in America with more than 30 years of experience serving some of KPMG’s most prestigious clients. There are over 9,000 KPMG people in the US who look up to you as the boss.

You receive some leaked information about which of your audits the US audit watchdog is going to examine as part of their annual inspection of how well KPMG perform audits.

Do you:

(a) Disclose this unethical breach immediately, or

(b) Try to keep things quiet and make sure that the audit files of the audits selected are perfect?

Unfortunately for Scott Marcello, the (now ex) head of KPMG’s audit practice in America, he didn’t choose option (a).

The background to the issue is that every year the US audit regulator, the Public Company Accounting Oversight Board (PCAOB) selects a sample of audits to inspect and ensure they have been performed properly.

A former employee of the PCAOB had joined KPMG. A friend of his who was still working at the PCAOB tipped him off about which audits would be selected for inspection this year.

The confidential information was then passed up the KPMG hierarchy until it reached Mr Marcello.

We can only guess what Mr Marcello and 4 other KPMG partners were planning on doing with the leaked information but one thing was for sure and that was they didn’t disclose the leak.

Whilst the 5 partners clearly weren’t very ethical, KPMG as an organisation acted quickly once they found out about it.

The 5 partners were fired and Lynne Doughtie, the chairwoman and chief executive of KPMG was quoted as saying “KPMG has zero tolerance for such unethical behaviour. Quality and integrity are the cornerstone of all we do and that includes operating with the utmost respect and regard for the regulatory process. We are taking additional steps to ensure that such a situation should not happen again”.

The PCOAB publish the results of their inspections and the previous results of the KPMG inspections perhaps give a reason for why Mr Marcello was keen for any help, whether it was ethical or unethical.

In 2014 and 2015, KPMG had more deficiencies in their audits than any of the other Big 4 in America.

38% of their inspected audits in 2015 were found to be deficient whilst in 2014, 54% were found to be deficient.

Goodbye tax advisors?

Do you know anyone who works in tax?

If by any chance you are in Australia then if I ask you this question in 5 years’ time, as a result of Ailira the answer may well be “no, as no-one works in tax”.

“Who is Ailira?” I hear you say.

Ailira is the brainchild of Adelaide based tax lawyer Adrian Cartland and stands for “Artificially Intelligent Legal Information Resource Assistant”.

Mr Cartland created Ailira to help people with their tax affairs and believes that she could eventually replace human tax agents.

He told the Australian Business Review that “Your tax agents will probably be gone within five years”.

What was interesting was that although to a certain extent Ailira functions like a search engine, you can ask it tax questions in the same way that you would ask a person who works in tax.

Mr Cartland said that “The one thing we had difficulty with is that people are so used to doing keyword searches that they struggle to ask a question as you would to another human.

“So we did some upgrades of Ailira’s interface to encourage people to treat Ailira like a human, more in plain English.”

That’s an interesting phase “plain English” as anyone who has worked in tax or studied tax will appreciate that it’s not always possible to explain tax in plain English as the tax laws can be pretty complex.

Still, good luck to Mr Cartland and importantly, good luck to Ailira who by the sound of things may well be doing a lot of work in the future.

It’s maturing nicely…

“Don’t worry, it’s secured with cheese” isn’t the most common phrase you hear when discussing the bond markets but a €6 million bond issue may well change that.

When a company issues a bond, the investor is lending money to that company in exchange for the bond. When the bond matures the company will repay the money that was lent (together with interest).

If you put yourself in the shoes of the investor, then what type of company would you invest in?

The chances are that you would be looking for large, well established and financially secure companies to invest in. That means that smaller companies generally find it challenging to raise funds via bonds.

An Italian cheese manufacturer has found a novel way around this problem.

4 Madonne Caseificio dell’Emilia is a relatively small Modena based cooperative firm which produces 75,000 wheels of Parmigiano cheese annually (nearly 2% of the world production of the famous cheese). It has issued a €6 million bond offering an annual yield of 5% with the capital being repaid in 5 annual amounts starting in 2018 and ending in 2022. The funds raised will be used to support their commercial expansion plans.

The interesting thing about the bond issue though is that it is secured by Parmigiano cheese worth 120% of the bond value. This means that if the company fails to repay the money the investors can get Parmigiano cheese from the company.

€7.2 million worth of cheese – that’s a lot of cheese! Let’s hope the bond matures nicely without any problems.

A good excuse to buy another handbag?

How much do the Louis Vuitton handbags cost?

A lot is the simple answer but some recent research by Deloitte’s has shown that the price of luxury items varies significantly around the world and foreign exchange movements play a big part in that valuation.

According to Deloitte, in US dollar terms London is now the “cheapest” city to buy designer and luxury goods.

Since the Brexit vote in June, at the time of writing the pound has fallen by more than 17% against the dollar (i.e. you need 17% more pounds now to buy the same amount of dollars you would have received back in June).

According to the research, on 7 October a Speedy 30 handbag from Louis Vuitton costs £645 ($802) in London, €760 ($850) in Paris and $970 in New York. China was the most expensive place to buy it with the handbag costing 7,450 Yuan ($1,115).

Nick Pope, fashion and luxury lead at Deloitte, told the BBC that “the trend in luxury pricing in the UK is being driven mainly by the depression on the sterling – thus making the same item more affordable in the UK than in any other luxury market”.

Of course, if your income is in British pounds then the cost to buy the handbag in London remains the same. If however your income is in another currency such as US dollars then it is $313 cheaper to buy in London than in China for example. If you are stocking up on your luxury handbags should you be planning a trip to the UK?

It’s not just the ladies from outside the UK who are buying luxury handbags who could be benefiting from the exchange rate movement.

Any male readers may be interested to know that a Brunello Cucinelli cashmere V-neck sweater now “only” costs £650 ($843) in the UK compared with $942 in France and $995 in the US.

$843 for a sweater?

Please form an orderly queue as you rush to the shops to buy one. Or maybe two…

It’s a dog’s life…

Greece has had a bad time of it over the last couple of years in terms of their finances but a recent announcement by their Finance Ministry may result in animals coming to the rescue.

When I say animals, I should be more specific and say that dogs will be helping out and not just any dogs but dogs who can sniff out money.

Let me explain a bit.

It’s been well documented that Greece has had a few financial problems. There were fears that they would crash out of the euro. Capital controls followed and there was a new international bailout for the country.

As a result, a lot of the Greek population perhaps understandably didn’t feel that confident in trusting the banks to look after their cash and a significant amount of money is being held outside of banks.

From November 2014 to July 2015 over 50 billion euros was withdrawn from the banks and It’s been estimated that between 15 to 20 billion euros is still being held by Greeks outside of the banking system.

That’s a lot of mattresses to be storing cash under and people are looking at avoiding capital controls and instead take the money out of the country without the authorities knowing.

Taking a suitcase of cash out of the country is seen as a safe option for a lot of people.

So, where do the dogs come in?

Well, a recent posting on a government website said that a team would be put together to assess tenders for the provision of dogs whose job is to detect cash. The dogs would be in place to sniff out significant amounts of cash being taken out of the country at border points.

Given all the money problems in Greece, one big advantage of this plan is that the dogs won’t be paid in cash. Instead, they will be more than happy to be rewarded with a biscuit or two…

A football star who can’t kick…

When you were young did you dream of being an accountant when you grew up? My guess is that most of you probably didn’t fall asleep at night dreaming of spreadsheets and calculators. Perhaps a more common childhood dream was playing for your favourite football team or being a famous actor or actress.

There have been some interesting developments recently though when it comes to playing for your favourite football team and some of the top teams are now signing players who will never be kicking a ball for their team. Instead, they will be representing their teams in the world of gaming, or to be more specific, football gaming such as EA Sports Fifa

Manchester City have recently signed Keiran Brown, an 18 year old gamer who has more than 12,000 followers on his YouTube channel.

Keiran will represent Machester City at Fifa esports tournaments where gamers sit in front of computers representing their team and watched by crowds of thousands of spectators.

Manchester City didn’t disclose how much Keiran will be paid but other professional gamers are reported to be paid in the region of £3,000 per month and can also win prize money at tournaments which can run into the thousands of pounds.

It’s quite a smart move for the club though as football games on consoles such as Xbox and PlayStation are extremely popular with supporters of the actual game.

Diegao Gigliani, vice-president of media and innovation at Manchester City was quoted as saying “As esport continues to gain momentum, it makes sense for our clubs to be part of the action and get closer to our fans, who love playing EA Sports Fifa as Manchester City. We will be a bigger presence at gaming tournaments, we will have more content through our digital channels and we will activate even more with our fans at matches and club events.”

So, in summary, if you want to play for your favourite football team but can’t kick a ball then maybe get out your Xbox and start practicing…

Would you do this for a bit of chocolate?

What’s one way of increasing the chances of getting hold of someone’s password?

Does it involve the use of the very latest supercomputer? Does it involve some clever IT geeks hacking into a computer for you?

Or does it involve chocolate?

A recent bit of research published in the journal Computers in Human Behaviour attempted to find out how people are obligated by the kindness of others. Or in other words, if someone does something nice for a person, how likely is it that the person will be nice back to them?

The researchers in Luxembourg conducted a survey of random people in the street asking them about internet security including questions about passwords.

Some of the people interviewed were given chocolate and some weren’t.

30% of those that were not given chocolate revealed their passwords which to me is a surprisingly high percentage and just goes to show that quite often human stupidity is the weakest link in internet security.

For the people who were given chocolate at the beginning of the interview the figure rose to 44% and if the chocolate was given just before the question on passwords was asked an incredible 48% gave their passwords! Yes, nearly half of the people asked their passwords as part of a survey told a complete stranger their password if they had been given chocolate.

Andre Melzer, the author of the study said that “when someone does something nice for us we automatically feel obliged to return the favour”.

So, in conclusion, if someone walks up to you in the office and offers you a piece of chocolate be careful what you say…

Is this the best time to leave the office?

When do you think it is a good time to leave the office on a Friday night? After all, if the sun is shining and you’ve got a nice weekend planned it would be good to be able to finish at a reasonable time.

In some jobs though there can be pressure to finish projects which legitimately means that you’ll have to stay late to meet the deadline.

In other companies though there can be a culture of staying late as there’s “always something to do” and never enough time to do it all or there can be pressure to stay late to “prove” that you are busy and working hard.

As an aside, when I was younger I used to work with a colleague who would bring in a spare jacket to leave on the back of his chair when he left the office at the end of the day – his boss would see the jacket on the chair together with an open file on the desk and the screensaver active on his computer and think he was still working hard and in a meeting somewhere else in the office.

Back to 2016 though and Credit Suisse, the leading investment bank, has introduced a new policy called “protecting Friday nights”.

In an email leaked to Reuters, Credit Suisse said it would be ordering all employees to stop working at 7pm on Fridays.

Marisa Drew, co-head of banking and capital markets in London reportedly told workers that she “had given a great deal of thought into how we can provide some time off for our bankers”. Ms Drew went on to say that this would allow “employees to make firm plans with family and friends and ensure that this time will be respected”.

So, good news for Credit Suisse employees as (unless they are working on a deal) they have to leave the office by 7pm on Friday.

When do they have to be back in the office though? Well, they have been told that they cannot go back to the office until midday on Saturday.

Yes, a whole 17 hours to relax, see the family and get some sleep…

This is shocking…

A lot of our readers are accountants or are training to be accountants. It should arguably follow therefore that you are good with figures. You are good with numbers and can manage your finances.

Not everyone though may be as good at managing their own personal finances and for any of you who may have problems controlling your spending, a new product will shortly be hitting the market which could be of interest to you.

A British company by the name of Intelligent Environments has developed a wristband that will deliver an electric shock to the wearer when they exceed pre-set spending limits.

The Pavlok wristband links to an individual’s online bank account and when a pre-set limit is exceeded a 255-volt electric charge is delivered to the wearer. The wristband is named after the Russian scientist Ivan Pavlov whose research showed that the behaviour of dogs could be altered by the prospect of reward or punishment.

Submitting yourself to an electric shock to stop yourself spending money does seem a bit extreme and with a cost of £120 then the buyer may well end up having an electric shock earlier than anticipated…

You can’t read this book…

Everyone seems to be on their smartphone or tablet at the moment. After all, when was the last time you read a book? Or let me ask you a slightly different question, when was the last time you coloured in a colouring book?

“Coloured in a colouring book!? I’m not a child”, I hear you say but whilst most people will come to the conclusion that the last time they coloured in a colouring book was when they were a young child, things may be changing.

One of the latest crazes doing the rounds in the UK at the moment is adult colouring books where grown men and women are buying adult colouring books to colour in. A quick Google search of “adult colouring books” will reveal the vast variety of such type of books (as an aside make sure you include the word “colouring” when searching for adult colouring books otherwise you may get an unexpected search result).

It’s been reported that more than 3 million adult colouring books were sold in the UK last year which represented over £20 million worth of revenue for the publishing industry.

Now, whilst certain trendy people may well be rushing to buy colouring books, the tax authorities in the UK are also getting interested in the trend.

The reason behind the tax authorities interest is that colouring books are currently treated as children’s books and as such are zero rated for VAT purposes (in other words VAT is not charged on the books).

The tax authorities are currently in talks with publishers about plans to classify adult colouring books as uncompleted books which would then make them liable to VAT at 20% in the same way that diaries and notepads are.

The net result is that if the tax authorities do reclassify the adult colouring books then either the books will become 20% more expensive for the individual purchasers or if they remain at the same published price, the publishers will have to take the hit.

More expensive adult colouring books? It’s enough to make you throw your toys out of the cot.

Who audits the auditors?

The Financial Reporting Council (FRC) has just published its audit quality inspection reports for the 6 largest auditing companies in the UK. The job of the FRC’s Audit Quality Review (AQR) team is to monitor the quality of the audit work of those UK audit firms that audit public interest and large entities.

The AQR team have been busy over the last year and have now released lengthy reports for BDO, Deloitte, EY, Grant Thornton, KPMG and PwC.

Overall, the quality of the audits has improved during the last year with the number of audits that required “significant improvements” dropping from 10 to 2 for the Big 4. There were no audits that required significant improvements at BDO or Grant Thornton.

Unfortunately for KPMG though, they were the company that undertook the two audits that were highlighted by the FRC as needing significant improvements.

The FRC reviewed 22 KPMG audits and out of those there were 2 that required significant improvements.

The first one involved a change of systems and a 3rd party IT provider. The FRC identified that the KPMG audit team did not “design and perform procedures to obtain sufficient audit evidence in response to the migration risk”.

In the second audit where there were problems the FRC highlighted that insufficient audit work had been performed in relation to revenue and inventory.

Details of the scope of the reviews can be found here and are the full reports on the individual companies are on the following links:

BDO
Deloitte
EY
Grant Thornton
KPMG
PwC

Would you buy a bottle of whisky or invest in a bottle of whisky?

Buying whisky or investing in whisky – that’s an interesting question and my guess is that most people who buy whisky are planning on gently pouring it into a glass and maybe adding some ice or a mixer before settling back to savour the flavour (before possibly waking up the next day with a headache…)

But should you be buying whisky as an investment rather than as a consumable item?

Most people are aware of the leading share indexes around the world such as the FTSE 100 and the S&P 500 (which show the index for the largest 100 and 500 companies quoted on the London and New York stock exchanges respectively) but there are also a number of other indexes out there.

These indexes measure movements and one of the more interesting ones is the Rare Whisky Apex 1000 which measures the price movement for rare scotch whisky.

It’s a significant market and last year there were rare whiskies sold at auction in the UK amounting to £9.6 million.

There was also a strong demand for rare whisky in Asia. In August last year a bottle of 1960 Japanese Karuizawa whisky was sold for over £80,000 which is a pretty significant figure for a bottle of whisky!

Back to the indexes though and the performance of the rare whisky index last year was impressive. It grew by 14%. Other indexes in comparison performed as follows in 2015:

FTSE 100 – down by 4.9%
S&P 500 – up by 0.7%
Gold index – fell by 10%.

So the increase in the Whisky index of 14% looks very good when compared to the major indexes but I guess there could be one problem.

Namely, if you’ve had a bit too much to drink and are looking for something to finish the evening off you’re more likely to drink some of your whisky investment than consume some of your share or gold investment.

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…

Let’s not run this up the flag pole…

Most of us have been there. Sat in a meeting when somebody decides to use “management speak” or “corporate jargon” to make something sound more impressive than it is.

You’ve probably heard of the phrase “think outside the box” but what about “let’s not boil the ocean”?

Michael Sugden, chief executive of the advertising agency VCCP, recently put together a list of the most irritating metaphors used in the corporate world.

He wrote in Marketing Magazine that the increased use of corporate jargon in recent years has resulted in meetings degenerating “into a quagmire of nonsensical verbal piffle”.

He put together his top 10 of the most annoying phrases and in reverse order the results are shown below.

Oh and in case you’re “not singing off the same hymn sheet” I’ve translated the “management speak” into English in the italics below the phrase.

10. Think outside the box
– come up with new ideas…

9. I may have a window for you
– I can see you on…

8. Content is king
–  first used by Bill Gates in 1996 to indicate that content would drive the success of the internet. It now appears to be used for random purposes in meetings…

7. Let’s not boil the ocean
– let’s not make this too complicated…

6. Level playing field
– keep things equal…

5. Let’s workshop this
– let’s spend far too long talking about this in a meeting…

4. Shift the dial
– to be honest I’m not 100% sure but possibly means talk about something else. Either way it sounds very dramatic in a meeting…

3. Let’s socialise this
– let’s talk about this…

2. Fail forward
– when something doesn’t work but we try to learn from it (if we still have a job after the error of course…)

1. Growth hacking
– again, I don’t think anyone is 100% sure what it means but it does sound very impressive…

So, there you go. A list of 10 phrases to [impress / annoy – delete according to how you feel about the phrases] your colleagues at meetings.

Improving productivity or big brother surveillance?

Is this a clever way to improve productivity or a big brother surveillance system creeping into corporate life?

Humanyze, a technology company, produces devices which monitor the activity of employees and one of the more well known companies that has used it recently is Deloitte in Canada where volunteers in their St John’s, Newfoundland office wore the devices which are like oversized ID cards.

According to Humanyze their “social sensing platform” uses a variety of sensors and is capable of capturing face-to-face interactions, extracting social signals from speech and body movement, and measuring the proximity and relative location of users.

They combine these with other data sources such as electronic communications, objective productivity metrics, and spatial analysis to provide insights on how complex work gets done in the modern organization.

CBC Canada reported that the Deloitte team in Newfoundland were changing from a traditional cubicle office layout to an open concept space and the Humanyze badges were used to measure how well employees were performing in the new layout.

The participation by the Deloitte staff was optional and they were provided with contracts that made them the owners of the data.

All the information was collected anonymously and the employees were given personalised dashboards that showed their performance benchmarked against their colleagues.

Silvia Gonzalez-Zamora, an analytics leader at Deloitte said that “The minute that you get the report that you’re not speaking enough and that you don’t show leadership, immediately, the next day, you change your behaviour. It’s powerful to see how people want to display better behaviours or the behaviours that you’re moving them towards.”

So, is this a clever use of technology or the first step towards big brother monitoring?

Either way, I guess it may help identify the office winner of the “who spends the most time in the toilet award”…