Mystery payments at Canadian construction company

This is interesting: An internal review at Canadian construction company SNC-Lavalin of certain payments approved by the CEO has resulted in that executive’s departure from the company.

The payments in question were approved directly by the CEO after the CFO rejected them. Documentation was apparently sketchy, as the review revealed that the projects they were attributed to were incorrect.

[The review] reveals payments to contracts that didn’t exist, mysterious agents whose identity “is without substance,” and staffers using emails and password-protected devices that the company couldn’t access.

They can’t be sure that the payments in question weren’t related to their controversial involvement with the former Gaddafi regime in Libya, since the recipients appear to be fictitious. They believe they weren’t, but there’s really no basis for that belief since the report is inconclusive.

SNC-Lavalin has operations in over 100 countries and earned over $7-billion in revenue last year.

The company said improper payments are a result of “management override, flawed design or ineffective enforcement of controls” in relation to hiring agents for two of its projects.

Design is one aspect of internal control, and operating effectiveness is the other. Add to that management’s ability override them, and they’ve pretty much covered all their bases!

Some former employees have conducted company affairs using non-corporate email addresses or had password protected devices to which the company does not have access.

This is incredibly suspicious, as what good reason could there be for using non-corporate email to conduct company business? Always a red flag, but tough to uncover. The article doesn’t discuss how it was in this case, unfortunately.

The original investigation, which was reported at the end of February, was over $35-million in payments which were undocumented. The reporting of this information resulted in a 20% decline in the company’s stock, which has since recovered only about ⅓ of the drop. Clearly, controls at the company are not strong enough and the market believes the environment may be such that more of these types of situations exist.

Now, with these recent developments, it seems that the “tone at the top,” a critical component of a strong control environment (see COSO Internal Control Framework), was not one of uncompromising integrity.

Depending on the nature of the payments, if it is ever determined satisfactorily, this could have implications related to the Corruption of Foreign Public Officials Act, Canada’s version of the Foreign Corrupt Practices Act in the US.


Thoughts on the proposed accounting profession merger

The country’s professional accounting bodies regulating the use of Chartered Accountant, Certified Management Accountant and Certified General Accountant designations are currently deep into merger talks, as you might have heard.

This affects me, of course, but I have a very pliable opinion on the merits of this path. Ultimately I’ve earned the CA designation by passing the UFE in 2006 and meeting the experience requirement in 2008, and nothing will change that whether the letters are CA, CPA (the proposal) or WTF.

The proposal is that the three bodies will merge their operations and we’ll all become CPAs, short for Chartered Professional Accountant, which of course is different from the USA’s Certified Public Accountant, but apparently deliberately identical to both confuse people and prevent incursion by that entity into Canada in the future. For the first 10 years we’ll be allowed to use both the new designation and the old one in tandem. I’d become Neil McIntyre, CPA, CA (woo hoo, free credential!) After 10 years we’d be forced to drop our old letters and use only the CPA.

CAs opposed to the change feel like the traditionally strictest requirements associated with an accounting designation in Canada will be watered down when they are combined with the other two. It’s a valid concern, certainly, but not a deal-breaker in my opinion. It’s not like in 10 years time everyone is going to forget that there are thousands of accredited accountants in the country that qualified under differing regimes. I can foresee a job interview involving a wink, nudge and a question about which regime exactly it was.

I truly do believe that the process to reconcile and merge the qualification process can be done well enough to satisfy all stakeholders. I’d personally like to see some form of the case-based exams from the UFE included, as I think they’re a good challenge and better than other forms of testing (e.g. multiple choice). And I don’t think the combined designation will carry less weight than the CA alone. Anecdotally, when I worked in public accounting, I knew someone who had a ton of trouble with the UFE, but in all other respects was a fantastic accountant and auditor, and would’ve made a great CA. He just couldn’t crack the exam. I don’t know whether it was the pressure or whether he didn’t test well generally or specifically with the case format. Conversely, there are some people who have no trouble with it and then have their designations revoked for incompetence or lack of ethics.

I find it interesting that one of the purported benefits of the merger is to reduce administrative costs. The parties point out that having three competing groups, each with provincial fiefdoms results in 40 different bodies, which can be reduced to 13 with the merger. If any were really concerned about the administrative costs they would’ve eliminated the provincial bodies already. (All three are likely proponents of a national securities regulator!)

I didn’t set out to write a post in favour of the merger, because as I noted earlier my interest in the debate is minimal. But I may have just solidified my support in the process of writing it.


I need to be Certified

Having spent the past 3+ years in internal audit, first for a global building materials manufacturer and now with a Canadian retailer, I figured I ought to go for the certification and make it official.

So, a couple months ago I committed to earning the Certified Internal Auditor (CIA) designation. The first step was to register with the IIA as a candidate, which is done entirely online.

The next step was to select and acquire study materials. The IIA has their own package, which they’re quite fond of based on some phone conversations I had with one of their representatives, and Gleim is another popular one, as far as I can tell from cruising the various LinkedIn internal auditor group discussions.

I went a different route. I had attended an IIA social event for new members (Toronto chapter) back in April, where I met a fellow CA who had more recently achieved her CIA as well, and she recommended Hock as a cost-effective alternative. So far I’m liking it, having worked my way through the textbook for Part 1 of the exam. I’ve begun to use their software (ExamSuccess) to take even more practice questions. (The textbook also has them, sprinkled throughout.)

The CIA exam is four parts, but if you’re a CA or CPA you can apply to be exempted from the final part. Part 4 covers strategic management, global business environments, organizational behaviour, management skills and negotiating.

I’m quite a nerd, so I actually enjoy studying and answering practice questions. Now that I’ve begun the process, I’m surprised I didn’t start it sooner!

Update (Dec. 6, 2011): The budget dropped out for training for the rest of the year and the CIA fell by the wayside. Maybe in 2012!


Integrate social media efforts across marketing and customer service

Most organizations likely place social media responsibilities primarily (or solely) with marketing, but a recent interview with Cisco’s Marketing Director on WebWorkerDaily, now part of GigaOM provides some insightful tips and makes the case for spreading it throughout the company, especially to customer service:

The heads of both your marketing and customer service departments should meet regularly. Marketing plans should be shared with — and can even be enhanced by — customer service. Each side should know how to use social media to not only fulfill their own goals but to help one another to get closer to reaching overall company goals.

Ensuring the alignment with the overall strategic plan is the key point, and in many cases KPIs for both groups will be similar. Hopefully customer service is already involved in other marketing efforts, but it’s especially important in the interactive space of social media. Customer service is better positioned to turn feedback into improvements to operations where identified.

Measure results together. As expectations are high for tangible returns on social media marketing investments, bring customer service in to help measure, analyze and tell the story of how social media is effective for the company.

Mine social media for more than sentiment. Instead of just looking for the positive, negative and neutral of what customers are saying about a company’s product or service, look for clues to how the public perceives the company as a whole.

Demonstrating a return on social media investments is a challenge for many companies, but collaboration across functions will help. As well, the social media team should build relationships with others subject matter experts within the company, so that customer feedback can be informed or addressed by the people best able to do so accurately. Tech companies, such as Google with their official blog, tend to do really well with this.

Building social media competence across the organization should also have the side effect of nurturing responsible personal use, which is still a risk, although one which I believe often unnecessarily overshadows the potential for beneficial use of social media to a company.

How are social media responsibilities organized in your company?

Accounting Blogs

Five years of blogging… Sort of

It has been five years since my first post on Feb. 18, 2006. In a way it’s the 5-year anniversary for this blog, but I haven’t really been writing as frequently lately as I should be in order to claim that legitimately. This is my first post in 2011!

So to celebrate, I’m raiding the archives and taking a stroll down memory lane.

Google Docs to surpass Office in a year: Google Docs has made great strides, but it still didn’t really happen, did it? A great alternative though for the cash-strapped with basic needs.

Why your organization should be using open document standards: What can I say, I’m a standards kinda guy. I still strongly believe in open standards, but I’ve also become pretty enamored with the XML-based formats for Office. Such small file sizes compared to the old binary formats!

Return to blogging: Ah my initial return from hiatus. I left public accounting and took a year long sabbatical to strike out into the world of internal audit. A year later, I knew everything there was to know and returned to share my knowledge. (Kidding!)

Today I am a CA: This is what I’d been working toward and blogging about since the beginning, and it was a very proud day to announce it to my readers! Next up: Certified Internal Auditor!

Here’s the hoping I blog more frequently over the next five years. Thanks for being a part of it.