Week-end: Work-Life Balance

Work life balance is a concept including proper prioritizing between work (career and ambition) and lifestyle (health, pleasure, leisure, family and spiritual development/meditation). It is a concept that supports the efforts of employees to split their time and energy between work and the other important aspects of their lives. It is a daily effort to make time for family, friends, community participation, spirituality, personal growth, self-care, and other personal activities in addition to the demands of workplace. Effective work-life balance encourages employees to work harder and discourage them from quitting their jobs. Work life balance means something different to every individual, but health and career experts share some tips to help you find the balance that’s right for you. The key to avoid burning is to let go of perfectionism, says executive coach Marilyn Puder-York PhD, who wrote the official Survival Guide. As life gets more expanded its very hard both neurologically and psychologically to bring perfection. She recommend dedicating a few chunks of time each week to self -care, whether its exercise, yoga or meditation. First identify what is most important in your life and then draw firm boundaries’ so you can devote quality time to these high priority people and activities.

Puder-York concluded the work life balance by saying that “When I talk about balance, it does not mean completion and achievement of every task, but it mean that you will get a time for self care, so that your body, mind and soul are being refreshed.”

Sources: 

http://www.forbes.com/sites/deborahlee/2014/10/20/6-tips-for-better-work-life-balance/

Audit Method: The Unrecorded Liability

Liability is defined in Conceptual Framework of International Financial Reporting Standards as “a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits”.

There can be many instances where management will be prone to not record a liability due to various reasons. The management may not record a current liability to improve its current ratio and present its liquidity position higher. Management may also skip to record a long term liability at year end to improver it debt to equity ratio. A high current ratio and low debt to equity ratio makes it easy for the management to obtain new financing for the company.

Auditor should verify the unrecorded liability by applying the following procedures:

• Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices. In a voucher system, a voucher is not prepared until the requisition, receiving report, and sellers invoice are reconciled with the purchase order.  Auditors search open files for unmatched documents.
• In searching for unrecorded payables, the auditor would look at disbursements made after year end to see if they should have been, and were, properly recorded as payables at year end.
• Tracing a sample of purchase orders and the related receiving reports to the purchases journal and the cash disbursements journal will enable the auditor to determine that the purchases were properly recorded.
• Analytical procedures.  Accounts payable turnover is very important.   Unusual relations should be investigated.
• Cash disbursements cutoff test.  Test if cash disbursement and accounts payable reduction are reconcilable. Inspect the last checque written and trace it to the accounts payable subsidiary ledger. Reviewing subsequent cash disbursements enables the auditor to detect items purchased before year end but not yet recorded, i.e., unrecorded accounts payable.
• Purchases cutoff test tests to determine if goods for which title has passed or not passed are appropriately accounted for. FOB shipping point and FOB destination are critical to this test.
• Trace subsequent payments to recorded payables.  Match checques issued subsequent to year end with the related payable.  Checque should be issued only for payables that existed on the balance sheet at year end.  Any checque that cannot be matched may represent an unrecorded liability at year end.
• If confirmations are used, small and zero balances should be sampled as well as large balances.  For example, if orders are placed with a vendor on a consistent basis, a confirmation should be sent to the vendor regardless of the balance due at year end.

Practice

The auditor should check for all the audit assertions while verifying unrecorded liabilities. Valuation assertion will verify whether accounts payable are valued in accord with GAAP/IFRS? Presentation/Disclosure assertion will verify whether the accounts liability balances are properly presented and disclosed? Accounts payable should be listed as a current liability.  Purchases should be listed in the calculation of cost of goods sold. Unusual transactions involving accounts payable should be disclosed, such as related party transactions involving accounts payable. Obtain a management representation letter with assertions relating to accounts payable and purchases.

Audit News Briefing: 15 December 2015

Audit-is-cool is pleased to accumulate and provide its readers with the news on audit and related topics:

December 8, 2015

Accountancy Age

Audit firm governance code to champion quality and transparency

Based on the feedback from early-year consultation of the Audit Firm Governance Code provisions held by FRC – the role of independent non-executives was revealed to be significant but could be further strengthened. Moreover, investors require more direct appraisal from NED regarding firms’ audit performances.

FRC CEO, Stephen Haddrill said: "The audit firm governance code has led to an enhancement in governance of the major firms who have put significant effort into adopting its key provisions… Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities. The proposed new provisions will strengthen this voice further, provide clarity about the code's purpose particularly in relation to audit quality and encourage further transparency to investors."

Please follow link for details: http://www.accountancyage.com/aa/news/2438245/audit-firm-governance-code-to-champion-quality-and-transparency

December 7, 2015

PwC

PwC appointed as auditor to probe Vatican finances

PwC shall conduct a comprehensive external audit of the Vatican’s accounts. This is to support the Pope in his zeal to excommunicate corruption from the church. The Big Four shall work with Australian Cardinal George Pell who is head of secretariat that was formed to oversee papal finances following a series of scandals.

Please follow link for details: http://www.accountancyage.com/aa/news/2438045/pwc-appointed-as-auditor-to-probe-vatican-finances

December 4, 2015

Accounting Today

U.S.: Litigation Environment Favorable for Audit Firms (for Now)

Law firm Willkie Farr & Gallagher partner, Michael Young, specializes in defending audit firms. He said in an auditing conference in New York that –

“The litigation environment toward the accounting profession right now is about the best I have seen it in more than 30 years of doing this… Litigation against the profession is down, and just as important, the ability of the profession to effectively tell its story, to effectively present its defenses, is better than at any other time while I have been practicing law. But the times are changing, and in fact they have already started to change.”

Much of the litigation in recent years has come from the financial crisis but SEC is sending the message that it is back on the accounting beat, Young warned.

Please follow link for details: http://www.accountingtoday.com/blogs/debits-credits/news/litigation-environment-favorable-for-audit-firms-for-now-76616-1.html

Audit Firm: KPMG Staff Arrested in Tax evasion Investigation

Her Majesty's Revenue and Customs-HM Revenue and Customs or HMRC is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support, and the administration of other regulatory regimes including the national minimum wage.

Four partners at the Belfast office of KPMG have been arrested in connection with suspected tax evasion. HMRC officials visited the global accountancy firm's city Centre office on Wednesday and detained the men. They are Jon D'Arcy, Eamonn Donaghy, Arthur O'Brien and Paul Hollway, the firm's most senior staff in Northern Ireland.

KPMG said it is cooperating with the investigation and the four men have been placed on "administrative leave". The firm added that it does not have "any indication that this investigation relates to the business of KPMG or the business of our clients". The firm added that it does not have “any indication that this investigation relates to the business of KPMG or the business of our clients”.

HMRC said: “Officers arrested four individuals from Northern Ireland [on Wednesday] in connection with suspected tax evasion. We can’t comment further.”

KPMG has been at the fore of a campaign to persuade the Treasury to grant Northern Ireland special corporation tax status. Among the other KPMG executives arrested on Wednesday was Paul Hollway who is the firm’s head of corporate finance in Ireland. Mr Donaghy is KPMG's head of tax in Belfast and has been heavily involved in the campaign to have corporation tax powers devolved to the Northern Ireland Executive. As well as their work for KPMG, the four men are directors of a property investment company called JEAP Ltd. The firm suffered heavy financial losses when the property market crashed in 2008. However, it is unclear at this stage if that forms part of the HMRC investigation.

Additional Thoughts

Tax evasion and tax avoidance are issues which require the utmost care and attention from the auditors and authorities as economy can suffer huge losses due to this. Auditors should be very careful and should look out for transactions and other matters which may indicate the possible tax evasion. Moreover while providing taxation consulting services to its corporate clients the auditors should ask for all the pertinent information from clients to avoid any chance of the possible tax evasion.

Sources:

• http://www.bbc.com/news/uk-northern-ireland-34931675
• http://www.theguardian.com/business/2015/nov/26/kpmg-partners-arrested-hmrc-tax-evasion-inquiry