Description: The case against Sino-Forest Corp, the forestry company with the missing forests, is winding down more than a year and a half after it started. The founder of the company was accused of “gross breach of trust” for misleading investors. A board committee looking into the company’s disclosures has been unable to find the trees or even whether the so-called missing trees existed.
Date: April 18, 2016
1) Have you followed the Sino-Forest story? What do you know about this case?
2) The story mentions that without being able to prove the existence of the standing timber, you also can’t prove valuation or ownership. What procedures would an auditor of a timber company do to gather evidence on these three audit assertions?
3) The article tells us that the Sino-Forest troubles began when news broke that it might be a Ponzi scheme. How would you define a Ponzi scheme?
Description: After fifteen years in the debtors’ doghouse, Argentina has reentered the bond market. When the country defaulted on its debts in 2001, the bondholders resorted to various maneuvers to try and secure their funds, even going so far as to seize an Argentinian navy ship. But this new bond issue seems to be welcomed by investors, with demand far outstripping supply, possibly due to a healthy interest rate in a time of low or negative interest.
Date: April 19, 2016
1) What did you find surprising about Argentina’s return to the bondmarket?
2) The article discusses the high demand for the bonds and the high interest rates. Would you expect the bonds to sell at a premium or a discount?
3) Depending on your answer to question two, how will the investors account for the transactions? What about the bond issuer?
Description: It would have been hard to miss it, the news of Senator Mike Duffy’s acquittal on all 31 criminal charges he faced for his role in the Senate expense controversy of recent years. The trial judge said Senator Duffy may have made various administrative errors in his expense claims, but there was nothing of a criminal nature. Meanwhile, Canadians may be wondering what all this means for the future of the Senate.
Date: April 21, 2016
1) Were you following the Duffy trial? Were you surprised by the verdict?
2) The Senate Expenses Timeline included with the story shows this saga began in 2012 with the release of an audit report questioning the documentation (or lack thereof) in support of a number of Senate expense claims. What audit procedures do you think the auditors may have employed to arrive at this conclusion?
3) Imagine that you are now a qualified accountant and you have just been appointed as the chief financial officer of the Senate. What would be some of your first steps that you would employ to help deal with the fallout of this Senate expense scandal?
Description: Canada’s oil producing provinces are facing pressures on their finances with decreasing royalty revenues. This past week, the Province of Newfoundland and Labrador released its budget for 2016-17, showing an increase in a range of taxes and fees. This included an increase in the Harmonized Sales Tax as well as a special deficit reduction levy of up to $900 on high income earners. Despite this levy, the province is still forecasting a deficit of up to $2 billion. The government is blaming the previous administration for the tough times, arguing that not enough was done to secure the future when royalties were flowing in more liberally.
Date: April 14, 2016
1) Are you from Newfoundland and Labrador? If so, how will you and your family be impacted by this budget, considering as well the reduction in funding for Memorial University?
2) If you were an accountant advising the government would you have chosen this approach to the downturn in revenues?
3) How do you think the financial statements of the province should account for the special deficit reduction levy?
Description: With shareholder pressure on the uptick, the latest survey of salaries among Canadian bank executives shows that overall compensation is down. Board’s may be looking at performance benchmarks more closely, accounting for some of the reduction in salary. But it is possible that the fact that four of the five CEO’s at the largest Canadian banks are new to the job may be having some influence as well. Increasing public pressure may also be at work here.
Date: April 11, 2016
1) Which factor do you think has had the most influence on these lower salaries for bank executives?
2) What are some things accounting theory tells us about setting compensation packages for executives?
3) Imagine yourself some years from now as a successful accountant who has been asked to join a board for a major bank. Further, you have been appointed to the compensation committee that sets the compensation for executives. What are two or three of the main things you have learned during your university training that you would like to share with the committee?
Description: Despite the fact that profits are up, Scotiabank announced that it is cutting jobs and closing branches. With consumers moving more and more transactions online, and banks bracing for Uberization of the banking world, Scotia is looking towards an uncertain future. But Scotia is not alone. Other banks have been cutting as well, and last year TD Bank booked a restructuring charge of almost $700 million while cutting 1,600 employees.
Date: April 13, 2016; updated April 14, 2016
1) What percentage of your banking do you actually do at a branch these days? Have you seen any impact of the bank cuts on the way you do your banking?
2) Do you think the banks have hooked onto the right strategy for dealing with the influence of tech upon the industry?
3) The article states how TD Bank incurred a major restructuring charge last year. What would be some of the conditions that a company would have to meet to record such a restructuring charge?
Description: Last year, the Liberals under Justin Trudeau latched onto the transparency theme. But last week the Parliamentary Budget Office (PBO) criticized the Trudeau government for what we might call a lack of transparency. The PBO said the latest federal budget contains some unrealistic forecasts, in particular one which underestimates the level of private sector growth, thereby lowering the tax base.
Date: April 6, 2016
1) Why do you think the government may have underestimated private sector growth as part of its budget?
2) What do you see as some of the ethical issues in this situation?
3) The article also discusses the issue where the Canada Revenue Agency has refused to provide the PBO with information on tax havens? How do you think this issue could be resolved?
Description: It was hard to miss the news this past week of the so-called Panama Papers. This vast leak of over 12 million documents has provided lots of data on potential tax avoidance for journalists to sort through, and plenty of headaches for politicians and public figures forced to account for dealing with the Panamanian law firm Mossack Fonseca. The Prime Minister of Iceland has had to resign under intense scrutiny, and, David Cameron, Prime Minister of Britain, has had to deal with public pressure around the revelation that his father has been named in the Panama Papers.
Date: April 9, 2016
1) Have you been following the stories around the Panama Papers? What is the single most interesting thing about them that has struck you so far?
2) What are some of the strategies Canadian governments could employ to determine if those named in the Panama Papers have a tax liability in Canada ?
3) If you were an accountant in practice, what ethical issues would you see if a client asked you to connect them with a firm like Mossack Fonseca?
Description: FinTRAC, the Financial Transaction and Reports Analysis Centre of Canada, imposed its first fine on a Canadian bank this past week. The fine of $1.1 million was because a Canadian bank did not report some type of suspicious transaction to the authorities. The only problem was FinTRAC didn’t reveal who got fined. And all of the Big Six Canadian banks said “not me.” One of the criticisms is that if FinTRAC doesn’t say who is guilty, what kind of a deterrent effect does the fine present?
Date: April 6, 2016; updated April 7, 2016
1) What type of activity do you think may have caused FinTRAC to impose this fine?
2) Do you think that FinTRAC’s control would be more effective if the identity of the offending bank was revealed publicly?
3) If you were an accountant tasked with preparing the financial statements of this bank, how would you account for this $1.1 million payment? What type of note disclosure might you consider?
Description: This past week the FBI announced that it had cracked the Apple iPhone associated with the San Bernadino tragedy. Subsequently, the FBI withdrew from its court action against Apple as the need for Apple’s co-operation in unlocking the phone was now a moot point. Speculation is that the FBI’s success against the iPhone may be a boon for security companies such as Symantec and FireEye.
Date: March 30, 2016
1) Had you followed any of the media accounts on the legal battle between Apple and the FBI? Which of the two parties – Apple versus the FBI – did you believe had the strongest position?
2) Were you surprised that the FBI was able to crack the phone?
3) Do you think that the fact that the FBI got into the phone means that third party vendors may benefit through creating new iOS security apps?