Are you trustworthy?

Recently I was watching a TED video. If you’re not familiar with TED you’re missing out. TED is a not-for-profit group running a series of live and online events with the purpose of providing a forum to ideas worth spreading. TED has been in operation since 1984. TED conferences bring together the world’s most fascinating thinkers and doers, who are challenged to give the talk of their lives (in 18 minutes or less). By the way TED stands for Technology, Entertainment, Design – the three worlds in which speakers are drawn from.

The video I watched was a talk given by Baroness Onora O’Neill a philosopher who focuses on international justice and the roles of trust and accountability in public life. She is a member of the British House of Lords, is an Emeritus Professor at the University of Cambridge and chairs the Equality and Human Rights Commission for the United Kingdom. Not a bad curriculum vitae to be sure!

In her 9-minute talk she addressed head-on the view that many in wider society trust others less.

According to the Baroness there are three important things to know and think about the issue of trust.

Firsly, is the claim that there has been a great decline in trust.

Secondly, given the above claim, we think there should be the aim to have more trust.

Thirdly, as individuals, society, governments, businesses and institutions, we should have the goal to rebuild trust.

Go to the TED link below and have a look – it is well worth it!

Until next time.

All my best,

James

TED Talk – Onora O’Neill: What we don’t understand about trust

Are accountants really “Trusted Business Advisers?”

The term “trusted business adviser” is often used to describe the pinnacle of the accountant–client relationship. Everyone seems to want to be a trusted business adviser. The key element of this exalted title is trust.

However, like most pedestals or sort after titles, through their overuse the term quickly becomes cheapened. It seems these days that anyone with a business card, website and is wearing a suit becomes a trusted business adviser. This, fortunately, is not the case. Becoming a real trusted business adviser takes commitment, passion, patience and lots of hard work.

One definition of trust is the strong belief or confidence in the honesty, integrity and reliability of another person. Such a belief cannot be fostered in a quick coffee meeting or drinks at the cricket. Trust is built through a series of interactions that show you are honest and consistent, and have the best interests of the client in mind. Trust is something that is easy to lose but difficult to earn. Here are some characteristics of a trusted business adviser:

  • They invest time and effort in initiating and building a relationship
  • Often they give out to the client before receiving anything in return.
  • The focus of their activity is not fees.
  • They consistently look for ways to help the client.
  • They are patient and long-term in their thinking.
  • They are flexible in the ways they do business to suit the client, not simply themselves.

If you were to were to use the above six points as a gauge for your professional activities with your clients how would you rate? Are YOU a trusted business adviser?

Keep smiling and bye for now,

James E

Are you a trusted accountant?

I was doing research on a book project the other day and came across a most interesting article on the web. Although it was originally published in April last year – its lessons are still pertinent. It talks about the position of trust that accountants have in the business community as well as some other professions. The full article appeared in Brisbane Business News – see http://www.brisbanebusinessnews.com.au/process/myviews/bbn_article.html?articleId=1685

A SURVEY of more than 600 Australian and 240 New Zealand business owners conducted by an accountancy, financial planning and law association has discovered that accountants are the most trusted advisers when it comes to business advice. The MSI Global Alliance March 2011 survey scanned a range of business and personal financial advice areas, where participants were able to select their lawyer, accountant, bank, business coach or financial planner.

While much has been written about the lack of professionalism of financial planners, participants rated them as the most trusted source of retirement planning advice (40 per cent) with accountants following closely behind on 37 per cent. This rated accountants highly despite the fact individual accountants are not allowed to offer investment advice to clients.

The banks, on the other hand, were harshly rated with only 10 per cent of participants agreeing that they are the most trusted source of advice when it comes to business finance and retirement planning. It also asked participants to comment on how each category of adviser could improve.

ACCOUNTANTS

Common perceptions

• In advice terms, too focused on past performance, not the future
• Do not like to leave their offices
• Partners in firms can be inaccessible

Suggested improvements

• Don’t charge for face-to-face meetings. It stops clients going to their accountant for advice and disables a proactive client-adviser relationship
• Visit clients in their offices. The fees will flow.
• Focus on assisting with forward planning and business strategy rather than being retrospective

LAWYERS

Common perceptions

• Fees always end up being higher than quoted
• ‘Legalese’ is difficult to understand and lawyers do not compensate their language for clients

Suggested improvements

• Estimate the work to be done and associated fees more clearly upfront
• Communicate immediately with clients if additional fees will need to be charged
• Breakdown fees charged more clearly
• Talk in a language that is easy to understand
• Be more proactive and instigate client meetings on matters such as estate planning

BUSINESS COACHES

Common perceptions

• Lack of formal qualification/credibility
• Rely on self-help books more than genuine experience with business

Suggested improvements

• An ‘institute’ is required that can regulate and accredit business coaches
• Focus more on coaching budgeting/savings planning

FINANCIAL PLANNERS 

Common perceptions

• Still charge commission, dressed up as a ‘percentage of funds under advice’
• There is no uniform qualification for financial planners, reducing their credibility
• Push clients into funds from which they receive the highest commission

Suggested improvements

• Charge a dollar based fee-for-service
• Clearer analysis and distribution of super fund performance compared with other funds
• Clients would consider performance fees when performance is better than market averages
• Be transparent and offer more individualised recommendations than managed portfolios from other financial institutions

Who keeps an eye on the auditors? (2 of 2)

Following on from the last post, here is another extract from the Radio National Background Briefing segment. It makes for great reading!

Former accountant and auditor who writes the accountancy watchdog column at Forbes Magazine, Francine McKenna.

Francine McKenna: The four largest firms-Deloitte, PwC (PricewaterhouseCoopers), Ernst & Young, and KPMG-they probably earn more than 100, 120 billion dollars worldwide. It’s a very large industry, just those four firms. And they employ worldwide hundreds of thousands of people.

Those numbers are made up of lots and lots of individual firms at the country level. So you have very large countries like Australia, like the United States, like the UK, like Germany, Japan, China, et cetera, where the firms may be very, very large and employ a lot of people and the revenues are very large, too. And it all gets added up together. However, each firm in a country is a private partnership, it’s a separate legal entity, it operates independently, and the firms, country-by-country, operate together under a brand name, like PricewaterhouseCoopers or like Deloitte and KPMG.

Stan Correy: Francine McKenna is making an important legal point about the big four audit firms. While, for example, KPMG China or Australia may have the same brand name, they’re separate entities. So if there are problems in KPMG China, that doesn’t mean KPMG Australia is to blame. And, as Francine McKenna explains, the ‘Big Four’ are past masters at avoiding blame.

Francine McKenna: We often say you can bring the auditors to court, but you rarely bring them to justice. First of all, they don’t go to jail because to go to jail they would have to be proved part of a fraud, complicit, then you would have to have the smoking gun, which doesn’t happen because the auditors don’t tell on each other-there’s sort of like the mafia, there’s this omerta-they never, never, never tell on each other.

Stan Correy: Nevertheless, with all this apparent incompetence, hiding behind complexity, and being too close to the people they’re supposed to be independently auditing, when are the audit firms liable? Francine McKenna says it’s tricky.

Francine McKenna: The other thing is that, you know, hardly anybody goes to jail. We have this, you know, ongoing debate now about how nobody is going to jail over the financial crisis and the auditors are at the bottom of the list in terms of people that anyone thinks deserve to go to jail about anything.

Stan Correy: Most big auditors have insurance against making mistakes and their good brand name is important to them, so they get the big clients. So they hate bad publicity and have a lot of defences ready. All this is being played out in a high profile case in Australia.

Journalist [archival]: Local stocks have tumbled three and a half per cent to a three month closing low, after retail property trust Centro announced it’s struggling to refinance $1.3 billion in debt…

Stan Correy: In late 2007, the shares of shopping centre owner Centro Properties Group collapsed after the company admitted it released misleading accounts to the market. The corporate legal drama involving Centro Properties Group then began, as investors who lost money wanted revenge. The drama involves management, directors, and auditors.

So, who was to blame for allowing the misleading accounts to be released? Well, two years ago, ASIC, the Australian securities regulator, brought proceedings against the directors on the board of Centro Properties Group and two managers, claiming they had breached their duties and had misled investors. In late June this year, ASIC had one of its rare legal victories.

ABC Newsreader [archival]: The federal court today raised the bar of responsibility for company directors. The court has ruled that directors of the giant property group Centro breached their duties by not picking up billions of dollars in errors in the accounts. In 2007, the directors approved the accounts, which showed the company had no short-term debt, understating the situation by about $3 billion.

Greg Medcraft [archival]: It’s a landmark decision in Australian corporate governance. I think it does send a very clear message to boardrooms across the country about corporate accountability.

Stan Correy: Greg Medcraft, the chairman of ASIC.

Justice Middleton rejected the directors’ argument that they relied on the expertise of outside auditors who had approved the accounts. But the Centro saga doesn’t end with the ASIC case. The directors of Centro are in turn suing the auditors, PricewaterhouseCoopers, and so are the people who lost their money in the Centro crash. There are two class actions against Centro and PricewaterhouseCoopers by investors-one by law firm Slater & Gordon, the other by Maurice Blackburn.

From Maurice Blackburn, senior associate, Martin Hyde.

Martin Hyde: Centro has brought cross-claims against its auditors. Centro said that if shareholders have lost money as a result of what went on it was partly or completely the fault of the auditors, PricewaterhouseCoopers. And so Centro and PricewaterhouseCoopers will fight it out and have to prove up the elements of their cross-claims at the hearing next March in the same way that we will have to prove up the elements of our case.

Stan Correy: It’s important to repeat what Martin Hyde just said. There are Centro investors suing Centro Properties and its auditors, PricewaterhouseCoopers. Centro Properties also has a claim against PricewaterhouseCoopers, its former auditor. And PricewaterhouseCoopers, in a cross-claim, is saying that the individual directors of Centro Properties and Centro executives misled the auditors. It’ll be QCs at ten paces for months.

Last June, Justice Middleton found that the Centro directors had failed in their duties when they approved the faulty 2007 accounts. The penalties will be handed down soon. ASIC wants the full punishment: fines and banned from holding office as directors. But Justice Middleton, while finding the directors ultimately guilty, wasn’t kind about the auditors either. He said there was evidence that the auditors didn’t understand the new accounting standards and that they didn’t inform the audit committee of a more than $1 billion error in the accounts.

Justice Middleton’s decision, according to Martin Hyde, reinforces the investors’ case against the auditors.

Martin Hyde: In one sense we still have to prove our case, and that hasn’t changed, but there are some aspects of the decision that may be helpful to us, and also if the judge goes on to make declarations about what happened, they are also potentially useful.

Stan Correy: So could you just give a summary of what your class action case is?

Martin Hyde: The Maurice Blackburn class action involves a range of investors, from the biggest institutions in the country right down to mum and dad shareholders, who lost money in Centro during the course of 2007. And we allege that the company and also the auditors engaged in misleading and deceptive conduct and also breached corporations law, and as a result our clients lost money.

Stan Correy: Martin Hyde from Maurice Blackburn.

The Centro case was widely reported in the international media, and at Forbes Magazine, Francine McKenna wrote a story on the judgement for her column.

Francine McKenna: I think it’s a very interesting decision; one, because the judge took such a very adamant position with regard to the directors’ responsibility and the clear direction that they could not abdicate responsibility to a third party advisor like an auditor. And that is the ready excuse that many executives and directors here in the United States use; in fact, our own US Attorney in Manhattan, I quoted him from an article, saying that we have a difficult time here prosecuting fraud cases, because executives say the auditor said it was OK, and the auditors say, ‘Our client gave us false documents,’ and so who am I to believe?

Stan Correy: In the recent ASIC case, the judge found that the directors couldn’t just delegate financial decision-making to the auditors. But PricewaterhouseCoopers, according to Francine McKenna, still has some explaining to do about their role.

Francine McKenna: And I think it’s going to be interesting to see what happens if PwC can also find a way to explain the fact that they didn’t stand up and do their job, I think, to communicate this information to the board of directors and not to let internal executives sort of paper over it and perhaps obfuscate the information from the directors themselves.

It’s a very interesting case both from the director and auditor perspective.

See you next post for something entirely different!

Keep well,

James E

Who keeps an eye on the auditors? (1 of 2)

Several months ago I put up a post that was titled “Auditing the Auditors. In Australia we are approaching the start of another audit season. I think it is a timely reminder to recall what auditing should all be about

“The other day I was listening to a podcast of the ABC Radio National show Background Briefing. The segment was titled Auditing the auditors. It was simply fascinating. Here is a transcript of the opening section. The ABC reporter’s name is Stan Correy.

Stan Correy: As the financial world tumbles all around us yet again, let’s pause to find out where the buck stops. Sure, the banks and big financial institutions played pass the parcel with other people’s money, but who was meant to stop their music? Is the answer the auditors, the people who sign off on the books and say they’re OK?

Remember ten years ago? Then it was Enron.

Congresswoman Stephanie Tubbs Jones [archival]: The reason we are here is because you audited Enron Corporation and the representations you made were not in fact a true financial picture of the corporation, such that a lot of people lost money and we’re in a public hearing trying to decide whether the auditing principles that have governed our nation for the past few years, are truly in the best interest of the public. Is that a fair statement, Sir?

Stan Correy: The ‘sir’ being questioned in congress then was the CEO of auditing firm Arthur Andersen, Joseph Beradino.

Joseph Beradino [archival]: And I’m here to give you some thoughts on how we might go forward with a much better…

Congresswoman Stephanie Tubbs Jones [archival]: Well then, why don’t you give me some thoughts? How is it that the public could see what was wrong with Enron based on your auditing practice?

Joseph Beradino [archival]: I don’t know how to answer that question.

[Excerpt from song: ‘Don’t Worry, buy Enron’]

Stan Correy: Arthur Andersen collapsed in a heap and no longer exists. Enron was thought to be a wakeup call to the world’s auditors. But just six years later, in 2007, the global financial crisis swamped the world. At the heart of the storm, dodgy accounts, signed off as OK by auditors from the big four audit firms.

Journalist [archival]: At more than 4 billion, the loss recorded by the Royal Bank of Scotland today is the biggest in British corporate history.

Commentator [archival]: Well, colossally big numbers we’re talking about for what used to be a global colossus. As you say, 4 billion of losses, 25 billion insured by the government, and if that goes sour that’s coming back to us, the British public.

Stan Correy: Auditors of the Royal Bank of Scotland were Deloitte Touche Tohmatsu. And then, across the Irish Sea there was the Anglo-Irish Bank.

Journalist [archival]: The soundtrack may have been upbeat on this video presentation to Anglo-Irish Bank staff, but the message it contained was anything but: one of the biggest losses ever for an Irish company and a colossal 4 billion government bailout.

Anglo Irish Chairman[archival]: From these figures it is clear that we made mistakes in some of the lending decisions taken in recent years, particularly in relation to property development here in Ireland.

Stan Correy: The auditors for Anglo-Irish Bank were Ernst & Young.

In Iceland, three of the biggest banks collapsed after Iceland was found to be in debt for $120 billion, ten times the entire economy. Auditors KPMG and PricewaterhouseCoopers were subsequently investigated over their role in the bank’s activities.

The giant American insurance company AIG was spectacularly bailed out by the United States government. AIG’s auditors: PricewaterhouseCoopers.

But strangely, it seems nothing much changed. In fact, it’s all really bad again. And if you thought there were problems in Europe and America, just wait till you hear about China. There-and it affects America and Australia, too-the auditors have for years been missing the fact that companies they were auditing had no business at all. They were empty shells doing nothing, listed on overseas exchanges but mere figments. No one home, but the auditors still signed off on them for years.

Tune into the next post for some highlights.

Keep well,

James E

Auditing the auditors (2 of 2)

Following on from the last post, here is another extract from the Radio National Background Briefing segment. It makes for great reading!

Former accountant and auditor who writes the accountancy watchdog column at Forbes Magazine, Francine McKenna.

Francine McKenna: The four largest firms-Deloitte, PwC (PricewaterhouseCoopers), Ernst & Young, and KPMG-they probably earn more than 100, 120 billion dollars worldwide. It’s a very large industry, just those four firms. And they employ worldwide hundreds of thousands of people.

Those numbers are made up of lots and lots of individual firms at the country level. So you have very large countries like Australia, like the United States, like the UK, like Germany, Japan, China, et cetera, where the firms may be very, very large and employ a lot of people and the revenues are very large, too. And it all gets added up together. However, each firm in a country is a private partnership, it’s a separate legal entity, it operates independently, and the firms, country-by-country, operate together under a brand name, like PricewaterhouseCoopers or like Deloitte and KPMG.

Stan Correy: Francine McKenna is making an important legal point about the big four audit firms. While, for example, KPMG China or Australia may have the same brand name, they’re separate entities. So if there are problems in KPMG China, that doesn’t mean KPMG Australia is to blame. And, as Francine McKenna explains, the ‘Big Four’ are past masters at avoiding blame.

Francine McKenna: We often say you can bring the auditors to court, but you rarely bring them to justice. First of all, they don’t go to jail because to go to jail they would have to be proved part of a fraud, complicit, then you would have to have the smoking gun, which doesn’t happen because the auditors don’t tell on each other-there’s sort of like the mafia, there’s this omerta-they never, never, never tell on each other.

Stan Correy: Nevertheless, with all this apparent incompetence, hiding behind complexity, and being too close to the people they’re supposed to be independently auditing, when are the audit firms liable? Francine McKenna says it’s tricky.

Francine McKenna: The other thing is that, you know, hardly anybody goes to jail. We have this, you know, ongoing debate now about how nobody is going to jail over the financial crisis and the auditors are at the bottom of the list in terms of people that anyone thinks deserve to go to jail about anything.

Stan Correy: Most big auditors have insurance against making mistakes and their good brand name is important to them, so they get the big clients. So they hate bad publicity and have a lot of defences ready. All this is being played out in a high profile case in Australia.

Journalist [archival]: Local stocks have tumbled three and a half per cent to a three month closing low, after retail property trust Centro announced it’s struggling to refinance $1.3 billion in debt…

Stan Correy: In late 2007, the shares of shopping centre owner Centro Properties Group collapsed after the company admitted it released misleading accounts to the market. The corporate legal drama involving Centro Properties Group then began, as investors who lost money wanted revenge. The drama involves management, directors, and auditors.

So, who was to blame for allowing the misleading accounts to be released? Well, two years ago, ASIC, the Australian securities regulator, brought proceedings against the directors on the board of Centro Properties Group and two managers, claiming they had breached their duties and had misled investors. In late June this year, ASIC had one of its rare legal victories.

ABC Newsreader [archival]: The federal court today raised the bar of responsibility for company directors. The court has ruled that directors of the giant property group Centro breached their duties by not picking up billions of dollars in errors in the accounts. In 2007, the directors approved the accounts, which showed the company had no short-term debt, understating the situation by about $3 billion.

Greg Medcraft [archival]: It’s a landmark decision in Australian corporate governance. I think it does send a very clear message to boardrooms across the country about corporate accountability.

Stan Correy: Greg Medcraft, the chairman of ASIC.

Justice Middleton rejected the directors’ argument that they relied on the expertise of outside auditors who had approved the accounts. But the Centro saga doesn’t end with the ASIC case. The directors of Centro are in turn suing the auditors, PricewaterhouseCoopers, and so are the people who lost their money in the Centro crash. There are two class actions against Centro and PricewaterhouseCoopers by investors-one by law firm Slater & Gordon, the other by Maurice Blackburn.

From Maurice Blackburn, senior associate, Martin Hyde.

Martin Hyde: Centro has brought cross-claims against its auditors. Centro said that if shareholders have lost money as a result of what went on it was partly or completely the fault of the auditors, PricewaterhouseCoopers. And so Centro and PricewaterhouseCoopers will fight it out and have to prove up the elements of their cross-claims at the hearing next March in the same way that we will have to prove up the elements of our case.

Stan Correy: It’s important to repeat what Martin Hyde just said. There are Centro investors suing Centro Properties and its auditors, PricewaterhouseCoopers. Centro Properties also has a claim against PricewaterhouseCoopers, its former auditor. And PricewaterhouseCoopers, in a cross-claim, is saying that the individual directors of Centro Properties and Centro executives misled the auditors. It’ll be QCs at ten paces for months.

Last June, Justice Middleton found that the Centro directors had failed in their duties when they approved the faulty 2007 accounts. The penalties will be handed down soon. ASIC wants the full punishment: fines and banned from holding office as directors. But Justice Middleton, while finding the directors ultimately guilty, wasn’t kind about the auditors either. He said there was evidence that the auditors didn’t understand the new accounting standards and that they didn’t inform the audit committee of a more than $1 billion error in the accounts.

Justice Middleton’s decision, according to Martin Hyde, reinforces the investors’ case against the auditors.

Martin Hyde: In one sense we still have to prove our case, and that hasn’t changed, but there are some aspects of the decision that may be helpful to us, and also if the judge goes on to make declarations about what happened, they are also potentially useful.

Stan Correy: So could you just give a summary of what your class action case is?

Martin Hyde: The Maurice Blackburn class action involves a range of investors, from the biggest institutions in the country right down to mum and dad shareholders, who lost money in Centro during the course of 2007. And we allege that the company and also the auditors engaged in misleading and deceptive conduct and also breached corporations law, and as a result our clients lost money.

Stan Correy: Martin Hyde from Maurice Blackburn.

The Centro case was widely reported in the international media, and at Forbes Magazine, Francine McKenna wrote a story on the judgement for her column.

Francine McKenna: I think it’s a very interesting decision; one, because the judge took such a very adamant position with regard to the directors’ responsibility and the clear direction that they could not abdicate responsibility to a third party advisor like an auditor. And that is the ready excuse that many executives and directors here in the United States use; in fact, our own US Attorney in Manhattan, I quoted him from an article, saying that we have a difficult time here prosecuting fraud cases, because executives say the auditor said it was OK, and the auditors say, ‘Our client gave us false documents,’ and so who am I to believe?

Stan Correy: In the recent ASIC case, the judge found that the directors couldn’t just delegate financial decision-making to the auditors. But PricewaterhouseCoopers, according to Francine McKenna, still has some explaining to do about their role.

Francine McKenna: And I think it’s going to be interesting to see what happens if PwC can also find a way to explain the fact that they didn’t stand up and do their job, I think, to communicate this information to the board of directors and not to let internal executives sort of paper over it and perhaps obfuscate the information from the directors themselves.

It’s a very interesting case both from the director and auditor perspective.

See you next post for something entirely different!

Keep well,

James E

Auditing the auditors (1 of 2)

The other day I was listening to a podcast of the ABC Radio National show Background Briefing. The segment was titled Auditing the auditors. It was simply fascinating. Here is a transcript of the opening section. The ABC reporter’s name is Stan Correy.

Stan Correy: As the financial world tumbles all around us yet again, let’s pause to find out where the buck stops. Sure, the banks and big financial institutions played pass the parcel with other people’s money, but who was meant to stop their music? Is the answer the auditors, the people who sign off on the books and say they’re OK?

Remember ten years ago? Then it was Enron.

Congresswoman Stephanie Tubbs Jones [archival]: The reason we are here is because you audited Enron Corporation and the representations you made were not in fact a true financial picture of the corporation, such that a lot of people lost money and we’re in a public hearing trying to decide whether the auditing principles that have governed our nation for the past few years, are truly in the best interest of the public. Is that a fair statement, Sir?

Stan Correy: The ‘sir’ being questioned in congress then was the CEO of auditing firm Arthur Andersen, Joseph Beradino.

Joseph Beradino [archival]: And I’m here to give you some thoughts on how we might go forward with a much better…

Congresswoman Stephanie Tubbs Jones [archival]: Well then, why don’t you give me some thoughts? How is it that the public could see what was wrong with Enron based on your auditing practice?

Joseph Beradino [archival]: I don’t know how to answer that question.

[Excerpt from song: ‘Don’t Worry, buy Enron’]

Stan Correy: Arthur Andersen collapsed in a heap and no longer exists. Enron was thought to be a wakeup call to the world’s auditors. But just six years later, in 2007, the global financial crisis swamped the world. At the heart of the storm, dodgy accounts, signed off as OK by auditors from the big four audit firms.

Journalist [archival]: At more than 4 billion, the loss recorded by the Royal Bank of Scotland today is the biggest in British corporate history.

Commentator [archival]: Well, colossally big numbers we’re talking about for what used to be a global colossus. As you say, 4 billion of losses, 25 billion insured by the government, and if that goes sour that’s coming back to us, the British public.

Stan Correy: Auditors of the Royal Bank of Scotland were Deloitte Touche Tohmatsu. And then, across the Irish Sea there was the Anglo-Irish Bank.

Journalist [archival]: The soundtrack may have been upbeat on this video presentation to Anglo-Irish Bank staff, but the message it contained was anything but: one of the biggest losses ever for an Irish company and a colossal 4 billion government bailout.

Anglo Irish Chairman[archival]: From these figures it is clear that we made mistakes in some of the lending decisions taken in recent years, particularly in relation to property development here in Ireland.

Stan Correy: The auditors for Anglo-Irish Bank were Ernst & Young.

In Iceland, three of the biggest banks collapsed after Iceland was found to be in debt for $120 billion, ten times the entire economy. Auditors KPMG and PricewaterhouseCoopers were subsequently investigated over their role in the bank’s activities.

The giant American insurance company AIG was spectacularly bailed out by the United States government. AIG’s auditors: PricewaterhouseCoopers.

But strangely, it seems nothing much changed. In fact, it’s all really bad again. And if you thought there were problems in Europe and America, just wait till you hear about China. There-and it affects America and Australia, too-the auditors have for years been missing the fact that companies they were auditing had no business at all. They were empty shells doing nothing, listed on overseas exchanges but mere figments. No one home, but the auditors still signed off on them for years.

Tune into the next post for some highlights.

Keep well,

James E

Trusted Business Adviser

The term “trusted business adviser” is often used to describe the pinnacle of the accountant–client relationship. Everyone seems to want to be a trusted business adviser. The key element of this exalted title is trust.

However, like most pedestals or sort after titles, through their overuse the term quickly becomes cheapened. It seems these days that anyone with a business card, website and is wearing a suit becomes a trusted business adviser. This, fortunately, is not the case. Becoming a real trusted business adviser takes commitment, passion, patience and lots of hard work.

One definition of trust is the strong belief or confidence in the honesty, integrity and reliability of another person. Such a belief cannot be fostered in a quick coffee meeting or drinks at the cricket. Trust is built through a series of interactions that show you are honest and consistent, and have the best interests of the client in mind. Trust is something that is easy to lose but difficult to earn. Here are some characteristics of a trusted business adviser:

  • They invest time and effort in initiating and building a relationship
  • Often they give out to the client before receiving anything in return.
  • The focus of their activity is not fees.
  • They consistently look for ways to help the client.
  • They are patient and long-term in their thinking.
  • They are flexible in the ways they do business to suit the client, not simply themselves.

If you were to were to use the above six points as a gauge for your professional activities with your clients how would you rate? Are YOU a trusted business adviser?

Keep smiling and bye for now,

James E