Changes to ACCA OBU Degree

The following changes will be effective immediately for ACCA students who registered after 1 January 2007 and who will sit the new ACCA Fundamentals level papers in December 2007.

* RAP - research and analysis project

1. Project mentor is still required.
2. RAP will be graded A, B or C.
3. RAP word limit is increased to 6,500 words.
4. Overall class of degree will be determined by the average marks of F4 - F9 module papers and the RAP grading.
5. You have to submit the RAP and a Skills and Learning Statement. And you must pass both papers.
6. If you failed the first submission of RAP, you can only get "C" at best, for getting a pass on resubmission.
7. You are given 3 chances to secure a pass for RAP. After 3 "strikes", you are out!

Bottomline
The process to be a "graduate" has become more vigorous. You need to plan your time and effort as part of your ACCA education strategy. For more information, you may click www.accaglobal.com/students/study_exams/qualifications/degree/.

Positive impact of fair value gain for Ipco

On Dec 15, 2007, BT reported that fair-value gain boosted Ipco International's 6-month profit by more than 100% (ie. from $2.1mio ti $5,4mio on a revenue of $24.4mio) despite a 31.5% fall in first 6-month sales.

What is Ipco's business?
Ipco is essentially a developer and investor in oil and gas, water and environment infrastructure projects.

ESA Electronic, its subsidiary in the semiconductor equipment distribution business, responsible for 31.5 per cent fall in group's sales of goods to $11.9 million from $17.4 million.

This was offset by a rise in other revenue from $2.4 million to $8.2 million, which included $7.5 million in 'fair-value gain' on financial assets.

So without the fair-value gain, the Group's total revenue would be $16.9mio instead of the currently reported $24.4mio (a 16% drop instead).

So while Labroy and SembMarine have been negatively affected by financial assets valuation, we have a company here that has been glossed with positivities instead.

P/S - Fair-value gain of $7.5mio is accounted as "Other revenue". Hmmm...

Audit exemption criteria for Groups?

a Japanese chef who has left this

The current law on audit exemption applies to individual company but not to a group of companies. So say Mr Joseph Alfred, Technical Advisor for ACCA Singapore.



Which law?

• Companies Act's Section 205(2) says companies are required to appoint auditors.
  
• Companies Act's Section 205A says private exempt companies with less than $5mio turnover and dormant companies are exempted from audit.

Where is the problem?

Let me illustrate with a simple example. Holding company has a turnover of less than $5mio and may be exempted from audit.

Subsidiary company has a turnover of more than $5mio and thus its financial statements would be audited. So far so good.

But when it comes to Group's consolidated financial statements, the regulator has confirmed that there is no legal compulsion for them to be audited.

Joseph opined that a Group with a turnover of of more than $5mio should NOT be exempted.

As for me, I am still not convinced with the need to audit the consolidated statements. As some practitioners have said, the need to audit should rest primarily on who are the ultimate key users of the statements. We should not just rely on mere criteria.

Four banks vs Asia Pacific Breweries for $109mio

"The best defence is offence."

Well that is the basic position of the four banks against APB in trying to claim back $109mio of their lost funds. Disregarding the bank's internal control failure to detect the fraud, the banks have chosen to place the faults on APB.

• One of the banks argued that Chia Teck Leng's acts were carried out in his capacity as APB's finance manager - and the company must shoulder the blame.


• Senior counsel Steven Chong, who represents two of the foreign banks, told the court that the fundamental issue was how Chia was able to perpetrate the fraud for almost five years and remain undetected. The obvious answer, he said, is that APB has vested wide powers and authority on Chia without any proper checks and balances in place.


• Chia was also able to ensure that correspondence from the banks was never opened by anyone other than him. His secretary was specifically never to open letters from banks addressed to him.

Background

From 1999 to 2003, Chia, now 47, had submitted to the banks fictitious documents with forged signatures of top APB executives, which convinced the banks to give him credit facilities in APB's name.

What did Chia do with the monies? He blew $62 million in casinos around the world, before being convicted and sentenced to 42 years' jail in 2004. Some millions still cannot find.

While Mr Chia sits in prison for the remaining 39 years, many bank officers' career have been scarred.

Accounting for Charities and Coops

The new Accounting Standards Council (ASC) will issue a separate set of accounting rules for Charities and Coops.

Donors to charities are more concerned with how the donated funds were used rather than financial performance information generally required by shareholders of companies.

The new accounting rules are still pending ie. waiting the new Council to get around to this issue.

Appeals Court raps Accounting profession

The Courts of Appeal ruled recently on 2 fraud cases where the auditors took some blame for losses experienced by their respective clients.

What are the 2 cases?

• Case 1 - Gaelic Inns vs PlanAssure Public Accounting - I discussed it back in Feb 2007. Take a look. http://accountingwithedgar.blogspot.com/2007/02/denise-ang-and-her-gaelic-victim.html


• Case 2 - JSI Shipping vs TeoFoongWongLCLoong (Tfwl) - Mr John Riggs, the MD of JSI Shipping, made $1.8 million disappeared via its monthly salary! FYI - his salary represented 25% of total staff costs. The Court said "Tfwl should have shown more professional scepticism." (In another word, the errors are so BIGG that normal human eyes should be able to see and check on them.)

So what is the penalty for not doing your job?

In Case 1, PlanAssure is to pay Gaelic Inn $317,108 (half of earlier ruling of $775,266) for contributing to the negligence.

In Case 2, Tfwl is to pay JSI $273,386 for being bo-chap to Mr Riggs' activities.

As in any profession, auditors too have their fair share of problems and risks.

Origin of "Debit" & "Credit"

I was curious about where and how the terms debit and credit come about.

I finally come across a brief explanation of the terms.

The words have Latin origins ie. "debitum" and "creditum". Pacioli is the name of the Italian monk who wrote about accounting in the 15th century and used these terms.

So they were NOT "debere" or "credere" as I thought they were initially. And the mystery continues ie. who was the inventor of these terms.

Well I learned something new today.

Are SFRSs very different from IFRS?

How does Singapore Financial Reporting Standards (SFRS) fare in terms of our assessment as being IFRS-equivalent?

One opinion said that SFRS are almost in complete sync with IFRS and are applicable to all entities. How come? Singapore generally adopts new or amended IFRS within a three-month period but there are some exceptions.

• FRS 40 Investment Property

IAS 40 was issued in year 2000 and effective for financial periods commencing Jan 1, 2001 while FRS 40 was issued in 2005 and effective for financial periods commencing Jan 1, 2007. By now, there are no timing differences between IFRS and SFRS.

Any difference between FRSs? Yes, the difference is in these areas:-

• Differing finance lease requirements
• One-off revaluation exemption from periodic revaluation for property, plant and equipment.

Anyway Accounting Standards Board (who will replace the Council on Corporate Disclosure and Governance with effect from Sept 1, 2007) is to present to Committee of European Securities Regulators (CESR) that the SFRS is equivalent to IFRS. Probably to get some sort of compliant certification from the Euro body.

Source - "Bridging the gap between accounting standards", Aug 23, 2007, BT, Choo Eng Beng and Chew Tong Gunn

Mid-career folks as Public Accountant?

my coffee at 11.37pm

In Joe's humble opinion - it is difficult for a middle-aged person (at least under current framework to qualify) to switch career and work his way to be registered as a Public Accountant.

Why is Joe so pessimistic?

Joe said the biggest stumbling bloke is the Practical Experience requirement.

Joe is a living example of someone who has acquired 4 of the 5 requirements but could not take the final step to be a public accountant.

How to get the Practical Experience?

For him to fulfill this requirement, he got to work in an audit firm as an audit professional for 3 years.

While the opportunities to seek such positions may be plenty at this point in time, the economics of transition has to be considered. Can Joe maintain his current income level to sustain the current costs of living with family bla bla bla while pursuing the trophy of public accountancy?

Define mid-career folks?

ACRA has defined “mid-career entrants” to include:

(a) people who have worked in other professional settings (such as bankers and financial analysts), but decided to make a career switch to the audit industry; and

(b) people equipped with the basic accountancy qualifications, but had chosen not to engage in any accountancy work in the early stages of their career.

Why is ACRA eager to look for ways to bring the mid-career folks into the audit profession?

One view is that professionals from alternative specialised industries often are experts in their own fields. These “experts” could make significant contributions to the audit profession by bringing in valuable knowledge and strengthen the audit team by adding to the team’s range of expertise.

Where the mid-career entrant aspires to become a public accountant, he could acquire the necessary audit experience under a public accountant before seeking to be registered. BUT HOW given Joe's position?

Any idea?

What are the qualifications needed to be a good Public Accountant?

flowers for me. thanks irene.

Can help me to answer the above question by classifying the existing 5 requirements (described below) either as

• "Essential",


• "Good to have" or


• "Thoroughly irrelevant".

The current 5 requirements for registration as a Public Accountant:-

1. Academic qualifications;


2. Practical experience;


3. Continuing professional education;


4. Completing the course on ethics and professional practice subjects as determined by the Public Accountants Oversight Committee; and


5. Membership with the Institute of Certified Public Accountants of Singapore.

Your view, please?

Public Accountant - How to be one?

Currently, the registration framework for public accountants comprises five elements:-

1. Academic qualifications;


2. Practical experience;


3. Completing the course on ethics and professional practice subjects as determined by the Public Accountants Oversight Committee; and


4. membership with the Institute of Certified Public Accountants of Singapore.


5. Continuing professional education.

The above first 4 are the various doors that a person aspiring to be a public accountant would have to go through before you gain your official registration and recognition as a Public Accountant. The 5th door is a maintenance factor.

What is a Public Accountant?

Public accountants are persons who are registered with ACRA in accordance with the Accountants Act (the “Act”) to provide public accountancy services of audit and reporting on financial statements or any other professional services that are required by any written law to be done by a public accountant.

What is the problem?

We have a shortage of them now and in future to promote high quality audit and corporate financial reporting to build confidence in Singapore’s corporate financial reports.

Any idea?

ACRA has proposed the following alternative pathways:-

• entry of international auditors (with specialist expertise);


• entry of mid-career professionals with specialist expertise which are relevant to audit; and


• re-entry of former public accountants who had left the profession.
  

Any other way?

Bong says...

Hi Edgar,

Just want to drop a mail to thank you for helping me to pass my 1.1 paper.

I got 90%.

I know you have been putting in a lot of effort on student. So far you are the one that spend most of the time with student. Giving enough time for student to think and try in the class.

That really help in building up confident of student rather than just quickly come out with the answer. especially for account dummy like me (have my study in mechanical engineering before).

Once again, THANK YOU and keep it up with your hardwork!

Your student,
Bong (Class of Jan 2007)

P/S - Bong, you have put in a lot of effort too. Well done.

Majority in CPA survey favour simplified treatment of SME accounting

A difficult bak kut teh lunch

The following are the results of a survey done by CPA Australia and the Corporate Governance & Financial Reporting Centre (CGFRC) at the National University of Singapore (NUS). It is reported in BT today.

1. 42% agreed with the definition of an SME in the proposed IFRS as 'entities that do not have public accountability and publish general purpose financial statements for external users'.


2. More than 60% felt that we should also include large unlisted companies which do not have public accountability into the new standard.


3. 72% said the new standard would better meet the needs of users of SMEs' financial statements.


4. 69% said they feel it would reduce the financial reporting burden for SMEs that want to use global reporting standards.


5. 59% said they believe it would reduce the audit burden of SMEs in general.


6. Banks who lend monies to SMEs are expected to be the main users of the financial statements.

What are some of the suggestions to simplify certain accounting treatments for SMEs?

SMEs are generally not in favour of complex accounting standards - for example:-

• share-based payments,


• accounting for impairment,


• fair value accounting.
  

What are the respondents' concerns?

1. Adopting SME-specific accounting standards today would lead to difficulties in aligning financial statements to full IFRS in future, when needed.


2. SMEs today may dread the work of converting from current full FRS to the new SME standards.


3. Many believe the guidance to implement the proposed IFRS for SMEs is inadequate.

P/S - On Wed, I will attend the Mr Kon's presentation at ASME.

Responses to ACRA Review

Mr Simon Ng Yap Peng and Mr Mickey Chiang, both representing their self and Ms Janet Tan, the executive director of ICPAS sent in their respective suggestions to BT / ST on Aug 2, 2007.

Firstly, Mr Simon Ng suggested:-

1. Let minority shareholders elect their independent representatives to sit in the audit committee of listed companies.


2. External auditors should set up a feedback box in their client's premises for their employees to "whistle blow" any irregularities.


3. External auditors should do surprise check on their clients.


4. Our accounting students should do case studies on recent scandals such as NKF, China Aviation Oil, Citiraya etc etc. [Edgar is doing it now thru' his blogs as he tries to inject realism into classroom learning.]


5. Encourage availability of post graduate courses for grads of other disciplines to learn about accounting matters.

Mickey Chiang questioned the following:-

• He understands that the ACRA review programmes were devised accountants from the Big 4. So are these programmes relevant to smaller/small audit firms?
• How many of those auditors who "failed" the review were from the Big 4?
  

Ms Janet Tan of ICPAS suggested the following:-

• To make available more training opportunities to upgrade knowledge and skills. [Yes, if the ACRA Review has highlighted that its members are caught in a time warp and self-contentment that they are good enough to keep making the monies without the need to keep up with time. But I don't think this is the main issue. Our members are failing at basic stuff ie. things like not doing stock checks and insufficient/no documentation.]


• Provision of a panel of "hot reviewers" for members whose work are now required to be reviewed by another suitably qualified person ie. "hot reviewer". [Yes, this will help an important concern raised by ACRA in the interim.]

Edgar says,

• I agree with Ms Tan that the review should be taken as a wake-up call to practitioners who think they can get away with shoddy work.


• But I am sure ICPAS will look for root causes that have contributed to the poor state. With the information procured during ICPAS's own check on its members over the years plus ACRA report, it should be able to present a more comprehensive remedial measures.

FRS40 and FRS12 equals more problem for companies

FRS40 on Investment Property

From 2007, annual changes in the fair value of investment properties are carried to P&L account.

So increased valuation of such properties would increase profit and consequent tax burden, vice versa. Recently, Overseas Union Enterprises (OUE) recorded fair value gains of $105.9 million in Q207 (nil in Q206) on its investment properties, due to the escalation in property values in line with the present exciting real estate market.

Such property firms would have already a cashflow issue in complying with FRS40 ie. cash to pay income tax on unrealised revaluation gains.

In addition to the above, property firms has another angle to consider ie. the impact of FRS12 on Income Tax on FRS40.

Companies have to account for the FUTURE tax consequence of a CURRENT event. This element of deferred income tax for any upward revaluation would have to be accounted for as an expense in the P&L.

What is "future tax consequence of a current event"?

An upward revaluation of an investment property

==> an increase in future stream of rental income OR increase in proceeds from disposal

==> make provision for the future tax liability today ie. deferred tax

While there is no actual cashflow for the provision, it is accounted for as an expense to create that provision.

Consequently, higher tax expense and higher effective tax rate.

Reference - "Property companies could be hit by deferred tax provision issues", Aug 2, 2007 Busines Times, Michelle Quah

A student of mine has joined AGO

Recently I received an email from a student with this type of address ie. @ago.gov.sg.


Curious, I ask him as to which branch of government is she working for now.


"Auditor-General Office," she said. [I thought it was the Attorney General Office. :)]


She is helping AGO to fufill its role to audit all ministries, statutory boards, embassies, and Temasek owned complanies for President. [Wow!]


That conversation brought my attention to the recent article in BT dated Jul 20, 2007 entitled, "Govt audit reveals financial lapses".


Examples of financial lapses revealed by Auditor-General are:-

• The Infocomm Development Authority of Singapore (IDA) could have better managed over $200 million in cash reserves for higher returns. [..from zero return?]


• National Volunteer & Philanthropy Centre (NVPC) had accumulated unused grants of $4.9 million in March 2006. [So again money is sitting idly around.]


• Ministry of Health (MOH) was found to have continued its payments for some 106 deceased persons through a scheme was administered by an agent. It has recovered some $55,850 of the $178,150 that was paid. [Phew! Amount not big.]

My Words

• Thank goodness we have a Government who is willing to be transparent about their own boo-boos.


• Thank goodness we have a good problem of dealing with money sitting around to the tune of millions of dollars. It shows that we have some hidden reserves ie. like housewives putting away money.


• Thank goodness we did NOT find massive frauds.


• It is good that we have taken stock of the problems. We will remedy them and move on.

5 Public Accountants' licence were suspended or cancelled

What happened?
ACRA, the independent regulator of auditors in Singapore, conducted a "test" on 110 of the total 780 public accountants from April 2005 to March 2007.

On Jul 25, 2007, ACRA has for the first time released the "report card" on the state of auditing profession in Singapore. The results are as follow:-

• One third of the 110 received a 'good' rating.
• Another third were rated 'satisfactory'
• The remaining third, or 36 accountants, were asked to undergo remedial action.
• The special 5 got their licence suspended or cancelled.
  

What are the areas of weakness?

ACRA deputy chief Mr Ow Fook Chuen listed the common boo-boos as follow:-

• Inadequate documentation of audit opinions.
• Lack of follow-up on subsequent events up to the date of the audit report. [Why the need to follow up? These events may materially affect the financial statements and the validity of the audit opinion.]
• Audit procedures were conveniently updated as 'noted' or 'done' without actual audit work or assessments being carried out. [While corners were being cut, clients still got charged. Or the other way round where clients want to lower audit fees and thus the corners cut.]
• Insufficient inventory count procedures eg. no physical count procedures.
• Some also blindly and recklessly relied on the audited financial statements by the auditors of overseas subsidiaries without considering their competence.

Edgar's words of wisdom (ha!)

A second round with wider coverage is expected to be completed in 2011. Hmm... isn't it a wee bit too long for the next report card in the current dynamic world?

To hasten the process of quality renaissance, should we do with public accountants what we did to hawkers in Singapore ie. force them to display their "A" or "B" or "C" licence? As hawkers' hygiene in food preparation has public implication, likewise the quality of work of auditors too has significant public implications.

So ACRA what say you?

ACRA's proposal to draw talents into audit

On July 25, 2007, ACRA has proposed some bold moves to ease the talent strain in the audit profession as follows:-

• It is seeking feedback on how to make it easier for mid-career professionals such as bankers and financial analysts to switch to accounting.
• To consider the possibility of letting international auditors with specialised expertise to practise here.

teaching you about "ethics"

One of the biggest problems facing the accountancy profession across the globe is dealing with issues that bordered on ethical grounds.

A student asked me recently on what should he do when the auditor has asked him to disregard some audit errors done.

Taking a step back from such incidents, the biggests issues seem to be:-

• how do we teach our students and
• what to teach our students about "ethics"?

How do our students learn about managing ethical issues?

In July 2007's Accounting & Business (A&B), "ethics should be taught (and learnt) as a part of lifelong professional learning".

What to teach then?

Peter Williams in A&B presented 5 fundamental principles in:-

• integrity ---- ["yuen cherk"]
• objectivity --- ["unbiased and focused"]
• professional competence and due care --- ["got leow" and not "boh chap"]
• confidentiality --- ["your mouth must learn to talk less or stop talking"]
• professional behaviour --- ["dun anyhow"]

Friends - It is not easy to be a professional and an accountant at the same time.

HKEx has pushed its limit again

With effect from 25 Jun 2007, Electronic Disclosure Project (EDP), the new regime for electronic dissemination of regulatory information will be launched.

EDP would consist of the following items:-

• mandatory paid announcements will no longer be required [notification in the newspapers will be eventually phased out - less advertising revenue for newspaper companies but lower cost of compliance for listed companies / good for the environment]


• companies must eventually maintained their own website

My concerns
I don't think HKEx and the respective listed companies are expecting the respective shareholders to prowl through a dozen of websites for any announcement that might impact them every day.

Eventually I would forsee the delivery of announcements and financial results by email to shareholders.

Then how about uncles and aunties who don't email addresses? They will learn when making money is involved.

Environmentally, this is definitely a good move.

Practical Experience Requirement (PER) Part 5

This posting focuses on the person called MENTOR.

• Who can be your mentor?
• What is the purpose of mentor to PER?
• Can I have more than one mentor?
• Any advantage or disadvantage of having an ACCA member as a mentor?
• What if my mentor is not an ACCA member? Will I be penalised?

For answers to the above, please read:-
http://www.accaglobal.com/students/publications/student_accountant/archive/2007/77/2957617

Practical Experience Requirement (PER) Part 4

Hi to existing student or affiliate,

If you belong to the above, you will be required to transfer to the new PER by 31 December 2007.

You will need to transfer any STR competences you have recorded under the current or pre-2001 scheme to the new PER.

I have just read this article that described the various actions needed for the following groups of student/affiliate:-

• those who have completed the requirement under the old STR
• those who have started but have not completed the STR
• those who have not started at all

Read this article for a complete help - http://www.accaglobal.com/pubs/students/publications/student_accountant/archive/pract0307.pdf

Pay rise for new recruits to Big Four

The tight labour market has forced the Big Four accounting firms to increase the starting salary twice in 6 months.

So what is the starting salary? Your neck must be straining to know?

As per today's ST, you should get about $2,400 with about 1,000 vacancies.

So what are waiting for?

Faster finish your ACCA papers and get your job applications in.

P/S - Govt is paying as much as $2,900 for accounting graduates.

IFRS 3 - Business Combinations

Crux of the issue
When company Alpha buys company Beta, there are leeways and incentives for Alpha to plan its allocation between goodwill and intangible assets arising.

If Alpha's objective were to maximise reporting of profit, it would be under-reporting the value of intangible assets and over-reporting the value of goodwill.

How come?
Goodwill is not amortised nowaday but subject to impairment test. The clever CFOs have discovered that it would easier to avoid an impairment charge.

Auditors, without a significant authoritative alternative source of info to verify the value of goodwill, would generally concur with the recommendation of the management.

Whereas for acquired intangible assets, they are separately valued on the balance sheet and subject to impairment test too. But as they are separately valued, each asset is individually tested for impairment. Thus it presents a higher risk of being devalued.

Practical Experience Requirement (PER) Part 3

for u...

Question from a Student

"I applied as SAA student before Jan 2007. BUT i'm not working in an accounting field as i'm not studying business related course during poly days. Hence does this apply to me? Do i need to change to a accounting related job before Dec 2007?"

First and foremost, all students and affiliates of ACCA will be affected by PER.

To get the four letters "ACCA" at the end of your name, GENERALLY you have to take 3 steps.

- Exams

- Ethics

- Experience ie. PER

So whether you are working directly or indirectly in an accounting-related job, you must be able to fulfill the lucky 13 performance objectives.

The first 9 Essentials are from 3 main areas ie.

• professionalism / ethics / governance


• personal effectiveness


• business management

As you can see, these are generally non-accounting/financial related and should be achievable by all.


The next 4 are to be chosen from 11 from 5 areas. They are definitely accounting/finance related but they are strictly not accounting/finance jobs. The details are as follows:-

Financial accounting and reporting
- prepare financial statements for external purposes
- interprete financial transactions and financial statements


Performance measurement and management accounting
- prepare financial information for management
- contribute to budget planning and production
- monitor and control budgets


Finance and financial management
- evaluate potential business / investment opportunities and the required finance options
- manage cash using active cash management and treasury systems


Audit and assurance
- prepare for and collect evidence for audit
- evaluate and report on audit


Taxation
- evaluate and compute taxes payable
- assist with tax planning


So realistically, what should you do?
Answer - Get yourself involved actively in at least 4 of the above activities. Diarise the whole process for each activity so as to evident your involvement. Your supervisor must be satisfied with your participation to finally sign off.


You have time to achieve all 13 ie. from the day you start work till whenever you are ready over different supervisors / departments / employers / companies etc.


So it is good to keep PER info in your office all the time!

Welcome more questions. Till then, cheers.

Practical Experience Requirement (PER) Part 2

Only existing students / affiliates who had registered for ACCA Qualification before Jan 2007 need to read this posting.

For existing students, you are required to convert to the NEW Practical Experience Requirements (PER) by 31 Dec 2007.

To assist you, an online conversion tool is available.

You can use this tool to convert and record existing experience to the new PER.

You can then use the TDM to log the performance objectives TO BE achieved as part of the new PER.

For affiliates applying for membership, ACCA will continue to accept applications based on current STRs until 30 Jun 2008.

Always remember
Get your Student Training Record (STR under old scheme) or PER sign off by your supervisor every year and/or BEFORE you resign!

NKF - When auditors are not up to mark

Hi,

Read this article by Ms Lee Su Shyan "When auditors fail to measure up to mark" from some time back.

PricewatehouseCoopers (PwC), who had been the auditor for last few years before the debacle, was blamed for NOT raising the alarm on the various excesses and deficiencies within NKF.

KPMG, who was appointed to do a special audit, found costs and subsidies were inflated and manipulated.

What did Ms Lee say to mitigate PwC's sad position?

There were supposed to be other people or entities within NKF who also have responsibilties to protect the stakeholders' interests. These people or entities were:-

• independent directors,
• audit committee and;
• internal auditors.

All these people or entities did not challenge "the quiet acceptance that ran through the organisation". So does it imply that PwC's responsibility as an auditor, would be any lesser?

FYI - KPMG found errors totalling $2mio against an adjusted surplus of $29.2mio. Deemed not all that "material". So in numerical terms, PwC's performance is not that bad.

Ms Lee highlighted the blessings that we should count.

• NKF's assets and reserves are largely intact.
• There were some but not crippling excesses by its ex-chief executive.
• NKF is still functioning and serving its patients today.
• PwC had been charging NKF a nominal annual audit fee of $35,000 as compared to hundreds of thousands dollars chargeable for similar audits.
• KPMG too charged NKF a nominal fee of only $100,000 for the special audit.

Since Humpty Dumpty (NKF) has had a great fall, all the King's men and all the King's horses are putting Humpty Dumpty back together again (for the sake of all the kidney patients).

ACCA CBEs for P1.1 and P1.2 in transition

Dear friends,

The following information is courtesy of SAA on the terms of offer of CBEs during the transition from OLD to NEW syllabus.

The last date that P1.1 and P1.2 will be offered by ACCA UK for CBE is Friday 12 October 2007.

But the last date that SAA will offer ACCA CBE under the old syllabus (Papers 1.1 and 1.2) is Friday, 14 September 2007.

New Syllabus
The date from which the new ACCA qualification F1, F2 and F3 examinations will be available as CBE is Wednesday 17 October 2007.

The first month that SAA will offer ACCA CBE under the new syllabus (Papers F1 – F3) is November 2007.

Passes in P1.1 and P1.2 will be automatically converted to the equivalent passes of F3 and F2 respectively.

Paper-based exam and/or CBE?

Hi - This is the revised version as of 13 Jun 2007.

Scenario
Just finished my P1.1 exam in Jun 2007. Being not confident, I signed up for CBE in Aug 2007. Which results will ACCA take?

Ed asked : What if i failed my paper-based exam after the release of the exam results but passed my Aug CBE?
SAA said : Aug's CBE result. Accounted as a pass for Dec 07 exam and student can only take 3 more Papers, including CBE, for Dec 07 Exam.

Ed asked : What if I passed both paper-based exam and CBE?
SAA : Paper-based exam's result.

HK to push for Qtrly Reporting AGAIN

Well, they have been trying to do it a couple of times since 1998.

Singapore attempted it once and concluded successfully in 2003 for companies with market capitalisation of more $75mio.

This quarterly reporting requirement was recently reaffirmed.

ACCA Paper 1.1 Exam ended a few hours ago.

Is that you? Hope not.

Hi friends,

How was the paper? The following are comments I got from some of you.

Section B consists of questions on the following topics:-

• incomplete records with sole proprietorship
• control account and reconciliation with listing total
• consolidation
• ratio theory on liquidity ratios
• FRS 38 on research and development and amortisation

"I finished my MCQs in half an hour."

"I didn't hear anybody complaining about the paper on the way out (of exam hall)."

"I did not have time to do 2 questions. Total 19 marks."

".. is this paper a bit difficult from the rest? As some never learn before..."

"ok lor"

"... inventory overstated. I minus off from the retained earnings n asset. Is it correct?"

So for the rest of you, what do you think of the paper?

Simpler but fuzzy SME accounts?

A quiet moment.

Background
Currently CCDG is seeking comment on the proposed SME FRS.

Discussion
Referring to a news article in BT Weekend dated May 19-20, 2007, here are the views of Mr Kon Yin Tong, an ICPAS council member, on the proposed SME FRS.

The proposed change is expected to reduce the existing volume of accounting requirements for SMEs by more than 85%.

This is no good as it would cause problems for USERS of financial information such as tax authorities and lenders. [Why? I wonder.]

He opined that given the different standards and thus different profit definition would result in creating more work for the tax authorities to determine taxable income. [So?] For the lenders, the bankers would be in a mess assessing creditworthiness. [Huh?]

Is he implying that the tax authorities and lenders, given their massive resources, will not be able to sort out their resources to meet the challenge? Instead the burden of reporting under the full FRSs be continued to dwell on the shoulders of plumbers, electricians, small retailers, traders.. who are toiling in increasingly demanding business landscape.

Mr Kon also highlighted the difficulty of SMEs presenting their financials should they decide to go public. [Huh?] If my humble company were to aspire to go public, I would have planned for it. And overcoming the reporting shortfall, if any, would be a lovely problem to solve. But the reality is that those SMEs without such aspiration would far outnumber those with aspiration to go public.

In my humble opinion, I believe the economic benefits derived from the proposed move would outweigh the costs.

2007 May ACCA Graduation

P/S - ACCA President Yam making her speech.

While the graduands, parents, relatives, friends listen.

World no. 1 for Paper 1.1

The top students for various subjects.

Paper 1.1 World No. 1 winner receiving her certificate from Mr Kon.

A representative of all graduands making her speech.

Practical Experience Requirement (PER)

What is the current process called Student Training Record (STR)?
Answer - It is where you are required to match your practical experience AGAINST a set of competencies and record them accordingly.

What is the new PER?
Answer - You have to demonstrate that you have met a range of workplace performance objectives ie. benchmarks of effective performance.

What are these performance objectives?
Answer - 9 key and 4 optional performance objectives.

How to complete a performance objective?
Answer - You are to respond to a set of "challenge questions" for each objective online or paper-based.

When to complete the return?
Answer - Annually ie. last quarter of each year.

Who can be my workplace mentor?
Answer - It could be your line manager, mentor or another individual. If possible, select a qualified accountant, so as to avoid being priority flagged for monitoring purposes.

What is the purpose of having a workplace mentor?
Answer -
- select performance objective to work on
- setting targets
- provide access for you to tap on mentor's experience for your overall development
- evaluate and review your progress

I disagree - Dec 2006 Section B Q2

Hi friends,

Can help me to understand the following? I disagree with official ACCA's answer to ACCA Paper 1.1 Dec 2006 exam Section B Q2. Can review my approach?

"During the year, $8,000 interest received on a holding of loan notes had been correctly entered in the cash book but debited to interest payable account."

Required
a) Prepare journal entries to correct error.
b) What is the impact on profit given the correction?

Edgar's answer
- DR Suspense a/c $8,000
- CR Interest payable a/c $8,000
[To cancel out the wrong entry into Interest Payable a/c.]

- DR Suspense a/c $8,000
- CR Interest Income $8,000
[To correctly place the entry into Interest Income a/c.]

This would increase profit by $8,000.

--------------------------------------------------------------
ACCA's official answer
-DR Suspense a/c $16,000
- CR Interest payable $8,000
- CR Interest receivable $8,000

Profit to increase by $16,000.

* Why credit "Interest Receivable"?

ICPAS Financial Highlights for YE 31 Dec 2006

Dear friends,

The info presented here and as always is, is to help to raise awareness of things surrounding you. This is also part of the training to review financial statements.

How much did ICPAS receive from its members?
Answer - It received $2.7mio (a drop of 3.6% against 2005) from its members.

How much surplus did SAA, the training arm of ICPAS, generate in 2006?
Answer - Despite having generated a healthy surplus of $1.9mio, it has declined significantly by 16% compared to 2005.

What is the overall bottomline then?
Answer - On the whole, ICPAS registered $1.5mio surplus (a negative 34% against 2005). The significant drop in surplus could be due to:-

1. higher expenditure in marketing & promotion activities and;
2. more than three-fold increase in deficit in the Practice Monitoring Division

Administrative expenses grew 25% to $4.07mio for 2006.

Cashflow

The most significant activity in 2006 which impacted ICPAS's cashflow was the acquisition of City Campus for $15mio.

1. Cash and cash equivalents declined from $7.8mio to $2.2mio.
2. ICPAS entered into a finance lease position of $8mio.

Should you wish to review the full financial statements, you may approach the institute.

ACCA Qualification - Underlying Intention #2

Dear friends,

In this posting, I attempt to BRIEFLY explain the main intention of all these changes.

In one sentence - ACCA intends to hard implant key values ie. professional values, ethics and governance into all aspiring members-to-be.

These skills are essential as the profession moves towards strengthened codes of conduct, regulation and legislation with an increasing focus on professionalism and ethics in accounting.

They will be examined at every subject (where applicable, with different emphasis) till the highest level in the new ACCA Qualification. They will also be a core element of students’ practical experience requirements. This point was stressed repeatedly in the recent lecturers' briefing.

The intent is demonstrated by the creation of the compulsory online practical Ethics module for all new students.

The focus on ethics is not uncommon. It is a singular subject to be passed in the CFA programme. Given the many accounting blow ups in the recent years, I don't think we are doing enough yet.

ACCA Qualification #1

Dear friends,

There are a few requests for me to give some attention to the new ACCA programme. So this is the first of my series.

What is the name of new programme?
Answer - Boringly and amazingly obviously called - "ACCA Qualification".
The programme was officially unveiled in Jan 2006 for implementation for Dec 2007 exams. That effectively crystallised the effort started back in Nov 2004.

Still the same number of 14 subjects but with significant change in the content of the respective subjects. It will change so much that you will NOT be able to correspond 1 from the old programme with another from the new programme. Example - Paper 2.1.

There is also the online Professional ethics module for new intake students to complete. I was briefed that they will actually track the time you spend on going through the module. Not compulsory for existing students. But you are encourage to do it.

ICPAS membership profile

P/S - A crowded house.

Hi friends,

Last week, I reported on ACCA's membership profile. Tonight I wish to share with you the profile of 18,143 ICPAS members from the latest annual report.

In terms of gender distribution, female members represent about 63% of total membership.

In terms of age distribution, it is as follows:-

• 18.4% are less than 30 years old,
• 43.5% are between 31 and 40 years old and,
• 34.6% are between 41 and above.

Practising members are ONLY 4.5% of total membership while non-practising counterparts represent the significant majority of more than 70%.

In my next article, I intend to give you a glimpse of ICPAS's financial positions.

Accountancy cannot be a mess.

In fact, "Accountancy, at its heart, is all about neatness. It is about of symmetry. It is about double-entry. It is about balancing things out. It breeds a feeling of control. The figures neatly agree. All is well with the world. Job done."

This is the first paragraph from the article entitled "stay focused" by Mr Robert Bruce. It really wowed me with its simplicity and yet so encapsulating.

As accountants, are we always looking to put various transactions in different "boxes" quickly and efficiently, so that we can pass entries, balance our books and go home?

Mr Bruce also took a swipe at the auditors when he said, "Diligent auditors follow screen-by-screen, ticking all boxes, and then fold up the laptops and go home."

He said the neatness give all of us a feeling that the job is done. But in fact it may not be and we could end up being at home for months after being fired for not doing our job. So Mr Bruce advised that we should tossed everything up in the air and watched how they come down to earth ie. undo the neatness!

Cheers to you, Mr Bruce. Interesting stuff.

CFOs, this is your job description.

P/S - a painting

Keith Stephenson, the advisory partner of PricewaterhouseCoopers and Asia Pacific leader of performance improvement came up with the list in an article written by Sonia Kolesnikov-Jessop of A&B.

1. Complying with reporting requirements.
2. Ensure no surprises.
3. Getting the audit committee to give you a thumb up on your general standard of corporate governance.
4. Get yourself to move from being a guardian of numbers to the frontline of generating shareholder value.
5. Managing movement offshore.

There is a need for a CFO to move up the value chain, staying relevant and keeping pace with business development as rallied by Lim Yen Suan, executive director of KPMG's Risk Advisory Service.

Is the general lack of such movement giving rise t0 a trend of non-accountants taking on the role of CFOs?

Mr Kaka Singh - ACCA Members Forum

Hi friends,

Wish to share the highlights of today's forum at M Hotel with Mr Kaka Singh, the immediate past President of ACCA Local council in Singapore.

He said once there were too many doctors and lawyers, now we are short of them. Then there were many people producing only on 2 children, now we are short of people in Singapore. He was responding to a question from a member who expressed his concern that ACCA as a desired qualification may be eroded given the high membership level of about 5,000 ACCA members and 3,000 affiliates.

Mr Singh noted a uniqueness of ACCA programme when he related this story. He attended the graduation for ACCA students and met a doctor who went through and graduated. Mr Singh asked why he needed to go through the programme. The doctor said the ACCA programme allowed him to gain competence in dealing with numbers in his job as an administrator of a hospital.

• The ACCA programme is the only avenue in Singapore that provides working adults and mid career individuals the opportunity to secure an a recognised financial training qualification part time.

CPD programmes under ACCA Singapore are priced on a cost recovery basis.

Mr Kaka's final words today - "How good you are will depend on how prepare you are."

P/S - Mr Kaka Singh is standing as a candidate for election to ACCA council in UK. Please give our support to him to ensure Singapore's voice in international forum.

Return on Equity & Creditors' Turnover in days

P/S - This is my feel.

Hi,

Just completed my lecture on financial ratios & interpretations recently. Two stories related to the topic were sent to me. I wish to share them with you.

The first story from Paul. He said,
"Hi Edgar, I thought this was particularly relevant to what you have mentioned in your last class with regards to inventory ratios. Interesting to relate this to everyday news, especially in Singapore context. Paul"

Paul cited Daniel Buenas's report that most S'pore companies are tardy paymasters and are worse paymasters than companies in China, Australia, Hong Kong and Taiwan. 52 per cent consistently late with their payments from a study done on 1,000 firms from 6 countries by Dun and Bradstreet (D&B).

Only 33 per cent of companies here were 'prompt' in their payments, which is defined as 'consistently paying within the credit terms given to a business'.

The second story in today's Busines Times said Singapore firms are among the Asia-Pacific region's top companies by return on equity (ROE). This is according to a Dun & Bradstreet's (D&B) study released yesterday.

Of the 1,000 companies ranked in the study, Singapore firms ie. Starhub Mobile and APL, Neptune Orient Lines's subsidiary, took second and fourth places respectively.

StarHub Mobile recorded an ROE of 1,019.3 per cent. The fourth placed Neptune Orient Lines subsidiary APL achieved a 935.2 per cent ROE.

Wow! Amazing....

SME Accounting Standards

Hi,

I am looking to form a small team of people to review and comment where applicable on the proposed standards.

CCDG is inviting for comment from public. Due date - Sep 1, 2007.

If you are interested in participating in the democratic process of accounting standard formulation and at the same time, learning something together, please drop me a note to indicate your interest.

Good day...

Hurray!!! Simpler SME accounting standard coming

The CCDG announced the new standard for small and medium enterprises (SMEs) last month and is seeking comments from the public.

The proposed rules closely relate to the new SME financial reporting standards put forward by the UK-based International Accounting Standards Board (IASB) in February.

What are some of the proposed changes highlighted?

• Choices for accounting treatment have been removed and topics that are not generally relevant to SMEs, such as share-based payments and segment reporting, have been cut.
• Methods for recognition and measurement have also been simplified. For example, for goodwill impairment, SMEs can use an indicator approach rather than an annual impairment test.

What are the potential impacts?

• CCDG expects the current volume of accounting standards for SMEs to be cut by more than 85 per cent.
• The auditors are looking at 10-15% reduction in audit fees. But is it fair? We will wait and see till at least after the first done under the new rules possibly end of next year.

The proposed rules are now opened for your comment till Sep 1, 2007.

I am delighted by the news as this would help to ease the frustration I experienced recently in dealing with some fellow professionals. Story about this in my next article.

Oxford Brookes Degree

P/S - A sad memory.

Hi,

Oxford Brookes has revised its degree programme to incorporate ACCA syllabus changes. Here are the snippets that I wish to share with you.

The revised scheme will apply from Aug 2008.

While you still have to complete F1 to F9, but only marks for F4 to F9 will count towards which qualification you will get ie. first class honours, second upper etc. Why? F1, F2 and F3 have been light-weighted to 2 hours of MCQs.

The quality of Research and Analysis Project (RAP) will also go towards qualification. It can ONLY upgrade you from one class to another. To illustrate, if your average mark for F4 to F9 qualifies you for second upper and you did such a wonderful RAP, Oxford Brookes may "bump" you up to first class honours.

By the way, I was told that you would have to submit a RAP of 6,500 words from Aug 2008 (currently 5,000 words). This is to partially compensate for the lower loads of F1 - F3.

For more detailed info, you know where to go right?

Stock valuation - Weighted Average Pricing

P/S - My Sunday walk along Boat Quay today...

Hi class,

There are 2 general types of weighted average pricing ie.

a) Cumulative weighted average pricing
b) Periodic weighted average pricing

a) Cumulative weighted average pricing
- The average price is determined by dividing total cost by the total number of units.
- A new weighted average price is calculated everytime upon arrival of a new batch of materials into store - key feature

b) Periodic weighted average pricing
- For a certain period, a RETROSPECTIVE average price is calculated for all materials issued during the period.
- The issue price can only be determined upon closure of a certain period.
- How to calculate?

Opening stock value + Cost of all receipts within period
-----------------------------------------------------------------------
Opening stock in units + All receipts in units

ACCA2007 Exemption policy announced

There is now a standard and transparent set of policy guidelines for those seeking exemption as they initiate their pursuance of ACCA qualification

Here they are:-

Type of degree (ACCA exemption)
- Accounting degree - major (F1 - F4 )
- Accounting degree - joint/minor (F1 - F3)
- Finance degree (F1 - F3)
- General business / management degree (F1)
- Law degree (F4)
- MBA (F1 - F3)
- Non-relevant degree (no exemption)

LLP for small businesses

Friends,

Saw this signboard at a hawker stall.

It reflects the increasing sophistication of people operating even small businesses.

Are you familiar with this form business registration to take advantage of it? For those uninitiated, LLP is limited liability partnership.

Send me a pic of anything interesting relating to the topic of accounting.

Cheers...

P/S - Will try the food this weekend.

Companies in China have 2 sets of accounts?

P/S - Jalan Besar Stadium

Yes, it is official now.

What happened?
Mainland-listed companies will have to prepare two sets of annual reports for this year after new accounting standards come into effect on Jan 1.

Shanghai and Shenzhen-listed companies will have to publish their 2006 annual reports as before, using the current accounting standards, but will also have to publish an additional report where their results are calculated according to the new international standards.

What are the implications?
According to Haitong Securities analyst Zhang Qi - 'Many companies used the old accounting system as a form of window dressing to make themselves look profitable when in fact they were not.'

Will this lead to a severe correction of Chinese stock markets if this has still not been factored into the pricing by now?

Initial public offerings (IPOs) or secondary offerings must also use the new accounting standards starting Jan 1, according to new regulations issued last week by the China Securities Regulatory Commission. Last three years' profit is a prerequisite for listing in China.

Will this therefore reduce the queue for IPOs in China and thus reduce demand for listing in foreign bourses eg. Singapore?

For those who will not make the cut, will they go back door listing?

Local companies are exempted from the rule for now.

If the government want to see a change in this area, it should take the lead by asking all its state-owned enterprises to make that change asap.

Reference - Dec 5, 2006, "New accounting rules affect China firms' profits", BT/SCMP.

CCDG out. ASB in.

Minister of State for Finance, Mdm Lim Hwee Hua said that Accounting Standards Board (ASB) will replace the Council on Corporate Disclosure and Governance (CCDG).

Effective Sept 1, 2007.

It will comprise key regulators, senior accounting professionals, and leading users of financial information.

Why the change?
Except for expanded responsibilities of issuing standards to cover entities such as charities, societies and co-operatives, I wonder why the need to change the name when essentially almost everything else remains unchanged.

Probably the name change is just that ie. to signify the addition of responsibilities.

Good night...

Yen Hoon says ...

Hi,

I thought that I didn't do well for paper 1.1 as I did last minute revision. I was expecting to retake the paper or at most get only 60 marks.

Instead, I got 87. Really happy about the result.

I'm now doing regular studies for my papers 1.3 and 2.1.

Thank you, Edgar, for being a wonderful and dedicated teacher.

Yen Hoon

P/S - Congrats to Yen Hoon. Edgar

Annie says ...

Dear Edgar,

The December 2006 Exams results are out today and I want to thank you for your patience and self-less devotion in lecturing us.

You are an outstanding lecturer who delivers lessons in a unique way. Thank you for your many times of 'nagging' (repeated) so that the concepts are driven to my head without much effort.

You are already a successful lecturer and I know you will enjoy more successes in future.

P/S Annie secured 85 marks for P1.1.

Tan K.T says ...

Hi Edgar and Mr Goh,

Thanks for all your guidance in my paper 1.1.

I am quite delighted with the result i have achieved for your paper 1.1
I have obtain a score of 78 marks for this paper 1.1. Although it is still a bit below my target score (80 marks), at least i pass the paper.

Finally can relax now and can enjoy my Chinese New Year before going all out for the other papers (especially Paper 2.3 under Mr Goh) Hahaha. =)

And by the way, Mr Goh, please forgive me of all those broken english (or maybe not even english language) i have use in this email. Just treat like what you always mention in the sunday class, listening to the uncle's conversation at the coffeeshop.

By the way, i like to wish you a happy Chinese New Year and have a prosperous new year ahead.

Gong Xi Fa Cai.

Once again thanks for all the effort you have made in order for me to pass this paper.

Regards,

Tan K. T.

Making Accounting Cool

Need to up the profile of accountants.

Why? General increase in demand for accountancy services due to:-

• increasing regulation
• hot economy
• record levels of M&A
• adoption of international accounting standards

In Australia, there is only one accountant for every 4 job openings.

How to raise the x-factor in accountancy for the supply?
Besides the standards thrills and frills of bigger pay packages, signing on bonuses, etc etc etc,

• Hong Kong Institute of Certified Public Accountants (HKICPA), through its office in Beijing, will help to train 1,500 mainland accountants over 10 years.
• The most interesting idea of all - Institute of Chartered Accountancy of India (ICAI) want to add the prefix "CA" (ie. Chartered Accountant) to the names of all licensed CPAs ie. as per "Dr" for doctors.

So signing off now at 1.45am, CA Edgar Wong :)

Reference - Feb 2007, "Making Accounting Cool", CFO Asia.

Denise Ang and her Gaelic victim

The festive spirit is among us.

Remember the case of Gaelic Inns of Muddy Murphy's Irish Pub and Penny Black vs Patrick Lee Public Accounting Corp for $1mio of negligence.

Judge Belinda Ang had found the auditors guilty of negligence for not alerting management earlier of possible discrepancy in the cash balances of up to $672,253. $775,000 was awarded.

In yesterday's ST, Judge Ang explained her judgement. She said directors cannot "siam" or abdicate their duties by engaging experts and reasonably competent employees.

Duties such as asking for and analysing bank reconciliation statements. The managment has to take some level of responsibilities for contributing to the negligence.

Patrick Lee PAC is appealing.

A definition of Accountant

Hi friends - Share with you the sentiment of this reader who wrote to me.

====================================

Hi Edgar,

Share my thoughts with you. A practical accountant in a harsh business climate is very different from a academic accountant. I am very shocked to learn what is meant by a real life accountant from my own exposure. This is also confirmed by your article on the Auston's case.

Their life is definitely not easy. I am beginning to re-define an accountant's job. Now, I know that running a business and being an accountant is no difference. Think about this point and you will know that their stress level is no joke.

RP

Ford Motor Co - Can this pre-historic company survive?

This 103 years old company recorded a whopping USD$12.7bio loss for 2006.

Why?

- slumping sales and huge restructuring costs

What is Alan Mulally, the president and CEO, and its management team trying to do?

Apparently they are executing a plan that will put the 103 years old company through a complete makeover costing USD$23.4bio. The makeover has started in 2006 and is expected to end in 2009. To pay for the bill all the way to year 2009, it has mortgaged its assets and borrowed the money.

• To shrink its massive production capacities to match shrinking demand.


• To change their product lines of trucks and petrol-guzzling SUVs to producing smaller, more fuel efficient vehicles.


• To clear up its pension commitment to 38,000 employees.


• To remove 14,000 white-collar managers.

Can they pull it off?

If not, another pre-historic dinosaur will disappear.

FRS 39 - etched in an apprentice's memory forever

Hi friends,

I am reproducing, with permission, an email (albeit edited) from a friend.

=========================================

Hi Edgar,

Share with you my day in the office today. I had been working on this assignment on FRS 39 - revaluation of fair value of term loans for a week already.

I submitted my completed audit schedule to the Accountant. With one glance and she said this to me, "The figures don't make any sense. How can the bank be making huge losses and the company be logging huge gains by lending the money to the company?".

She picked up a high-lighter and high-lighted almost every item in the schedule. I started laughing uncontrollably. Of course I am laughing at my stupidity.

Of course, I understand perfectly the remarks, "The figures don't make sense." because in auditing, somehow we are trained to have feelings for numbers.

FYI - The Accountant had been explaining FRS 39 to me for ONE WEEK already.

As she stared straight into my eyes, I felt her asking me telepathically, "Can or can you not handle it?".

My subconcious mind responded, "And what makes you think I can handle it?" But for my pride and dignity, I kept silence. Yet I was very apologetic that I was not able to perform and deliver on my work.

FRS 39 should be included in paper 1.1, so that I don't have to look stupid. But I did learn a thing or two from this assignment. FRS 39 is actually a schedule to calculate the IRR in order to get the effective interest rate and compare against the book value as per the general ledger.

Am I right, Edgar?

============== The End ==================

P/S Jane Doe :), thanks again for letting me share a page from your auditing life with your fellow students.

The financial statements are not telling us enough?

Our students are often asked, "What are the various financial statements?"

The five statements are:-

• Balance Sheet
• Income Statement
• Notes to the Account
• Cash Flow Statement
• Statement of Changes in Equity

In a study by the Economic Intelligence Unit (EIU) and Deloitte last year, it suggested that financial statements - in their present format - do not provide a complete picture of the soundness of a company.

The study calls for financial statements to reflect both financial and non-financial indicators of a company's health.

The Americans set the pace with the Sarbanes-Oxley Act in response to the collapses of Worldcom and Enron. The Act is a set of rules that are targetted more towards severe corporate misbehaviour, eg. fraud and the falsification of accounts.

The EIU-Deloitte study showed that 'traditional' financial measures fail to reflect the state in the more mundane but critical non-financial areas.

Some examples of these non-financial areas cited:-

• What are company's relationships with important parties, such as customers, employees and suppliers?
• Are the products of company of certain quality?
• Are your employees committed to the company?
• What is the key source of future revenue and profit in a firm?
• What is the state of product innovation?
• What is the level of brand loyalty and strength?
• What is the level effectiveness of the board and top management?

Most of the white-collared executives surveyed in Europe said they would prefer to see more incisive information on their companies' key non-financial drivers of success.

How to make such information on key non-financial drivers a reality?

• Set industry standards to measure these crucial drivers. Without such standards, reliability of such information would be a big concern.


• Coerce a mindset change in companies that non-financial measures do affect profitability. I believe the companies will get the message when the market reacts to such information compared across companies and industries.


• It is also important to have board members and executives who are knowledgeable about non-financial measures. In similar vein, the scope of auditing would expand too and will thus require the necessary expertise beyond accounting and/or auditing.

These non-financial measures would help us to see the company's future prospect better.

Reference - "Inadequacies of Financial Statements", Business Times, Michelle Quah, February 4, 2005.