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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 recent 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”…

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.

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)

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…

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

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

I had the pleasure of bumping into my first auditing lecturer last week. 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!

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.

Can you trust an accountant?

That’s an interesting question and I’m sure that along with most other professions there are people you can trust and people you can’t trust.

If I asked the question about trusting accountants to the rock band Deep Purple though I’m pretty sure what answer I’d get.

Dipak Shanker Rao looked after the accounts of Deep Purple for more than 20 years.

In fact, to be fair when I said that he “looked after” the accounts maybe I should have said that he siphoned off more than £2 million of the band’s money without their permission.

Mr Rao has admitted “borrowing” at least £2.27 million from two of the companies within the Deep Purple empire. HEC Enterprises and Deep Purple (Overseas) owned the copyright to a lot of the band’s songs but the companies went into receivership in 2016.

Out of the £2.27 million borrowed by Rao, only £477,000 has been recovered. Ian Gillan, Ian Paice and Roger Glover (members of the band) are suing Mr Rao for up to £4 million.

In the meantime, Mr Rao has been struck off as an accountant and banned from managing or controlling a company until 2028.

One of Deep Purple’s most famous songs is called “Mistreated” and I’m sure that they feel that way at the moment…

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.

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.