Wiley Accounting Updates

Posted March 10th, 2013 by Gerry La Rocca & filed under Accounting Careers, Corporate Restructuring.

Canada is falling behind other countries

When it comes to putting women on corporate boards, according to a report by TD Economics.

While participation in the labour force has increased significantly for women, that change has yet to be reflected at the top of Canada’s largest companies, according to the report.

Women represent just 11 per cent of board members on companies listed on the S&P/TSX composite index, which represents large publicly traded Canadian companies.

Women have much larger representations on the boards of foreign companies listed on many major worldwide stock markets.

Among the TSX-composite-listed companies, 42 per cent have no women on the boards of directors, while 28 per cent had just one female board member.

The TD report’s 11-per-cent figure is slightly lower than that of a similar survey by GMI Ratings, which puts the percentage of female board members at 13.1 per cent.

According to GMI Ratings, Canada ranked 9th among major industrialized nations for female board membership in 2011. That’s down from 6th place in 2009.

Percentage of women on boards of directors (2011)

Norway: 36.3%

Finland: 26.4%

Sweden: 26.4%

France: 16.6%

Denmark: 15.6%

Australia: 13.8%

New Zealand: 13.7%

Netherlands: 13.1%

Canada: 13.1%

Germany: 12.9%

United States: 12.6%

Source: GMI ratings

The decline has a number of implications

According to Beata Caranci, deputy chief economist at TD and lead author on the report.

“First, it is simply an unacceptable outcome on equity grounds. Second, and more troubling to economists, it implies a market failure to appreciate the skills and perspectives that women can bring to the table.”

Quotas?

What the report doesn’t call for is for quotas for women on boards, similar to what exists in countries like Norway and the United Arab Emirates.

“They are the antithesis of merit,” writes Caranci. “They also risk stigmatizing qualified women on boards as ‘tokens’.”

Instead, the report calls for a tough new “comply or explain” policy, which would require companies to put gender diversity policies in place when it comes to choosing new board members. It would allow companies to ignore those policies, but only if they explain why to shareholders.

Shareholder awareness and accountability

It also calls for companies to disclose the proportion of board members and senior executives that are female, so progress can be measured. The report says this would increase transparency, awareness and accountability on gender diversity.

While the number of women on boards at Canadian companies is falling behind, the number of women at the top of major Canadian companies is even lower.

None of the S&P/TSX 60 companies — the 60 largest publicly traded companies in Canada — have female CEOs. Only two, BlackBerry and Manulife, have boards of directors chaired by women.

Notable female CEOs in Canada include Linda Hasenfratz, head of auto parts manufacturer Linamar, Christine Day, CEO of Lululemon Athletica, and Heather Reisman, CEO of Indigo Books & Music.

Discussion Questions:

1. Why do you think there are fewer women as Chief Executive Officers?

2. Do you agree with the policy of instituting Quotas? Are quotas a workable solution?

3. Should shareholders’ be aware of the number of women who are members of the Board?

To read the complete article visit, CBC News

Posted March 3rd, 2013 by Gerry La Rocca & filed under Auditing, MD&A.

Financial Collapse

Could auditors have prevented the failures of the 2008 financial collapse? A CICA/CPAB initiative analyzes proposals for an improved process

Illustration: Michael Austin

Does a corporate failure automatically mean there was an audit failure?

This is the underlying question linking the proposals for enhancing audit quality coming from policy-makers, standard-setters and regulators in the EU, the UK and the US — the regions hardest hit by the global financial market collapse of 2008. Even though no one has directly blamed the auditors or the audit process for creating the crisis, many were left wondering what role the auditors played and whether they could have prevented it. Were the auditors sufficiently independent, objective and skeptical?

But were regulators, managers, investors and standard-setters here in Canada worried about audit quality before international proposals were floated a couple of years ago?

Auditor independence
Internationally there are a half-dozen initiatives focused on independence largely aimed at addressing the threat of familiarity when audit partners and firms become too cozy and therefore accepting of management.

In August 2011, PCAOB (Public Company Accounting Oversight Board) issued a concept paper looking at mandatory audit-firm rotation but did not specify a time frame. In November 2011 the European Commission recommended mandatory firm rotation after six years when only one firm is involved, and nine years in the case of joint audits. It also suggested a move to audit-only firms and further restrictions and limitations on firms providing non audit services to the companies they audit.

Audit efficiency

“Ultimately you want the best and most efficient audit the auditor can conduct at a reasonable price. If you have auditors coming in to audit a large organization, it takes them two to three years to get familiar with the organization. You can’t then flip them out every three to five years. It doesn’t make any sense. You don’t have the efficiencies or the thorough review of an audit that is necessary,” says Patrick Crowley, executive vice-president and CFO of OMERS and a member of the Auditor Independence Working Group. “Completing a comprehensive review of the auditor and their work on a periodic basis would provide enormous value for the organizations but also for the auditor and the investor who relies on the financial statements.”

In Europe, the call for a six-year mandatory rotation has been opposed and an alternative proposal of 25 years put forward. In the US, PCAOB has heard from 700 individuals and organizations and more than 90% of respondents do not support mandatory firm rotation. As well, the European parliament has nixed the call for joint audits and audit-only firms.
Audit reporting
Even though Canada did not experience the same fallout and problems other countries have as a result of the financial crisis and the Canadian Auditing and Assurance Board adopted International Standards on Auditing in 2010, there is an expectation gap in the Canadian marketplace between what some stakeholders, investors, analysts and perhaps even corporate preparers expect of the audit and what they are actually getting.
But there is a bigger problem with the proposals, says Sir David Tweedie, president of the Institute of Chartered Accountants of Scotland and former chair of the international and UK accounting standards boards, who spearheaded the overhaul of global accounting standards. Simply put, they don’t go far enough. “In my personal opinion, the audit report is seriously flawed,” he says. “Having been an audit partner at one of the Big Four I knew there were some excellent audits but you wouldn’t know that from the outside because you haven’t seen what happened behind the scenes. You know soon enough when there is a bad one because it’s splattered all over the financial pages. But the good ones disappear without a trace. That’s part of the problem. Companies and investors see the audit as just a commodity.

Transparency

Why doesn’t the auditor say what kept him awake at night, what he concentrated on, the big judgments, the fights with management? That is what the investor needs but doesn’t get.

What I’m saying to the firms is this is an opportunity — don’t fight it. Auditors are on the firing line because people aren’t sure what job they did. Present the facts, what happened, and there is your transparency and corporate governance.”

“Going concern” is perhaps the proposal that could have the most significant impact on auditors’ reports. It was also one the committee rejected. According to Davies, European regulators seem to be concerned with the need for auditors to comment on the viability of businesses going forward. This is not necessarily the view of the Auditor Reporting Working Group. What’s more, it’s not ultimately what the proposals do, says Davies. “There are two ways of preparing statements: on a going concern basis or on a liquidation basis if the company is being liquidated, which is rare.

What is being proposed in the UK and Europe is that the auditor state in the audit opinion that the statements are being prepared on a going concern basis. This is not an indication of the viability of the company going forward. All it says is that you are not using the liquidation basis of accounting.”

Another piece in the going concern proposals touches on material uncertainty and calls on auditors to state not only when there is a material uncertainty related to going concern but also when there is no such uncertainty. “This provides no useful information and we are worried about the risk of misinterpretation by the user,” says Jean Bédard, professor, School of Accounting and chair in corporate governance at Laval University, member of the Auditing and Assurance Standards Oversight Council and member of the Audit Reporting Working Group.

Transparency of the auditor process is another big focus area. To that end, the working group supports proposals to include descriptions of auditor responsibilities and it is exploring proposals aimed at expanding the information on which an auditor can provide assurance beyond the financial statement.

“If we are going to go down that path, work needs to be done to address how to go about providing that assurance, what is the framework we would use, what’s the information we need to provide assurance over,” says Davies. “Could you provide assurance over management discussion and analysis? Potentially you could. Is there demand for that? Is there value in that? I wouldn’t want to make that investment until we understood if users would view it as valuable and companies would be willing to compensate the auditor for it.”

Discussion Questions:

1. Would the rotation of auditors improve Audit Quality?

2. Will transparency be improved if auditors describe the work that was done and the issues that most concerned the auditors during their audit?

3. Will audit quality be improved if the auditors gave their opinion on the company’s “Going Concern” or would there be a higher risk of misinterpretation by the investing community?

Article written by Mary Teresa Bitti , see CA magazine article, www.camagzine.ca or click for the complete article

Posted February 24th, 2013 by Gerry La Rocca & filed under Taxation & Planning.

Tuition fees tax credit

Tuition fees qualify for a non-refundable 15% federal tax credit for 2012 if you pay them for yourself.

To be eligible for a credit, the fees must be paid to a Canadian university or college.

Generally any fees you claim must total more than $100 per institution.

Along with admission fees, eligible tuition fees include library and lab charges, examination fees, application fees, mandatory computer service fees, charges for certificates, diplomas and degrees, and the cost of books included in the fees for correspondence courses.

Also eligible are mandatory ancillary fees for health services, athletics and various other services ( but not student association fees or fees covering goods of value that you retain)

Fees paid to an education institution, professional association, provincial ministry or similar institution for an examination required to obtain professional status recognized by federal or provincial statute, or to be licensed to practise a profession or trade in Canada, are eligible for this credit.

Fees paid to private schools for grade school or high-school education will not entitle you to a federal tax credit.

However, religious private schools may be able to provide a tax receipt for some of your tuition fees, treating that amount as a charitable donation, made toward the school’s religious instruction.

Education Amount

As a separate credit from the tuition fees, you are entitled to a further federal education tax credit of $400 (worth $60) for each month you are in full-time attendance at a post-secondary educational institution.

For part-time post-secondary students, the education tax credit is $120 (worth $18) per month that you attend an eligible program at least three consecutive weeks long and involving at least 12 hours of instruction per month.

Students with disabilities may qualify for the full $400 per month credit even if they attend the institution only part-time.

Textbook tax credit

Post secondary students eligible to claim the education amount above, can also claim a non-refundable textbook tax credit to help cover the costs of their textbooks. The amount you can claim for the credit is based on:

$65 for each month you qualify for the full-time education tax credit amount.
$20 for each month you qualify for the part-time education tax credit.

Transfer of unused student credits

If you are unable to use your tuition, education and textbook credits in 2012, because you have no tax to pay, up to $5,000 in combined federal credits can normally be transferred to your spouse or to a parent or grandparent.

Alternatively, you can carry forward any unused and untransferred tuition, education and textbook amount and claim them against your taxable income in later year,

Note, however, that such amounts carried forward cannot be transferred, only the student can claim them in later years.

Documentation taken from the KPMG website, click link. You may request your Tax Planning for you and your family, complimentary copy by writing to KPMG.

Here is the link to Canada Revenue tax guide for your 2012 personal taxes

Discussion Questions:

Why does our Canadian Tax System have so many rules and regulations?
Should we consider simplifying our Federal Income Tax Act?
Based on the above do you find the textbook tax credit is sufficient to cover the cost of your textbooks?

Posted February 17th, 2013 by Gerry La Rocca & filed under Accounting Careers, Auditing.

Engineer Evan Vokes repeatedly raised concerns with company behind Keystone XL pipeline

Whistleblower

A former TransCanada engineer says he reported its substandard practices to the federal energy regulator because he believed the company’s management, right up to the chief executive officer, refused to act on his complaints.

In an exclusive television interview with CBC News, Evan Vokes said he raised concerns about the competency of some pipeline inspectors and the company’s lack of compliance with welding regulations set by the National Energy Board (NEB), the federal energy industry regulator.

Vokes said he refused to back down and the workplace friction eventually took its toll.

“It was unbelievable the effect it was having on my health,” Vokes told CBC News chief investigative correspondent Diana Swain. “I was certainly on my way to a heart attack, or a stroke, for sure. There is no doubt about it.”

Vokes said he met with the Calgary-based company’s vice-president of operations, and he also wrote a detailed letter to TransCanada Corp. chief executive officer Russ Girling. Frustrated, he finally made a formal complaint to the NEB, a version of events confirmed in an interview by the board’s chief engineer.

“We understand he went right through the chain of command to the top in [TransCanada Pipelines Ltd.],” Iain Colquhoun said in an interview.

“Evan Vokes took the initiative to try and resolve the problem using the internal procedures and we would encourage people to do that,” Colquhoun said. “But having not got there, he took the extra step of involving the regulator, and we would certainly encourage that.”

Pipeline safety of ‘paramount importance’

The regulator warned the company it would not tolerate further infractions of regulations related to welding inspections, the training of pipeline inspectors and internal engineering standards. It also announced a further audit of the company’s inspection and engineering procedures.

‘We are confident that any remaining concerns the regulator has about compliance and pipeline safety will be unwarranted.’—TransCanada statement

“Pipeline safety is of paramount importance to the NEB, and it will take all available actions to protect Canadians and the environment,” the regulator stated.

In an email statement to CBC News, TransCanada said “our reviews concluded that the items raised by the former employee were identified and addressed through routine quality control processes well before any facilities went into service.

“We are confident that any remaining concerns the regulator has about compliance and pipeline safety will be unwarranted,” the TransCanada statement said.

The NEB is continuing its investigation of TransCanada and warned that if the company doesn’t fix the identified problems, it “will not hesitate to impose appropriate corrective actions.”

Lack of independent inspection questioned

Many of the complaints by Vokes focused on TransCanada’s practice of allowing its pipeline and fabrication contractors to hire the inspectors that would be inspecting the contractors’ work.

In 1999, the NEB imposed a regulation which requires the companies contracting the work, such as TransCanada, to supply independent inspectors to inspect the contractors’ work.

“There is an inherent conflict when a prime contractor does his own inspections,” Vokes said, especially when the project involves gas pipelines under high pressure because the consequence could be greater since it relates to public safety.

“In pipelining, there is a huge amount of stress for a very thin pipe,” he said. “You certainly should be paying attention to what is wrong with your pipe, making sure nothing happens to it, and there are no injurious defects to your pipe as it is being put into the ground.”

Vokes said the NEB regulation ensures contractors can’t pressure inspectors to sign off on work that is not up to code.

TransCanada has publicly admitted it did not always follow this regulation in the past, but said it was industry standard. Vokes said TransCanada believed independent inspection slowed production, driving up construction costs.

To read the complete article: Click or Visit CBC news

If you have more information on this story, or other investigative tips, please email [email protected].

Discussion Questions:

1. Does the company follow good internal control practices pertaining to independent inspection of pipeline installations?

2. How would you rate the risk of poor inspection, High, Medium or Low? Support your decision.

3. What additional process controls would you put in place to ensure that no defective pipes or substandard installations occur during the pipelining process?

Posted February 3rd, 2013 by Gerry La Rocca & filed under Canadian Economy.

Good-Bye Penny!

Effective February 4, 2013, the Canadian government will not distribute any more pennies and that may mean you may lose or earn a few pennies when making purchases in cash.

Cost Benefit Analysis

As part of the its Economic Action Plan 2012, the government announced that the Royal Canadian Mint will cease distribution of the penny to save the government $11 million a year. It was widely reported that producing the one-cent coin is costing the government 1.6 cents each.

Rounding up or down?

This means that the penny can still be used to pay for any money transactions but consumers and businesses should not expect pennies for change. Instead, cash transactions will be rounded up or down. If pennies are not available for cash transactions, the government guidelines urged businesses to round up or down “in a fair and transparent manner.”

For illustration purposes, the Mint suggested that if the transaction is $1.01 or $1.02, this can be rounded down to $1 while transactions of $1.06 or $1.07 should be rounded down to $1.05. If the transaction is $1.03 or $1.04, the total should be rounded up to $1.05, while transactions totalling $1.08 or $1.09 should be rounded up to $1.10.

Electronic or Cheque payments?

However, transactions done electronically — by credit card or debit — or through cheques will be not rounded.

Any taxes, fees or duties have to be calculated first before the final amount is rounded for cash transactions, according to the government guidelines. The rounding should also be done for the total and not for individual items

The government said the penny will remain legal tender like other Canadian coins

History

The February 2013 schedule was actually postponed. The government had earlier planned for a phase out of the penny in fall 2012.

Digital Journal earlier reported that the postponement was to allow consumers and businesses, including financial institutions and charities, to prepare for the transition.

On May 4, 2012, the last penny was struck in special ceremonies in Winnipeg by Finance Minister Jim Flaherty and Parliamentary Secretary Shelly Glover.

While the government will not issue any more new pennies, the government said the penny will remain legal tender.

On the government’s FAQ page, it reads:

While businesses do not have a legal obligation to accept any particular Canadian coins or bank notes in a retail transaction, the penny will continue to be legal tender like all other Canadian coins, and businesses may accept the coin as a means of payment if they so choose.

Consumers can deposit the pennies with their favourite financial institutions.

The Canadian penny was first minted by the British Royal Mint in London in 1858.

Information obtained from Digital Journal, Read more click on link: http://www.digitaljournal.com/article/342657#ixzz2Jr1T89hs

Discussion Questions:

1. Do you see any accounting changes for retail store operations?

2. What is your opinion on removing the Penny from circulation?

3. When you see a Penny on the floor, will you continue to pick it up , for Good Luck! or simply say Good-Bye Penny?

Posted January 27th, 2013 by Gerry La Rocca & filed under Accounting Careers, Corporate Social Responsibility, Fraud, Fraud Accounting.

Anti-Corruption Squad

Quebec’s anti-corruption squad has arrested former SNC-Lavalin CEO Pierre Duhaime, charging him and Riadh Ben Aissa, ex-head of the company’s construction arm, with fraud in connection with construction contracts for a Montreal super-hospital.

Duhaime stepped down from SNC-Lavalin in March after an investigation revealed he signed off on $56 million in “improper payments,” to undisclosed agents, breaching the company’s code of ethics.

SNC-Lavalin spokeswoman Leslie Quinton issued a statement Wednesday, saying the company “has and will continue to co-operate fully with all authorities who request our assistance” and that it has “voluntarily turned over information” to authorities.

Authorities in Canada and Switzerland have been conducting a widening probe of the company’s dealings, including in Libya, focusing on $195 million in payments by SNC-Lavalin.

On Sunday, a joint investigation by CBC/Radio-Canada and Swiss public Broadcaster revealed the Swiss probe is examining $139 million in payments to a Swiss bank account tied to mega-construction contracts in Libya. That’s in addition to $56 million in “improper payments” identified by the company last spring, when Duhaime was forced to resign.

Widening investigation

Swiss investigators are trying to determine who approved a string of multimillion-dollar payments by SNC-Lavalin International now at the centre of the case. Sources have told CBC/Radio-Canada that Swiss investigators have questioned six high-level SNC-Lavalin executives, and hope to question three more, as they hold Ben Aissa in jail.

Geneva-based lawyer Roland Kaufmann is facing similar charges of money laundering and corruption in connection with the case.

Ben Aissa oversaw global construction projects and forged close ties to the Gadhafi regime in Libya, winning the company billions in contracts to build an airport, a prison, and a major water distribution project.

SNC-Lavalin says it has handed its records documenting payments to the two companies to Swiss authorities, but that it is unaware of any “misuse of the funds.”

Ian Lee, a professor of international business at the Sprott School of Business, says large corporations face risks when they do business in corrupt countries.

“It’s a real dilemma,” he told CBC News. “If you don’t pay bribes, the chances are you won’t get the contract. And if you do, there’s a very good chance you’ll go to jail in Canada.” He said with some countries, “you have to walk away.”

Shares of SNC-Lavalin Group fell 92 cents to close at $39.99 in TSX trading Wednesday, from a 52 week high of $54 .

Click to view the TSX quotes

Discussion Questions:

1. In order to do business in certain countries, you need to bribe. In your opinion do you believe this to be a true statement?

2. Why are bribes in certain countries tolerated?

3. As a Forensic Accountant, what steps would you take to detect bribes in large multinational corporations?

Click to read more on SNC-Lavalin

Posted January 21st, 2013 by Gerry La Rocca & filed under Accounting Careers, Advanced Accounting, Canadian Economy, Corporate Restructuring.

Managing the message: Canada’s new anti-spam law sets a high bar

New laws target electronic communications

Canada’s Anti-Spam Law (CASL), expected to come into force in 2013, will be one of the toughest of its kind in the world. Texts, tweets, Facebook posts and emails will all fall under its purview. In fact, CASL and its regulations will apply to any electronic message sent in connection with a “commercial activity,” even if it is sent without the expectation of making a profit. Simply encouraging participation in a commercial activity is enough to get caught by this Act.

Consent is a key feature of CASL

According to the new law, Canadian and global organizations that send commercial electronic messages (CEMs) within, from or to Canada need the permission of their recipients to send those messages, with very limited exceptions. This is in stark contrast to the US anti-spam law, which allows CEMs to be sent without permission until a recipient “opts-out”. The result? Organizations will need to amend their electronic marketing practices and update their customer relationship management databases to comply with CASL’s stricter consent model.

Are you prepared to comply before CASL comes into effect?

A focus on enforcement

The Canadian Radio-Television Telecommunications Commission (CRTC), the Privacy Commissioner of Canada and the Competition Bureau will all play a role in enforcing CASL. In addition to sharing information among themselves, these agencies can coordinate with foreign jurisdictions to pursue violators.

Organizations that don’t comply risk serious penalties:

• Up to $10 million per violation for corporations

• Criminal charges for organizations that make false or misleading representations regarding the sender or subject of a CEM

• Civil charges enabling businesses and consumers to seek damages of $200 per violation, to a maximum of $1 million per day

• Personal liability for company officers and directors who knowingly infringe the law

• Investigation of spam messages, which recipients can send to a Government of Canada reporting centre. Activities related to phishing, email harvesting and the use of spyware/malware will also be investigated

The key to compliance

Updating your electronic databases to manage consents and unsubscribe requests can be a complex task. But it also promises to yield rewards that extend far beyond compliance. As you update your digital marketing practices, you can establish more meaningful communications with your customers and prospects – ones that are solicited and anticipated in accordance with CASL.

To read more, please visit the Deloitte website on “Managing the Message”

Discussions Questions:

1. Do you agree with the new ” Canada’s Anti-Spam Law ” (CASL).

2. Will this new law hinder new business from starting up?

3. Have you been affected by Spam and Malware violations?

Posted December 9th, 2012 by Gerry La Rocca & filed under Accounting Careers, CPA.

Have female CAs come a long way?

Female CAs have come a long, long way since their beginnings in the profession. How do they see the road ahead?By all accounts, Janice Rennie is a pretty inspiring woman. Based in Edmonton, this FCA and mother of two sits on six boards, is a former owner of two businesses, has held numerous senior management positions and stays active in several charities. This year, she was elected a Fellow of the Institute of Corporate Directors, having already earned her fellowship from the Institute of Chartered Accountants of Alberta in 1998.

But Rennie will be the first to say the path to success has included its share of trials. During her early days as a CA in the 1980s, she recalls a client who didn’t want to work with her because she was a woman. “I was well regarded in the firm, but the client didn’t see how a woman could bring any value to the business,” she says. Her firm backed her up, but the experience set the precedent for how Rennie would approach her career going forward: “To be equal, I knew I had to be better than the guys.”

Rennie’s hard work paid off and in 1990, at the age of 33, she was asked to join her first board at NOVA Chemicals (then called Nova Corp. of Alberta). Not only was she the only female on the board; she was the youngest member by at least 20 years. “I knew I was plunging into an area where men traditionally walk,” she says.

Today, women make up a third of all members of the profession. About half of new entrants are female, compared with 23% when Rennie graduated in 1981 and a paltry 2% in 1970. From 2009 to 2011, women secured the overall highest standing in Canada on the Uniform Final Evaluation and last year, they garnered all the regional gold medals as well. (At the time of writing, the 2012 results had yet to be released.) Many of the major CA firms across the country have recognized the potential of their female employees by implementing initiatives geared specifically to helping women succeed in leadership roles.

As Boomers retire:

As the boomers retire and more women move through the profession, Taub says there will be an inevitable changing of the guard that will hopefully entail a leadership consisting of both women and men who are open to customizing the work environment. In the interim, she believes there should be policies in place to train people who evaluate talent to be more objective. “The traditional model of working in an office 80 hours a week may not work for everyone,” she says. “There is talent out there that will get the work done in an untraditional way.” Fortunately, some firms have already made major strides in introducing such policies. The CICA’s Work/Life Balance Report shows one in two respondents (52%) work for an employer that has policies to handle gender issues. Flexibility around work arrangements is also gaining popularity, with two in three respondents reporting that their employers offer flex time. Some benefits, such as summer hours and flex time, are catching on with both genders, although women are still the major users .

Discussions Questions:

1. Why is it still difficult for women to achieve the CEO positions?

2. What do you understand by Work/Life balance?

3. Would flex time be a good thing for all employers to offer their employees.

Article written by Rolalind Stefanac, read more about Woman at Work

Posted December 2nd, 2012 by Gerry La Rocca & filed under Accounting Careers, Auditing, Financial Accounting, Fraud Accounting.

What is the role of Forensic Accountants:

Forensic accountants are uniquely suited to help in-house counsel address issues involving financial reporting, accounting and internal controls. They also collect and analyze accounting and internal-controls evidence. They produce a fact-based report that can inform the decision-making process in inquiries, investigations and dispute resolution.

By product of Forensic Accountants work:

The forensic accountant’s work often include remediation strategies to help a company mitigate and remedy procedural or internal-controls gaps that allowed the underlying issue to occur. Inquiries into accounting and internal controls raise a host of technical issues requiring specialized knowledge that forensic accountants are uniquely positioned to provide.

How does Forensic Accounting differ from Auditing?

The objective of a forensic accounting assignment is to collect, analyze and report on the evidence or facts surrounding a particular act that often has litigious, fraudulent or criminal implications.

Auditors also collect and analyze evidence, but an independent auditor’s objective is to attest to the credibility of assertions that are under examination, such as the material accuracy of financial statements for which the audited company’s management is responsible.

Internal auditors examine evidence to determine whether people followed prescribed processes or internal controls; this occurs, for example, in an operational or Sarbanes-Oxley compliance audit.

Forensic accountants, independent auditors and internal auditors all have experience related to accounting and internal controls. All are process oriented and know how to spot issues.

Most important trait of Forensic Accounting:

The most important trait of a good forensic accountant stems from the difference in the work’s objective as previously discussed.Once an independent or internal auditor spots a concern, protocol is to notify company management about the issue but not investigate further; that’s management’s responsibility. This is where the objective shifts and one of the forensic accountant’s strongest skills comes in: an investigative mind that drives him or her to answer questions about what occurred, when and how it happened, and who was involved.

Sometimes forensic accountants also may need to gather facts about why an event may have occurred. This is true, for example, in a fraud claim where the trier of fact must find intent to determine fraud. Forensic accountants always look for answers to such questions or for red flags in the evidence.

Many forensic accountants have additional training and experience in skills such as evidence collection and preservation, witness interviews, and data-mining and analysis. They often are well aware of legal procedures and protocols, and they also may be subject-matter experts with specific specializations, such as corruption, bribery or money laundering.

Practical Considerations

One consideration is whether to hire a forensic accountant directly as an employee or to engage an outside third party that provides such services. A factor in this decision is whether it’s useful to have the skill set in-house or preferable to have the forensic accountant be completely independent of management.

If in-house counsel decides to hire the forensic accountant as an employee, the department to which the individual should be assigned is a consideration. Should the forensic accountant be part of internal audit, for example, or legal and compliance?

In the past, companies have used existing internal auditors to do this type of work as a way to reduce costs and due to the perceived similarities in the skill set and work product. More and more, however, forensic accountants employed by an organization are assigned to the legal and compliance department because of the legal implications surrounding the work. This structure also allows the forensic accountant to maintain an objective approach to an assignment as he or she is not governed by management or influenced by potential biases within the organization.

Assigning the forensic accountant to the legal and compliance department also could result in more privilege protection than assigning him or her to internal audit or another department. In some instances, outside counsel may need to engage the forensic accountant on behalf of the company to invoke the attorney-client privilege.

Collaboration with a forensic accountant can be especially effective for developing case strategy when financial reporting, accounting or internal controls are involved.

Article written by:Elizabeth M. Junell, click to obtain the complete article

Discussion Questions:

1. Would you consider a career in Forensic Accounting, based on what you have read in the newspapers and the heard in the News?

2. Are the differences between a Forensic Accountant and an Auditor , clearly differentiated?

3. What are the risks of choosing a Forensic Accounting career?

Posted November 4th, 2012 by Gerry La Rocca & filed under Canadian Economy, Managerial Accounting.

Succeeding in Turbulent Times

The credit crisis is just one of several factors influencing Canadian companies today. The Canadian dollar, rising energy costs, pressure from off-shore competitors and the economic slowdown in North America are also contributing to widespread economic uncertainty; creating challenges and opportunities and a need for businesses to focus on value preservation and enhancement.

Liquidity, Cash and Working Capital

Liquidity, cash and working capital are keys to survival and growth of a business. Businesses need to manage their cash and related assets and liabilities in an efficient and cost effective way, in order to optimize liquidity, improve profitability and respond to market conditions in a timely manner.

Liquidity

For a financially distressed company, cash release or preservation may mean survival. For a non-distressed company, cash release can be used to reduce debt, fund growth and investment or provide a better return to stakeholders.

Reducing Costs While Maintaining Performance

Reducing costs while maintaining performance means helping identify ways of saving costs in some areas of the business and enabling it to operate more cost efficiently.

But wherever costs are reduced, this action must be done in a way that delivers lasting business performance improvements, rather than in a quick hit with short-term gains and long-term difficulties.

Proactive cost management is critical to running an effective organization. Strategic plans need to be driven, tools built to track progress and a cultural commitment must be created to minimize unnecessary costs.

Managing Risk

Managing organizational risk in tough times means taking a holistic view. This requires an integrated cross-departmental framework of controls, checks and balances.

Organizations can no longer afford to treat risk in silos, in separate departmental level initiatives. Risk management needs to be an integrated, enterprise wide approach, keeping focus on multiple key indicators which show early warning signs of potential business problems, with pre-planned strategies to address potential risks.

Ongoing board level attention is required, as risk management is no longer a purely compliance issue. Globally, organizations are facing uncertain times, and management of risk at the highest level is critical. Only with a systematic, but strategically led approach to risk management, can organizations of today be more assured of avoiding, or better managing, the pitfalls of difficult market conditions.

Discussion Questions

1. Based on your everyday experience, do you see changes in the economy? Do you feel that we are in turbulent times?

2. What must businesses do to stay alive or in business during tough times?

3. Managing Risk! What are some of the risks faced by businesses today?

See KPMG Succeeding in Turbulent Times link for more details