The Hindu Business Line : Lawyers don't want to marry auditors

HERE, we are talking about multi-disciplinary partnerships where accountants team up with other professionals to create one-stop shops. But the UK's Law Society is not keen on allowing its solicitors to embrace auditors. "The auditor owes a duty to the public, which is very different from the duty owed by a lawyer," is a quote that appears in Accountancy. What's the difference? "The lawyer's duty of independence is a duty owed to the client (not the public) and it is a duty to make sure that the lawyer gives proper advice to the client, uninfluenced by third parties. By contrast the auditor's duty of independence is a duty owed to the public - he or she should not be so influenced by the client as to give the wrong information to the public." Another quote views MDPs as "the Enronisation of the legal profession." And that if large accountancy firms took interest in law firms, "the integrity and independence of the law firm could be compromised by the interests of the accountancy firms' consultancy clients." It's good they're fighting before teaming up.

Apply rigour to spending

CATEGORY spend management, as Aberdeen explains, is about focussing on cost structures and market dynamics for specific categories. All along, enterprises have been busy with production and related areas. They must now apply the same rigour "to non-production spend categories, such as temporary labour, travel, telecommunications, printing, advertising, and marketing to ensure optimum operations." The first of Aberdeen's report in this area documents "the drivers, strategies, enablers, and technologies (DSETs)" of contract labour.

Handle future in 57 seconds

ONE-minute manager, speaker and so on, are only too well known. How about "60 seconds to your first trade"? Motley Fool gives some tips to take `a giant step toward controlling your financial future' in less than a minute: "0:57: Decide how much you'll invest; 0:50: Consider what you'll be investing in; 0:38: Compare broker fees and services; 0:21: Do the paperwork and sign the cheque; 0:03: Revel publicly." For more details, check out www.fool.com.

Model question paper

WHAT are the subjects of interest to shareholders? A booklet from Ernst & Young gives useful clues. "Questions can be expected with regard to executive compensation packages, the use of stock options, `shareholder access,' and the roles and responsibilities of management, the independent auditor, and the audit committee in the financial reporting process. Shareholders also can be expected to address topics such as the company's key risks, sales and earnings, liquidity and financial strength, dividend payouts, market performance, competitive position, and future business strategies." Does that sound like a mock exam? "We wish you a successful meeting," notes E&Y.

Serious fraud shaking

A Recent newsletter from the Association of Certified Fraud Examiners cites an article from The Guardian: "What's happening at the Serious Fraud Office (SFO)? Two multimillion pound prosecutions have just collapsed, raising concerns about Britain's foremost fraud investigating and prosecuting body." A case of SFO getting stolen in the fraud, notes the paper. "The first case was thrown out after prosecutors used as their prime witness a man described by the presiding judge as a `liar' and a `thief'." The case was about a high-yield investment scam and an elaborate money laundering operation involving channelling funds through several law firms. And bringing up the case was expensive; it cost the authorities about $16m. Something serious, really.

Bulge in the packet

AVERAGE salaries rise marginally, but total pay packages increase by 24 per cent in 2003.

Chief executives at nine of the top UK 10 companies in the FTSE 100 index are making five times as much from awards of shares, long-term incentives and pension contributions as from their basic salaries, reports Accountancy. "On average, basic salaries made up only 16 per cent of the top chiefs' pay," it states, citing a research by Independent Remuneration Solutions. Tax authorities are keen that pay should be "clearly displayed in the annual report" and that "partial disclosure and spread of information is not transparent and suggests that companies have something to hide." A big packet shows, doesn't it?

Too big and too slow

DEEP pockets should be paying their bills faster than the small fry. True or false? False, if you were to ask the Federation of Small Businesses (FSB) in the UK. Interestingly, government regulations require "all plcs and their large subsidiaries to state in their annual reports the average length of time it takes them to pay their bills," observes Accountancy.

But fewer companies are reporting on their payment practices. "The Department of Trade and Industry has argued that it is the auditors' duty to make sure the information is disclosed in company accounts, but accountancy bodies says it falls on company directors, not auditors, to supply the information." FSB's report says that the average time a plc takes to pay its bills is 46 days and that around £20bn is outstanding at any one time.

Essential but non-financial

AS companies get pressurised to disclose non-financial information, auditors have to take a more active role, says PricewaterhouseCoopers. "Companies need to show they have thought through the ramifications of how they manage the people, the innovation processes or environment matters — these are all critical components of modern management," notes PwC, as per a report in Accountancy. "To ascertain whether the sustainability report is a true and fair account the auditor has to ask other people, including stakeholders, to find out whether it is a balanced picture of what is going on."

A day may come when this becomes essential info and the financial data become non-essential.

GlobeTrot@thehindu.co.in

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