Work-life balance: Laptops on holiday

Work-life balance is a topic that comes up frequently in the accounting profession. Robert Half, a recruiting company, surveys accountants occasionally.

38% of accountants take the office with them on holiday in the form of either a laptop or handheld computer. The research also found that 34% of accountants globally admit to working in the evenings, while 37% respond to e-mails and take phone calls in the evening when they have pressing deadlines.

  • I left everything when I went on vacation last month. No laptops, and the phone was off the entire time!
  • Working in the evenings is a given during busy season and sometimes necessary at other times.
  • I respond to emails if I happen to check my work address, but that doesn’t happen regularly at this time of year (see above).

I may have left the computers at home because I was worried about potential surges and didn’t want to buy a protector. But I definitely cut the cord to the office. Generally you aren’t taking vacation if it is a busy time, though.

I was reading and responding to email earlier this afternoon (Sunday!) because I happened to check. It didn’t really feel like work, and certainly not burdensome. It all depends on the current workload. If I was writing this post in March, it might sound different!

Accounting gets a shot of adrenaline

Bill Kennedy’s getting it done at Energized Accounting, a relatively new blog hosted by Google’s Blogger that so far has been host to some inspirational posts for me. The latest is all about a favourite topic of mine, data visualization:

If you want effective communications, you have to take responsibility for both the sending and the receiving of the message. You have to take into account how your stakeholders take in messages. Some people are just confused by spreadsheets.

Bill’s a CA and is from Toronto, making him a pretty cool guy right away. But his posts reveal his enthusiasm for helping his clients. He talks a lot about Microsoft Dynamics GP, which a lot of my clients use as well. I’m hoping to learn a thing or two that might help me help my clients!

From the sounds of things we’re on the same page in terms of providing clients with their financial information in innovative and illuminating ways.

On an interesting side note, Bill links to Francine’s blog and labels it satire! Oh, if only.

Income trusts get distributable cash standard

Canada’s CAs have announced guidance for a key metric of income trusts, that of distributable cash.

The term ‘distributable cash’ generally refers to the cash that an income trust could potentially distribute to unit holders. Investors use this information when assessing the entity’s ability to fund future distributions and to help value their investments.

But the problem with the measure is that investors had no way of knowing where the cash had come from: general operating activities, or selling off productive assets and related future capacity. There was no way to compare across trusts since they all defined the term differently, or even to compare the same trust year over year. The CICA recommendations seek to remedy this:

The CICA guidance recommends that income trusts report a new measure called “Standardized Distributable Cash” to improve consistency of reporting and comparability between entities. Together with other disclosures recommended in the framework, the new measure gives the industry a common methodology for providing investors with information.

Standardized Distributable Cash is defined as cash from operations, after adjusting for capital expenditures, restrictions on distributions due to debt covenants, and minority interests.

The recommendations are not without criticism, however.

Independent investor advocate Diane Urquhart noted that the new CICA measure of distributable cash is not an addition to generally accepted accounting principles and will appear only as part of management’s discussion and analysis. […] “It’s ugly,” declared Al Rosen of forensic accountants Rosen and Associates. “When you needed this – and in a tougher form – would have been at least five years ago.”

I believe those are the biggest criticisms of it: the “standard” isn’t part of GAAP officially, but merely guidance to help trusts provide investors with higher quality information, and the recommendations are a little late in coming.

Better something than nothing, and better late than never.

Annual review a chance to look forward and back

I had my annual performance review Friday afternoon. I knew what to expect, because it’s basically the aggregation of each job review we get throughout the year. Job reviews are a solid lead indicator for the annual appraisal. Reviewer comments are cited and my performance is compared to expectations.

It also afforded me the opportunity to share my thoughts on the past year with a manager and a partner, my goals for the future and anything else that was on my mind related to my career trajectory with the firm.

I’m feeling very comfortable running audits as the senior in charge, I noted. For me, being in a position with greater responsibility provides the motivation to do great work. In the coming year I will find myself more frequently in this role.

I also noted that I want to work on larger audits, including public companies. The closest I have come to a public company is a co-operative, which is widely held and therefore the risk level would be similar to public companies. I’ve also done a couple inventory counts for a public company. Slim experience in what I see as an important step in my development.

In summary, I’m looking forward to increased responsibility, hopefully on new, exciting and bigger clients with more complex accounting. I need to keep challenging myself.

Sucks to be Seidman

By now, the verdict in the BDO Seidman lawsuit has been covered by all the major industry blogs. All the heavyweights have registered their opinions in this great swirling mass known as the blogosphere. The mainstream media has tossed it around this way and that. There is near unanimity amongst all commenters: Sucks to be them.

I don’t disagree completely. For failing to detect a fraud perpetrated at E.S. Bankest LLC, Seidman is on the hook for $170 million in actual damages and a whopping $351.7 million in punitive damages. The combined amount of $521.7 million is the value of accounts receivable E.S. Bankest fraudulently reported in their financial statements, which were audited by BDO.

Naturally a lot of speculation has focused on whether the firm will be able to survive, assuming their appeal doesn’t reduce the damages. Big Four Blog does the math:

The WSJ says, “Testimony and evidence presented showed that BDO had profit distributable to partners of more than $170 million for its 2006 fiscal year, which ends in June, and a net worth of about $40.5 million. […] Among 250 partners works out to about $700,000 payout per partner. The $521 million damage is equal to three years of current year earnings. […] Can BDO Seidman effectively handle such a large amount of payouts, without losing its current structure? This is serious money for a medium sized firm.

It’s serious money, period. Jack says:

Even for the Big Four, $522 million is a lot of scratch. Recall that the Department of Justice fined KPMG $450 million in its tax shelter travails. That caused outsiders to wonder if it would interfere with KPMG’s equilibrium. This is not the way BDO Seidman would like to join the big leagues.

Just how much scratch a half billion really is for either a Big Four firm or a mid-tier one is not crystal clear. Francine asks the question:

When will the SEC and PCAOB start encouraging all the firms to be more transparent about their ability to continue to weather all of these high payouts? It seems we only hear there’s a problem with covering the liability when the firm is about to go under.

E.S. Bankest was part-owned by the plaintiff in the lawsuit, Banco Espírito Santo (Get it? E.S.!), and Bankest Capital. BES relied on “faulty audits showing that Bankest Capital’s income had nearly tripled from 1995 to 1996” when deciding to start the venture!

The entity was involved in factoring, which is when a third party buys accounts receivable from companies at a discount (to improve cash flow for the original company), collects the receivables and keeps the profit. Needless to say, the accounts receivable assets of a factoring company should be a main focus of a properly conducted risk-based audit.

Another interesting bit is how quickly the jury decided the firm had been negligent. One hour. Gross negligence. The evidence must’ve been pretty convincing.

The best evidence of the existence and accuracy of receivables is the confirmation. This is where the auditor takes a sample of receivables outstanding at year end and sends a letter to the customer asking them if they agree with the amount owed. If they agree, it is confirmed. If they disagree, they typically provide what they believe the balance was, and the two must be reconciled.

The strength of the confirmation should be obvious. Evidence coming from a third party is stronger than other procedures performed on AR like vouching to invoices and shipping documents, which are client-prepared.

The problem is that most confirmations are not returned. In my experience, I’ve gotten as few as 6 of 20 back, although it really depends on the organization and industry. I’ve heard that some companies or the management have a policy of not returning confirmations. Either way, when confirmations are not returned, the auditor has to fall back on alternative procedures, which are less persuasive.

Another typical procedure is the analysis of the aging of receivables. The longer a receivable has been outstanding, the less likely it will be collected. An auditor will identify larger receivables that have been outstanding for longer than 60 or 90 days, and discuss the situation(s) with management to assess whether the receivables are collectible.

Details regarding the failed audits have been unsurprisingly scarce, but it’s a good bet that the two areas above played a significant part.