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"?