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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…

The Captain was sober, the First Mate was drunk. Was that true? Was that fair?

I’ve been a qualified accountant for a fair few years now.

I had the pleasure of bumping into my first auditing lecturer recently. It was at a business mixer event and even though it was a long time since we last saw each other he really hadn’t changed that much.

We got talking and I reminded him of something that he told me that I’ve remembered ever since and to me is a great way of explaining what is meant by “True and Fair”. Those of you that have studied financial reporting papers will be aware of the importance of “True and Fair” in connection with financial statements.

In summary, financial statements should provide what is generally understood as a true and fair view of the reporting entity’s financial position, performance and changes in financial position.

I always remember my lecturer telling me the story of the ship’s captain that was having a problem with his first mate who was always drunk. In the end the captain wrote an official entry in the captains log saying “Today, the first mate was drunk.”

The first mate was upset about this and the next time he took charge of the ship when the captain was asleep, he wrote in the log that “Today, the captain was sober”. This of course implied that on other days the captain wasn’t sober as he was drunk.

Now, the statement “today, the captain was sober” was clearly true but I’ll leave it up to you to decide whether or not it was fair!

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.

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.

Enjoy the freeze…

Working from home has become a fact of life for a lot of people due to the Covid-19 pandemic. Synonymous with working from home are the video conferencing facilities such as Zoom, Google Meet and Microsoft Teams.

The growth in use of these technologies has been phenomenal. Back in December 2019 for example there were on average 10 million daily meeting participants on zoom. Fast forward to 2021 and the daily averages are around 300 million.

The technologies have been incredibly useful for keeping teams together and maintaining working practices but with back-to-back zoom meetings sometimes going on for hours some people are suffering from “zoom fatigue”.

There’s also the issue of what happens if you are desperate for a cup of coffee or a call of nature during a particularly long and boring meeting?

It’s pretty obvious on the screen if you try and sneak out for a couple of minutes and taking your laptop with you to the kitchen or toilet is best avoided.

Enter the recently released freezingcam.com which as the name suggests enables you to simply click a button on screen and your webcam will freeze and give the impression that you are having internet connection issues.

After quickly popping out of the room to do whatever you wanted to do, you can get back to your desk, click the unfreeze button and lo and behold you are back at the meeting and everyone thinks you were having internet issues rather than looking for those chocolate digestive biscuits in the kitchen…

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.

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…

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…

You are (probably) a liar…

Here’s a nice ethical question for you – have you lied recently?

My guess is that you have. Now before you get all righteous about it, I think that you probably did it without even thinking.

Wow, this is pretty worrying isn’t it? A lot of you are studying for professional exams and if I’m here saying that you have lied without thinking about it then what does that mean for your profession going forward?

Terms and conditions (or T&Cs) are essential for companies which are operating on the Internet or providing apps. For example, they clarify the relationship between the user and the supplier and make it clear what it provided. In reality, the chances are that they also limit the liability of the provider!

A recent report by thinkmoney identified the number of words in the T&Cs of some of the leading apps.

They found that the combined terms and conditions of 13 top apps including TikTok, WhatsApp and Zoom would take 17 hours and five minutes to read!

The longest was Microsoft Teams which was 18,282 words long.

To put this into perspective, there are more words in the Microsoft T&Cs than there are in Shakespeare’s famous play Macbeth (if you’re interested, a mere 18,110 words).

For those of you that are fans of Shakespeare you may prefer Hamlet to Macbeth.

Instead of reading Hamlet you could read the T&Cs of TikTok (11,698 words), WhatsApp (9,920 words) and Facebook (8,588).

A combined number of words for these 3 of 30,206 words which is more than the 30,066 word count of Hamlet.

Back to my original point when I said that you are (probably) a liar.

So, have you ever clicked that you have read and agree to the T&Cs…

Fancy working for the Queen?

I’m not sure where you work or what your office is like but my guess is that it’s not as historic as where you would work if you were successful in applying for this job.

The Royal Family has advertised for a new Management Accountant to look after the “Privy Purse” (the British sovereign’s private income). The job is based at Buckingham Palace.

Candidates for the job need to be qualified and should have “outstanding problem-solving skills”. They will need to produce management information and financial accounts and the advert promises that “no two days will be the same and the deadlines we work to will stretch you. Yet in all that you do, you’ll rise to the challenge and deliver faultless accuracy and a first-class service to this unique organisation”.

It’s not just a solid knowledge of figures that they require as the advert goes on to say that candidates need to demonstrate that they are “as good with people as you are with numbers, which is crucial given the customer focussed nature of this role”.

Now let’s get down to the exciting part and how much are they prepared to pay for this position?

According to leading recruiter Robert Half, the average salary for a Management Accountant in London is currently £58,100.

The salary that is being offered for the Royal job is £40,000.