cpd focus nzica annual report focus on audit recover canterbury

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THE CHARTERED ACCOUNTANTS JOURNAL NOVEMBER 2011 VOLUME 90 NO. 10
NOVEMBER 2011 VOLUME 90 NO. 10
CPD FOCUS
Penny & Hooper
NZICA ANNUAL REPORT
Modest profit in the year to June
FOCUS ON AUDIT
How will the new licencing
regime affect you?
RECOVER CANTERBURY
Supporting Christchurch businesses
Acclipse
New
ERHP requested
NOVEMBER 2011
contents
NEWS (latest)
4
Quiz – 1990s
A life of service
6
F4F3 final proposals approved
7
Award prompts winner to achieve
more
A prizewinner at last year’s
Leadership Awards reflects on what
the award means to her
8
Leadership Awards finalists
The finalists in the NZICA Leadership
Awards and Annual Report Awards
have now been named
10 Grit and mettle
On the cover:
Neil Miller tries to discern
the shape of our next
government. P58
EDITOR
ASSISTANT EDITOR
CIRCULATION
PUBLISHER
24 Changing landscape of “permanent
establishment”
10
Customer Service Centre
(contact: customer@nzica.com)
Tel: 04-474 7840
11 Condolences
29,500 copies printed
12 Have your say on the future of IFRS
PRINTING The Chartered Accountants Journal is
printed by PMP Print.
ADVERTISING
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organisation’s financial, non-financial
and narrative reports to present a
rounded picture
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The Chartered Accountants Journal
is published monthly (except January) by
the New Zealand Institute of Chartered
Accountants, PO Box 11-342,
Level 7, Tower Building
50 Customhouse Quay
Wellington 6011
Tel: 04-474 7840
Fax: 04-499 8033
Web: www.nzica.com
All material appearing in The Chartered
Accountants Journal is copyright.
Editorial material does not necessarily
reflect the views of the Editor or the New
Zealand Institute of Chartered Accountants.
Advertising sales by
Rosie Payne
DDI: 64-9-917-5931
Mob: +64 27 491 3570
Email: rosie.payne@nzica.com
28
NEWS (business)
20 How do we communicate value?
Aaron Watson (aaron.watson@nzica.com)
DESIGN, PHOTOGRAPHY
David Geard
& PRODUCTION
SUBSCRIPTIONS
NZICA has a history of looking
after its members in times of natural
disaster
An updated definition of permanent
establishment in the 2010 double tax
agreement between New Zealand
and Australia presents opportunities
and potential concerns for enterprises
operating on either side of the Tasman
NZICA AGM
CA Awarded IoD Accolade
13 Drive me wild
Win the chance to test drive the
motoring creme as part of NZICA’s
business partnership with BMW
15 New admissions
NEWS (Canterbury)
28 Support for Canterbury SMEs
The Canterbury Recovery Trust has
helped more than 160 SMEs get
back to business after February’s
earthquake
Congratulations to our people on the
rise
16 Show us your snaps
Gisborne and NZICA staff conference
17 Ask Uncle Tom
Superseding a member and
“professional reasons”
The Chartered Accountants Journal is the
official magazine of the New Zealand Institute
of Chartered Accountants.
CHARTERED ACCOUNTANTS JOURNAL NOVEMBER 2011
1
November 2011
contents
COLUMNISTS
54 Filing percentages showing
improvement
43
Tax agents are getting better at
managing their workloads
55 Tobin tax
FEATURE (Auditor Oversight)
35 The Auditor Regulation Act 2011
From July 2012, a new licencing and
oversight regime will be in force for
auditors of issuers. Intended to shore
up investor confidence in the financial
system, how will the new regime work
in practice?
NEWS (business)
41 Key changes in the new auditing
The EU could have a financial
transactions tax in place sooner rather
than later
56 New rules and responsibilities
CFOs face new strategic challenges
and the rules around audit are under
revision in the UK
58 The shape of the next government
Neil Miller tries to discern the shape
of our next government
62 Optimism in Aussie
Economic readings are picking up
over the Tasman
standards
International Standards on Auditing
(New Zealand) are in effect – are your
auditing practices up to speed?
43 007 in 2011
They might seem like props from a
James Bond movie, but some “new”
technologies have the potential to help
businesses increase both productivity
and profit
45 Annual Report
The President, Board Chair and
Chief Executive’s comments from the
Annual Report
INSTITUTE
70 Notices of decisions and orders
of the Professional Conduct
Committee and Disciplinary
Tribunal
CPD ADVANTAGE
72 CPD Roadshow to include small
towns
An upcoming PD roadshow covering
Penny and Hooper and the abolition
of gift duty will travel to a number of
small towns
73 Branch social events
74 CPD Events Calendar
PRIVILEGE PARTNERS
76 Privilege partner news
IMAGE MATTERS
77 Hot Deals
62 Image Matters
Amanda Chow Provisional CA, an
auditor at BDO Wellington, gets a
makeover
SHELF LIFE
NEWS - OPINION
80 The changing face of insurance
Transparency, communication and
clarity are required if the insurance
issue is to be resolved in Christchurch
66 What’s new in the library
68 Latest readings
Auditing
45
62
2
APS
New
Early right request
3
LATEST
A life of service
QUIZZICAL CORNER
Compiled by Papa Snazzy
Retired CA Tony Finnigan says his inability to say
no helps explain why he has devoted much of his
life to charity work.
1990s
1.
What is the name of the
revolutionary space telescope first
launched in 1990?
2.
Which nineties TV series starring
David Hasselhoff became the
most watched TV show of all
time?
3.
The wreckage of which ship, made
famous for rescuing survivors of
RMS Titanic, was discovered in
1999 ?
4.
Who was elected president of
France on 1 May 1995?
5.
In 1990, which food outlet opened
for the first time in Moscow?
6.
Which organisation did the
creators of the “world wide web”
work for?
7.
Where was the 1992 Earth Summit
held?
8.
What was Dolly the Sheep’s claim
to fame?
9.
Which Star Wars episode
premiered on the big screen in
1999?
10. Who was offered their first
recording contract after playing
at King Tut’s Wah Wah Hut in
Glasgow on 31 May 1993?
1. Hubble 2. Baywatch 3. RMS Carpathia
4. Jacques Chirac 5. McDonalds 6. CERN
or European Organisation for Nuclear
Research 7. Rio De Janeiro, Brazil 8. First
mammal to be cloned 9. Episode 1: The
Phantom Menace 10. Oasis
ANSWERS
SCORES
1-3 Sad
4-7 Not bad
8-10 Rad!
4
RETIRED CA TONY
Finnigan says his wife
has had to “put up with
a lot” over the years, as
he devoted hours and
hours of his time to
others. He describes
himself as the sort of
person who has “never been able to say
no”, which might explain why he has
dedicated a vast amount of his life to
charity work.
The father of 11 and grandfather of 36
“It was so satisfying that people would
take ownership of it.”
He also enjoyed the relative autonomy
of the role.
“There were four meetings a year and
the rest of the time it was left to me to run
it.”
Finnigan was awarded a QSM for his
charitable work, which included being
foundation secretary of the New Zealand
Federation of Family Budgeting Services,
marriage guidance, work with the Cancer
Society and The Lion Foundation.
The father of 11 and grandfather of 36 was recently honoured in
Palmerston North when he retired as secretary of Ozanam House
Trust, after 40 years of service
was recently honoured in Palmerston North
when he retired as secretary of Ozanam
House Trust, after 40 years of service.
Finnigan was one of the founders of
Ozanam House, a place for out-of-town
cancer patients to stay when getting
treatment in Palmerston North.
At the time he was doing voluntary work
for the Cancer Society of New Zealand and
secretary of his local branch of St Vincent
de Paul.
A group of Vincentians, came up with
the idea for Ozanam House in 1967. The
original accommodation was a modest
house near the hospital. It has since grown
into a large complex, with extra homes
acquired and built along the way.
Finnigan admits charity work has taken
up a considerable amount of his time.
He says he spent so long as secretary of
the Ozanam House Trust because he liked
the work, and the people.
Accounting was not Finnigan’s first
choice of career. He says his “do-gooder”
bent led him first to the seminary.
But he left after two years and was
prompted by his mother to work for his
father, a chartered accountant, and so this
career began.
In recent years he has focused on dispute
resolution, offering this to clients looking
for an alternative to settling matters in
court, dealing with anything that has a
contract as its basis.
“The selling point was always that it
was a speedy remedy intended to be less
expensive.”
Finnigan has recently moved down to
Nelson to join his wife, who moved there
in May.
He remains a member of the Arbitrators
and Mediators Institute of New Zealand,
acts as a JP and is a visiting Justice at
Manawatu Prison.
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5
LATEST
F4F3 final proposals approved
After extensive nationwide consultation, Fit for the
Future 3 final proposals have now been approved
and await a member vote.
FIT FOR THE FUTURE 3 (F4F3) sponsor and NZICA President Ross Jackson says undertaking a
national road trip as part of the extensive F4F3 consultation process was not only lively, but
has reaped rewards for members with final proposals now approved for a member vote in
November.
“Personally, it was incredibly valuable to have the time to chat, to listen and to discuss
ideas and issues face to face in all the regions we visited. There’s nothing like face-to-face chat
over a coffee to change the conversation from ‘us and them’ to ‘me and you’.”
More critical, however, were the resulting final proposals which reflect member feedback,
Jackson says.
“People contributed a huge amount and I think the quality of the final proposals really
shows the effort and thought that went in.”
F4F3 is the third phase in NZICA’s four-phase review of governance and operations which
began in 2008. The consultation phase which ran between June and August enabled Jackson
and other Council and Board members to meet with more than 400 members, staff and
volunteers in more than 21 locations.
He says the process of extensive consultation, research, surveys, roadshows and
development of final proposals is NZICA “walking the talk” of an institute that responds to
members’ needs.
“Every region and branch has its own strengths, personalities and challenges, but towards
the end of the trip there was definitely feedback that kept consistently cropping up.”
Final proposals were recently passed by Board and Council and will be voted on by
members in November.
Jackson says two concepts underpinning this phase of the Fit for the Future review are
relevance and value.
“The final proposals are detailed because they have to be, but what it boils down to is
simple: that everything we plan, develop and deliver is relevant and provides value for our
members.”
If passed by the member vote in November, the key F4F3 changes would be:
1. Products and services (in particular Professional Development) – will be better
targeted to members’ sectors and made more accessible via increased online delivery.
2. Current NZICA Branch structure – current Branch Committees will change to “Local
Leadership Teams” (LLTs) that will improve the relevance of, and access to, NZICA products
and services. LLTs will advise NZICA about local member needs and preferences for service
delivery. LLTs may be extended from current Branch areas to be established in additional
areas where there is member demand for local service delivery.
3. Member “voice” – strengthening National Conference and Regional Forums so they
become key collaborative events that connect members with each other, office bearers and
management across a range of issues.
4. Council composition – will move from a Branch to a Regional electoral college model
with changes to Councillor numbers in some areas, which will improve proportional
representation and ensure all members have a vote. For members this means that rather
than voting for a Councillor for your branch, you will vote for a Councillor for a region.
6
Jackson says members should exercise
their democratic right to vote in November.
“Feeding into the consultation is great,
but we really encourage all members to
have their voice heard on the future of their
professional body by voting.”
Voting information will be sent to all
members in the first week of November
and members will be able to vote online, by
post, or in person at the NZICA AGM on 30
November. Details of the final proposal as
well as roadshow presentations, research,
and member feedback received during the
consultation period are available on NZICA’s
website: nzica.com/f4f3
SIG VOICE HEARD IN CONSULTATION
Between June and August, F4F3:
• visited 21 locations nationally and
internationally
• met with more than 400 members “on
the road”
• received more than 50 pieces of
feedback on the consultation document
• delivered its survey to all NZICA
members and received over 1000
responses.
Jeff Barkwill CA, Chair of the Treasury &
Financial Markets Special Interest Group,
says he was worried when he saw the
initial F4F3 proposals.
“I felt that the proposals would
adversely impact literally thousands
of Auckland SIG members who enjoy
significant interaction with the branch
through professional development
specifically designed for their needs and
who love to network furiously with each
other in a convivial atmosphere.”
Barkwill says his concerns were taken
on board and acted on.
“I am pleased to say that President
Ross Jackson and Board Chair Graham
Crombie listened to members’ concerns,
arranged a facilitated meeting of all
Special Interest Group chairs from around
the country and duly changed the model –
keeping it to what it is at present.”
Award prompts winner to
achieve more
A prize-winner at last year’s Leadership Awards
reflects on what the award means to her.
Cassandra receives her prize at the 2010
Leadership Awards
WINNER OF THE 2010 Outstanding New Member
Award Cassandra Crowley CA recommends people
apply for the NZICA Leadership Awards not just for
the recognition, but for the opportunity to reflect.
“Taking the time to go through the entry process
and reflect on what you have achieved during your
career is almost as valuable as anything else.”
The Chief Executive of Local Government Online
says while winning the award was recognition of her
career to date, it has also prompted her to do more.
“If anything it has probably prompted me to refocus what my next steps are in my career. There is so
much I want to do that I have yet to achieve.”
She says the team at Local Government Online has
expanded and has “some very exciting projects lined
up for that should generate some positive disruptive
change for the sector”.
In addition to this role, Crowley owns Essity, a
store at Wellington airport stocking New Zealand
natural skincare.
“Essity is doing fantastically and continues
to grow. We are in the middle of some exciting
developments at the moment that may result in some
pretty big changes – watch this space.”
Crowley is also involved in charity work as
president of Birthright Wellington and treasurer of
Literacy Aotearoa Wellington.
Crowley recommends people who are starting out
in accounting and keen to stamp their mark on the
industry get a broad experience base.
“A broad base provides you with flexibility
and the scope to progress your career as specific
opportunities and challenges come up. There are a
variety of ways that you can achieve this, whether it
be within one of the Big 4, smaller public practice,
within government or as part of a corporate career.
“Make sure you ask questions, learn, and get
mentors or supporters around you. Work hard, set
goals and above all try to have fun.”
As winner of the 2010 Outstanding New Member
“If anything it
has probably
prompted me
to re-focus
what my next
steps are in my
career”
~ Cassandra Crowley
Award, Crowley’s prize included a $5000 travel
package.
While work and personal commitments have
meant she was unable to use that this year, she is
heading overseas soon.
“I have a trip planned to visit family in North
America and off to Cuba at the beginning of next
year. Cuba is a destination I have wanted to visit for
some time so really looking forward to it.”
She also won a $2000 Telecom credit, but admits
she was “a boring bean counter” when using it.
“I just popped the credit on my account – a few
years worth of free phone and internet.”
The prize package also included leadership
training from Human Synergistics, to profile her
leadership style and techniques.
She says such awards provide recognition for an
individual or an organisation's success.
“They also serve as an inspiration and showcase
to others of what being a NZICA member can mean
in today's business environment.”
Crowley is looking forward to attending this
year’s Leadership Awards, which will recognise
the contribution New Zealand’s best accounting
professionals have made to their employer, clients
and the profession.
A new award this year, the Public Sector CFO of
the Year Award, reflects NZICA's increased focus on
public sector accountants.
In addition to the Outstanding New Member
Award there are also awards for the Chartered
Accountant of the Year, Outstanding Service to the
Profession and Annual Report Awards, recognising
best practice in annual reporting.
The Leadership Awards gala dinner will be held
at The Town Hall, Wellington on Wednesday 30
November.
7
LATEST
Leadership awards finalists
The finalists in the NZICA Leadership Awards and Annual Report Awards
have been named. This year sees the introduction of a new Public Sector CFO
category alongside the popular New Member and CA of the Year awards. So
without further ado, the nominees are…
CROMBIE LOCKWOOD CHARTERED
ACCOUNTANT OF THE YEAR
Jan Dawson FCA
Partner, KPMG
As CEO and Chair of KMPG,
Jan Dawson became the first
woman to head a Big 4 chartered
accounting firm in Australasia.
She currently holds a variety of
directorships and board positions.
Conal McMahon CA
Manager, Censere Group, Shanghai
Conal McMahon has a mix a
private and public sector work
experience in New Zealand and
Asia. Among other roles, he is
Chair of the Wellington Young
Accountants SIG and Treasurer of the Young Japanese
NZ Business Council Committee.
Joe Hanita CA
Nikki Fowler CA
Financial Controller, BNZ
Nikki Fowler has moved from
traditional accounting practice to
senior financial governance in the
banking sector. She is also active
in the voluntary sector.
Group Accountant
Te Wananga o Aotearoa
Joe Hanita has a background
in public practice with Waikato
accounting firms. He is Chair of the
Nga Kaitatau Maori o Aotearoa
(Maori Accountants Network) and a member of
NZICA’s Public Sector Advisory Group.
Roger France FCA
Self employed
Roger France has worked in
chartered accounting, chief
financial officer positions, and
has now moved into governance.
Among other roles, he is in
his third year as Chancellor of the University of
Auckland.
Senior Manager, Assurance,
PwC, Hamilton
Kate Vogel joined PwC as a
graduate and has become a valued
driver of strategy and growth in the
firm’s audit and assurance business
through Waikato and the Bay of Plenty.
WESTPAC OUTSTANDING NEW
ERNST AND YOUNG PUBLIC SECTOR
MEMBER OF THE YEAR
CFO OF THE YEAR
Brett Banner CA
CFO, Ministry for Culture and
Heritage
Brett Banner has a background
in the public sector with the
Ministries of Justice, Defence,
and Culture and Heritage. He
was recently appointed CFO at the Commerce
Commission.
8
Kate Vogel CA
Lara Ariel CA
CFO, Ministry of Justice
Lara Ariel has private sector and
public sector experience and has
demonstrated a commitment
to sound financial practice and
the provision of practical “user
friendly” advice. Sustainable financial management is
a core plank of her role at the MoJ.
NEWS IDEAS: journalnews@nzica.com
BRIEFCASE
Paul Anderson CA
GM, Corporate Services,
Christchurch City
Council
Paul Anderson led
the CCC’s business
operations during
three states of emergency. He introduced
“balanced scorecard” management
systems that led to CCC being inducted
into the Harvard Business School Balanced
Scorecard Hall of Fame.
Scott Scoullar CA
CFO, Inland Revenue
Scoullar spent 12
years in the corporate
banking industry in
financial reporting
and performance
management roles before joining the
public service. He is a member of NZICA’s
Public Sector Advisory Group.
PRESTIGE PRINT ANNUAL
REPORT AWARDS
Annual Report by a Corporate
Organisation: Tainui Group Holdings Limited;
Marlborough Lines Limited; Christchurch
International; Airport; Solid Energy; Fonterra
Annual Report by a Public Sector
Organisation: Guardians of New Zealand
Superannuation; National Institute of Water
and Atmospheric Research Ltd; Watercare
Services Ltd; Reserve Bank of New Zealand
Annual Report by a Not for Profit:
Parents Incorporated; Agriculture Industry;
Training Organisation; New Zealand Red
Cross; Royal NZ Foundation of the Blind; NZ
Rugby Union
Sustainability Reporting: National Institute
of Water and Atmospheric Research Ltd;
Otago Polytechnic; Christchurch International
Airport
CA firm triumphs over adversity
VIRTUAL CHARTERED accountancy firm
Academy Chartered Accountancy Limited
has won an award for succeeding in
the face of considerable challenges. Phil
Astley CA and his wife Lynette set up a
business offering virtual business and
chartered accountancy services after a
health challenge forced Phil to reassess
his life. The company offers remote
chartered accountancy services through
tools like Skype. Academy Chartered
Accountants Limited was judged “Most
outstanding triumph over adversity” in the
recent David Awards. These annual awards
recognise heroes in home and small
businesses throughout New Zealand.
Staff morale big concern for management
Staff morale kept 37% of Kiwi bosses awake
earlier in the year and remains a concern for
New Zealand businesses.“Naturally employers
are keen to hold on to their top performers when
business is good, but it is equally important that
they keep their teams motivated and engaged
when the outlook is uncertain,” says Megan
Alexander, general manager of Robert Half New
Zealand. “As financial pressures grow, there is
a tendency for employers to cut back on things
they consider to be ‘non essentials’ – like efforts
to boost staff morale. “It is also tempting for
bosses to assume that their staff members
are happy to even have a job and wouldn’t
consider moving when the going is tough.”
Alexander says the most talented employees will
always have options and losing them can cause
additional stress.
Forum of firms focuses on audit quality
More than 50 senior audit professionals from 24
international networks of accounting firms met
recently to share their perspectives on the topic
of audit quality. The symposium, organised by the
Forum of Firms, assembled a group of experts
to discuss several elements of audit quality, in
support of work currently being undertaken
specifically by the International Auditing and
Assurance Standards Board (IAASB). “It was
designed to encourage participants to exchange
views on audit quality from the perspectives of
different stakeholders,” says David Maxwell,
chair of Transnational Auditors Committee.
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9
LATEST
Hastings St burns after
the 1931 Napier quake
that measured 7.8 on
the Richter scale.
Grit and mettle
NZICA has a history of looking after its
members in times of natural disaster.
FOLLOWING THE CHRISTCHURCH earthquakes,
many comparisons were made to the Hawke’s Bay
earthquake which devastated Hastings and Napier
in February of 1931.
The events and stories that emerged at that
time are now hauntingly familiar, including the
sentiments expressed in the Accountant’s Journal
from that period.
In 1931, there were 87 members of the then
Society living and working in Hawke’s Bay. Two
members from the area had given the President
a report which was discussed at the Annual
Society Meeting in March of 1931, describing how
members were coping since the 7.8 earthquake
hit.
Many of the members, the Society heard, had
lost their homes and their furniture had been
destroyed. Their business premises and, in some
cases, all their records were gone.
Both the accountants and the business
community, said the report, felt that they had an
uphill battle to fight but had “their nerves set
10
Many members
were stuck for
cash and did
not even have
the money
to send their
relatives a
telegram to let
them know how
they had fared
to meet the problems of the next few months,
possibly a year or two”.
The cleaning up process in connection with their
business would be considerable, however. Business
came to a complete standstill in the region, stated
the report.
“So far as our accountants are concerned, they
forgot all about their businesses for at least a
fortnight and gave their time to community work,
and it is only now that they are beginning to get
back to their offices to try and get things together.
I could quote you some instances where men have
lost every paper in their office.”
After the earthquake struck, many members
were stuck for cash and did not even have the
money to send their relatives a telegram to let
them know how they had fared.
During the annual meeting, the question arose
whether the Society could do anything to assist its
members. It was decided that the Society should
make a grant of £250 to the Prime Minister’s
earthquake relief fund, that a further sum of
£1,100 should be allocated as a special fund to
be administered by a special committee to be
set up by the council, and that affected members
subscriptions would be paid for by the Society.
A Mr Denton, who had co-written the report and
was present at the meeting, said the money offered
would be most appreciated.
“It is gratifying also to know that the Dominion
as a whole, despite that we are all in a condition
NEWS IDEAS: journalnews@nzica.com
CONDOLENCES
of stress, is getting behind us and treating
this thing not as a local thing but as a
national disaster. That feeling alone will
help us tremendously in heartening up
the folk to do their best to again place
Hawke’s Bay on the map.”
Two years later, at the annual meeting
in March of 1933, the Hawke’s Bay
earthquake was discussed again, however
this time the meeting was held in Hawke’s
Bay itself.
“In times of disaster such as occurred
in Hawke’s Bay, the test of the real worth
of a profession comes to light, and it is
now generally conceded that the action
taken by the accountancy fraternity
was the best possible way to assist the
confreres who were temporarily stunned
by the catastrophe,” the President told the
society.
“The wonderful transformation that
has taken place in Napier is a tribute alike
to the courage and vision of the people
of Hawke’s Bay, and reflects the greatest
credit on the two Commissioners who have
carried out the task.”
New Zealanders, he said, because of
the small nature of our community, are apt
to become a little self-centered, and this
particularly applies at a time when we have
our own difficulties.
“The manner, however, in which the
citizens of Hawke’s Bay generally have
tackled their problems and are surmounting
what at one time looked almost like an
impossible task should serve as an example
of the rest of the Dominion.”
Eighty years later, despite the
technology our modern lives afford us,
it has once again been illustrated in
Christchurch that it is the people’s grit and
mettle that enables them to rise from the
rubble.
ALEXANDRA JOHNSON is a freelance Wellington
writer.
The New Zealand Institute of Chartered
Accountants extends its sincere
condolences to the families of:
Richard Frank Ault CA (Honorary Retired)
of Christchurch, who had been a member of
NZICA since 28 July 1958.
John William Drury FCA (Hon Retired) of
Auckland, who had been a member of NZICA
since 15 February 1940.
Allan Hubbard FCA (Retired) of Timaru, who
had been a member of NZICA since 17 April
1951.
James Robert Bruce Menzies CA (Honorary
Retired) of Hawarden, who had been a
member of NZICA since 10 June 1948.
Ross Warren Seaton CA of Titahi Bay, who
had been a member of NZICA since 9 June
1977.
Clive Wesley Stephenson CA (Hon Retired)
of Auckland, who had been a member of
NZICA since 26 April 1948.
Vivian Ansell FCA (Honorary Retired) of
Lower Hutt, who had been a member of NZICA
since 10 June 1948.
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New Zealand’s
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CHARTERED ACCOUNTANTS JOURNAL NOVEMBER 2011 11
LATEST
Have your say on the future of IFRS
RECENTLY THE GATEKEEPER of IFRS, the IASB,
issued an Agenda Consultation seeking the
views of constituents on the direction to
take IFRS.
The New Zealand accounting framework
for for-profit entities is based on IFRS and
this outreach represents an important
opportunity for New Zealand to provide
input into how standards are developed and
how existing standards can be maintained.
The global uptake and use of IFRS is now
significant. IFRS has permeated both the
developed and the developing world, placing
significant demands on the IASB to get it
right for all.
At the same time, there is general
acceptance that financial reporting has not
kept pace with the evolution of strategy and
business models and their value creation.
This is forcing the IASB to consider the need
to research strategic issues in financial
reporting.
With the increasing investment in IFRS
globally by national standard setters, it is
imperative that New Zealand has its say.
NZICA’s Technical Services Team is working
to ensure members views are obtained and
communicated to the IASB. See nzica.com for
details or email submissionfeedback@nzica.
com to make specific comments.
The 2011 NZICA Annual General Meeting and National Conference
THE NZICA 103rd Annual General Meeting
and the National Conference will be held
on:
Date: Wednesday, 30 November 2011
Venue: Level 7, NZICA Office,
Tower Building,
50 Customhouse Quay,
Wellington
Time: 1.45-2.15pm
Registration for the National
Conference and AGM
2.15pm
National Conference
3.00pm
Annual General Meeting (AGM)
All NZICA members are invited to
attend.
National Conference commences at
2.15pm
The National Conference includes four
major items of business.
1. The Council will elect the President and
Vice President.
2. The Council will appoint the Board.
3. The Council will appoint the
Nominations & Governance Committee.
4. Members may submit and debate remits
(remits must be submitted in writing to
the Board not less than 28 days prior to
the date of the National Conference).
Only Councillors are entitled to vote at
the National Conference however other
members are entitled to attend and speak
to remits.
CA awarded IoD’s top accolade
BILL CAPAMAGIAN CA has
been presented with the
Institute of Directors’
highest accolade, The
Distinguished Fellow
Award.
He has made an
exceptional contribution to the wider
community and has had a major influence in
12
a number of NFPs and charitable trusts in the
Bay of Plenty region.
Capamagian is a governance leader with
a career that spans more than four decades.
He joined the Owens Group Ltd in 1967, a
company that became a major player in the
growth of the Port of Tauranga, and in New
Zealand in the 1970s.
He rapidly rose to Deputy Managing
Annual General Meeting (AGM)
commences at 3.00pm
The AGM agenda is available on our website,
and includes three major items of business.
1. Receipt of the 2011 Annual Report and
Audited Financial Statements for the year
ended 30 June 2011, as per rule 17.2.
2. Re-appointment of Ernst & Young as
auditor, as per rule 25.1.
3. Voting on proposed Rule changes, as per
rule 27.1.
If you cannot attend the AGM you can
cast a postal or electronic vote, full members
will have received notification regarding the
voting process.
Provisional members are not entitled to
vote but are welcome to attend the meeting.
Director of the fast growing Owens Group,
headed by Sir Robert Owens, and was made a
director of a number of the group’s subsidiary
companies.
Since 1982 much of his consultancy work
has been the guiding of the Owens family
investments.
He was made a director of the Port of
Tauranga in 1994, retiring from the board in
2010. He served for a number of years on the
Bay of Plenty Export Institute and for a period
as chairman.
BRIEFCASE
MYOB business survey
Drive me wild
Want to put the latest BMW through its paces?
NZICA members have a unique opportunity to win
the chance to test drive the crème of the motoring
crop as part of our new business partnership with
BMW.
THIS CHRISTMAS, get behind the wheel of a
BMW and its two closest competitors - Audi
and Mercedes Benz - and really put them to
the test at a customised driving facility.
To celebrate our new partnership,
NZICA and BMW are offering 30 members
spots in BMW’s Head to Head driving
experience on 19 December at the
Pukekohe Park Raceway in Auckland. You’ll
get the chance to drive all three marks –
BMW, Mercedes and Audi – putting each
vehicle through rigorous driving programs
designed to test its abilities. Performance
vs performance, handling vs handling,
technology vs technology. You be the
judge.
Visit nzica.com/headtohead to be in
to win. Entries close 30 November.
0800 223 729
Ace Payroll
for New Zealand
employers.
More Kiwi businesses are expecting to see
their revenue improve in 2012, while many
businesses, particularly in the retail sector,
are planning for a strong end to the year,
according to the latest MYOB Business Monitor.
The MYOB Business Monitor survey of over
1000 businesses nationwide has highlighted
improving revenue expectations and strength in
key sectors for the final quarter of 2011, despite
a mixed performance for the economy to date.
Revenues for business in 2011 have been
narrowly balanced, with 30% of Kiwi
businesses reporting increased revenues for the
year, while 31% report decreased revenues –
down from 32% in April. Start-up businesses
(less than 2 years) have struggled in the
last year, with only 19% reporting increased
revenue, while larger businesses (20-199
employees) are doing well, with 42% showing
revenues that have increased by comparison
with a year ago.
Ernst & Young reports 2011 global
revenues of US$22.9 billion
Ernst & Young has announced combined global
revenues of US$22.9 billion for the financial year
ended 30 June 2011, compared with US$21.3
billion in 2010, a 7.6% increase. “We have had
a very strong year in each of our four geographic
areas,” says Jim Turley, Global Chairman and CEO
of Ernst & Young.
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Crombie Lockwood office
(there are 20 around the country);
email phil.taylor@crombielockwood.co.nz
call 0800276624 or visit
www.nzica.com/privileges/crombielockwood
14
PEOPLE
admissions
NEW ADMISSIONS
CONGRATULATIONS TO OUR PEOPLE ON THE RISE
The following admissions to NZICA’s Chartered
Accountants, Associate Chartered Accountants and
Accounting Technicians Colleges, and Certificates
of Public Practice have been confirmed.
CA COLLEGE
Abela, James George ........................ Auckland
Bryleva, Elena ................................... Auckland
Chan, Kinlon ..................................... Auckland
Chandra, Akansha............................. Auckland
Chauhan, Pallavi ............................... Auckland
Cheng, Yi .......................................... Auckland
Coulton, Amy Lyn .............................. Auckland
Cyril, Shalini Suzanne ........................ Auckland
Doyle, Kelly ....................................... Auckland
Glew, Kylie Christine ......................... Auckland
Govind, Sonal ................................... Auckland
Gray, Kieran ..................................... Auckland
Gurr, Natalie Jean ............................. Auckland
Hughes, Naumai ............................... Auckland
Lal, Bhavisha..................................... Auckland
Lau, Daryl ......................................... Auckland
Leite, John ........................................ Auckland
Li, Jinghua ........................................ Auckland
Liu, Haiying ....................................... Auckland
Ma, Tao............................................. Auckland
Matsudo, Hideto ............................... Auckland
Peng, Jia Yu....................................... Auckland
Ramani, Krishna................................ Auckland
Singh, Harish Vinay Pal ...................... Auckland
Smith, Kelly Marie ............................. Auckland
Stephens, Bryce Hinton ..................... Auckland
Vincent, Calvin .................................. Auckland
Yusuf, Swaleha.................................. Auckland
Zeng, Jin Xiu ..................................... Auckland
Zhou, Xiaozhou................................. Auckland
Bean, Thirza ....................................Canterbury
Fahim, Ghada Mikhail .....................Canterbury
Panapa, Wayne Trentham ....Gisborne/East Coast
Francis, Jodi ..................................Hawkes Bay
Eatwell, Benjamin James ........................Otago
Ward, Sarah Elizabeth ......................Southland
Cargo, Hayden Sean.....................Waikato/BoP
McFarlane, Sharlotte Elizabeth.........Waikato/BoP
Bhana, Shirena ...............................Wellington
Chan, Andrew Thomas Junior ..........Wellington
Li, Mengsu ......................................Wellington
Pathmanathan, James Premkumar ..Wellington
Pattekar, Supriya Anil ......................Wellington
Quirke, Alicia Dallas ........................Wellington
Shadwell, David ..............................Wellington
Smith, Danny John ..........................Wellington
Torrance, Andrew Lance Joseph.......Wellington
Visser, Jared Hudson .......................Wellington
Abel, Darren Malcolm ....Westville, South Africa
Grobbelaar, Jaco Andre ...............................UK
Kelly, Francis Ireland ................. New York, USA
ACA COLLEGE
Kaur, Gunnjit..................................... Auckland
Vora, Bakul Rameshbhai ................... Auckland
Zhu, Suzhen ...................................... Auckland
Cai, Ningjing ...................................Canterbury
Caswell, Shona ...............................Canterbury
Holland, Sharon Margaret ...............Canterbury
Wang, Xuanyu .......................................Otago
Matuku, Rohan ...................................Taranaki
Sahay, Reena Ragini Mala ............Waikato/BoP
Wevita, Roshan...............................Wellington
Mulder Albertus Johannes .........Nagoya, Japan
AT COLLEGE
Yao, Zhi ............................................ Auckland
Kivell, Lynette.................. Central Bay of Plenty
Cook Leanne Jodi .................................Nelson
Bryant, Tracey Anne Rose ....................Taranaki
Seebeck, Ellen Jane .............................Taranaki
PUBLIC PRACTICE CERTIFICATES
Johnson, Darren James ..................... Auckland
MacKenzie, Ian Jonathan .................. Auckland
Allred, Aaron Bruce .........................Canterbury
McCulloch, Grant David ..................Canterbury
Willems, Bernard Gerard .................Canterbury
Lee, Martin Moh Hian ..... Central Bay of Plenty
King, Jill Heather ..............................Southland
Taylor, Craig Robert ......................Waikato/BoP
Mexted, Hamish George .................Wellington
MOVING UP
ROHAN MATUKU ACA
Business Advisory team member,
Staples Rodway, New Plymouth
How long have you been in your
current role?
Three years.
Why did you choose accounting as
a career?
I had been in London for eight
years working for investment
houses and needed a change. I
find numbers easy and it was
something I had been considering
for a while. Accounting is
something you can do all around
the world and there seems to be a
wide variety of careers that relate
back to accounting.
Which is your favourite season
and why?
Summer – more sunshine, the
beach, BBQ’s. Everyone seems
happier when the sun is out.
What keeps you busy in your
spare time?
Between work, study, and a twoyear-old son I don’t get much
spare time to myself.
Where was your most recent
holiday destination?
We haven’t been on a proper
holiday yet this year, but last year
we went to Hawkes Bay to eat,
drink and relax and had a great
time. This year has just been short
weekends away catching up with
family and friends.
What is one goal you’re hoping to
achieve before the end of 2011?
Finish my degree – I am sitting
the last four papers of a BBS. I
have done 17 papers in the three
years I have been working full
time at Staples Rodway, so I will
be happy to see the end of it and
get a bit of spare time. I can’t wait
to finish, but hopefully I will be
able to do PAS next year.
15
PEOPLE
social
SHOW US YOUR SNAPS
The Gisborne/East Coast branch recently turned 100 and celebrated
the centenary during their Presidential Dinner on 21 September.
1
4
2
5
3
1. Pat Flockart
2. Juanita Herbert and President Ross
Jackson
3. Paul Dodson goes in for a slice
4. Teresa and Jim Campbell
5. The Gisborne Branch 100th anniversary
cake (before)
NZICA’s end of year staff conference at Te Papa was a day of teambuilding activities, laughter
and some interesting insights from members.
1
4
16
2
5
3
1. MC Jeremy Kennerly
2. Lea Hart, Kelvin Duff, Pamela Li and
Shona Lee
3. Abigail Wyn and Roderick Keating
4. Guest speaker Jamie Fitzgerald
5. Vice President Richard Austin in the
hot-seat
NEWS
Ask Uncle Tom
Superseding a member and “professional
reasons”.
by TOM DAVIES FCA
O
ur
Professional Conduct team
get to deal with more of the
dark side of the Institute than is
generally reckoned to be good
for their health
But it does have its moments.
There was one recently that
certainly raised their spirits on
what was otherwise proving a
rather dreary day.
A chartered accountant was out walking
his dog one Sunday when it up and attacked
the complainant (the dog, not the chartered
accountant, although I would have excused
him if he had, now knowing the full
circumstances.)
The complainant was hospitalised by her
injuries and suffered severe post-traumatic
stress disorder (PTSD), for which she was
seeking a significant sum. The complaint was
that the chartered accountant wouldn’t oblige
with compensation, which was deemed by her
to be a breach of the Code of Ethics.
Hmm, not sure about that one, so let’s look
into it further.
The dog was one of those strangely-labelled
breeds whose name I can never pronounce,
and was small, so small that it was the only
dog on God’s Earth to which a chihuahua
could adopt a lordly air. So small that it was
impossible to trip over it – you could only
squash it.
PTSD indeed. I can imagine Professional
Conduct’s filing procedure: “I wonder if I can
get this into that bin 13 feet away on the first
throw.”
Following on from that dubious ethical
breach, and as promised last month, I’ll move
to discuss the “professional reasons” letter
that the Code of Ethics requires chartered
Even
raising a hat
(standard
garb in
those days)
to another
member’s
client in the
street was
dicing with
a strike-off
decision
by the
Disciplinary
Tribunal
business
accountants to write to members whom they
look forward to superseding.
I get numerous enquiries over this.
Para 164 of the Code of Ethics requires a
superseding member to make enquires of the
existing member as to whether there are any
“professional reasons” why the appointment
should not be accepted. The Code of Ethics
doesn’t give much detailed assistance in this
area (in fact, it doesn’t give any) so hopefully
what follows might provide some guidance.
Firstly, there are no matters which are
specifically declared to be a professional
reason requiring a proposed accountant to
decline appointment.
How the use of this “professional reasons”
term first arose I don’t know, but I suspect
its origins go back to an earlier era when
the ethical requirements worked in favour
of accountants not wishing to lose clients,
and when there were severe restrictions
on chartered accountants taking on other
members’ clients. Even raising a hat (standard
garb in those days) to another member’s
client in the street was dicing with a strike-off
decision by the Disciplinary Tribunal.
The government of the day, some time in the
early 90s I recollect, deemed such provisions
to be anti-competitive and the Society, as it
was called then (and still is by some members),
had to remove them from the Code of Ethics.
However, the words “professional reasons”
remained, and I think should be interpreted
today as referring to any information that
a member would like to know about when
considering accepting a new client.
The Code of Ethics requires the existing
accountant, with the client’s permission, to
disclose all information needed to enable the
proposed accountant to decide whether or
not to accept the appointment, and to discuss
freely with the proposed accountant all
matters relevant to the appointment of which
the latter should be aware.
This is a fairly wide brief, and potentially
introduces matters for consideration by
the proposed accountant beyond those of a
purely ethical nature.
The Code of Ethics suggests that this
communication channel should be used by
the proposed accountant to check whether
the reason given by the client for changing
accountants stacks up against the existing
accountant’s understanding. Although the
NEWS
business
ostensible reason may be ethical in
nature, from my experience it is more
likely to be fee-based, either a current
dispute or unhappiness on the part of
the client over the general level of fees
charged by the existing accountant.
The Code of Ethics states
that the fact that there are fees
outstanding is not a professional
reason for declining appointment,
so an existing accountant should
not use the existence of outstanding
fees as a reason to persuade a
proposed accountant not accept an
appointment. However, knowledge
that the client disputes every fee
and takes months to pay could be a
very good reason for turning down
a prospective client. Unfortunately,
a legal view obtained on this matter
suggests that it would be a breach
of privacy legislation for the existing
accountant to inform the proposed
accountant of fee disputes and slow
paying tendencies on the part of the
client without the client’s permission
(which is unlikely to be given).
There is other information which
is relevant to the consideration of
the appointment. This includes
such matters as the insolvent state
of the client, persistent tax evasion,
illegal activities, or that it is facing
significant litigation or investigation.
Again, these situations require the
client’s permission before being
reported to the proposed accountant.
The exchange of this pertinent
information can be complicated
by the probability that a client will
refuse permission for the existing
accountant to discuss serious issues
with the proposed accountant. It
takes a confident client to agree to
have its tax evasions or drug dealing
profits discussed with a third party,
and sometimes the last persons to
acknowledge an entity’s insolvency
can be the management and owners
themselves.
So the next question is: What do
you do when the client refuses to
allow the proposed accountant to
discuss its affairs with the existing
18
accountant, or denies the existing
accountant permission to discuss
certain issues with the proposed
accountant?
In both cases the IFAC Code of
Ethics (and that of the Institute of
Chartered Accountants in Australia)
states that the proposed accountant
should decline to accept appointment.
Our Code is not so strongly worded,
but does state that the member
should take particular care before
superseding the existing accountant.
My personal view is that if you
accept an appointment with both
accountants being refused permission
to discuss the client’s affairs between
them, then you must be desperate to
feed your family. On your head be it.
Where the existing accountant
is refused permission to discuss an
important issue with the proposed
accountant, I recommend that the
existing accountant responds to the
required letter from the proposed
accountant along the lines of: “There
is a matter relevant to your proposed
appointment that I would like to
discuss with you, but the client has
refused me permission to do so.”
This is really waving a red flag in
front of the proposed accountant,
who, if still interested, should return
to the client with a “please explain”
enquiry. If permission is still refused
by the client, then I believe the
proposed accountant should walk
away from the engagement.
To get down to some specific
situations which are not uncommon:
• The proposed accountant learns
that the client is evading tax.
Certainly something a prospective
new accountant would like to
know about.
This can be a matter of degree. If
the tax evasion is minor in relation
to the client’s size and affairs, this
may not be a sufficiently strong
reason to decline appointment,
and the proposed accountant
may decide to accept the client
provided it ceases the evasion
and corrects the position. With
this advance information the
accountant should be on the alert
for future evasion, and if it occurs,
consider dropping the client.
If the tax evasion is major in
terms of the client’s overall
affairs, then I believe the proposed
accountant should turn down
the appointment. By knowingly
becoming associated with a
client practising tax evasion, the
member’s integrity is called into
question, and the member could
well be breaching the Code of
Ethics.
Apart from the ethical question,
significant tax evasion is often
discovered by Inland Revenue, and
it is likely that the member’s name
will be tarnished by association,
which will not be helpful in
dealings with the department on
behalf of other clients. It may also
cause IR to look more carefully
into the affairs of the member’s
clients. It does nothing for the
reputation of the profession and
the Institute.
• The proposed accountant learns
that the client is engaged in
illegal activities. The range of
possible illegal activities is wide,
and might include drug dealing,
money
laundering,
taking
deposits without a prospectus,
management’s embezzlement or
defrauding owners of the business,
false Customs declarations, taking
on employees outside the PAYE
regime – the list goes on.
If the client is indulging in illegal
activities then I believe the member
should decline to act for the client.
Again, it impacts on the member’s
integrity, and when the illegalities
come to light, the member may
well be tarred with the same
brush as regards reputation in the
community, not to mention the
likely damage to the profession
and the Institute.
It is important to realise that
reputation can be affected even if
the illegality occurs in a part of the
client’s affairs with which the member may not be
directly involved as accountant.
• The client wishes to adopt a financial statements
presentation which the existing accountant objects
to. In other words, the client may be trying to
lever the existing accountant into preparing
financial statements in a misleading manner, or
exerting pressure on an auditor to accept a position
which does not comply with GAAP and financial
reporting standards, with the threat that unless the
CA acquiesces the client will seek a replacement
accountant or auditor.
On the assumption that the existing member’s stand
is reasonable and professionally tenable, I believe
the proposed accountant should refuse to become
involved. (Note that this is a different situation
from the one where another member is formally
engaged to provide an opinion on an accounting or
reporting matter. Rules for this type of engagement
are contained in AES-1).
• The client has had three accountants in the last
three years. You will be the fourth and, rest assured,
there will be a fifth next year. Walk away.
To turn now to office administration, a thing that
annoys me about foyers and reception desks is the
fiddly book that receptionists get you to fill in, often
with a sticker to place on your lapel, and which three
hours later walking down Lambton Quay you find still
attached and making you look like a dork. (Yes, the
word does appear in the Oxford Dictionary, but the
editor will not allow me to descend into its etymology.
Do it yourself.)
NZICA’s business services people inform me that
the books have to be kept for three months, and are
inspected by the Institute’s auditors no less.
I can imagine hunts being conducted through the
office for visitors who didn’t sign out six weeks ago.
What a waste of time – we would have smelt them long
before if they were still on the premises.
Such visitor books bring out the latent anarchic streak
in me, although my wife prefers the term “Napoleonic
tendencies”. On occasions when not being too carefully
observed I’ve filled in the visitor name as “N Bonaparte”
calling to see “Josephine”. I have these visions, when the
building goes up in flames, of a distraught fire warden
rushing around clutching the visitors book, hammering
on the cubicle doors in the men’s loos, shouting, “Mr
Bonaparte, are you in there? Have you got Josephine
with you?” Vive l’Empereur!
Master tax
in New Zealand’s premier
postgraduate tax programme
The Master of Taxation Studies Programme is designed to
accommodate the needs of fulltime professionals. As three
day intensive workshops, courses are staggered conveniently
throughout the year. Course lecturers are some of New
Zealand’s leading tax lawyers, accountants and academics.
COURSES OFFERED IN 2012 INCLUDE:
•
•
•
•
•
•
•
•
•
•
•
The Tax Base
International Taxation
Avoidance Provisions
The Goods and Services Tax
Taxation of Property Transactions
Taxation of Corporate entities
Tax Disputes
Tax Administration
Taxation of Investment and other entities
Principles of US Federal Income Tax
US International Tax Planning
For further information contact
Professor Craig Elliffe on c.elliffe@auckland.ac.nz
Associate Professor Peter Vial on p.vial@auckland.ac.nz
Or visit: www.commerciallaw.auckland.ac.nz
Tom Davies FCA is Director – Professional Support at
NZICA.
NEWS
EWS
business
How do we communicate value?
Integrated reporting links an
organisation’s financial, non-financial
and narrative reports to present a
rounded picture.
by TECHNICAL SERVICES TEAM
T
he
current financial reporting model has been developed
for an industrial world in which the value of a business
is largely represented by its tangible and financial assets.
However, this no longer holds. Physical and financial
assets for the S&P 500 comprised 19% of total value in
2009, compared with 83% of total value in 1975. Such
a change suggests that the majority of market value now
corresponds to intangible factors, some of which may
be explained by financial statements, but many not.
Broader social and environmental opportunities, and how
organisations respond, are among some of the “other” considerations
taken into account when determining value.
This poses the problem: How do we communicate value?
In a move to respond to the above issues the International Integrated
Reporting Committee (IIRC) in September 2011 released a discussion
paper outlining a roadmap for linking an organisation’s strategy
FINANCIAL REPORTING OVER TIME
20
to financial, non-financial and narrative
information.
The thinking behind such a combination
of financial and non-financial information
is to embed sustainability and other internal
information into organisational performance
and governance structures. This should give
stakeholders a more holistic basis on which
to evaluate organisational performance.
The IIRC was founded by representatives
from the International Federation of
Accountants (IFAC), the Global Reporting
Initiative (GRI) and The Prince of Wales
Accounting for Sustainability Project to
develop a set of global reporting standards
and guidelines to produce an integrated
“One Report”.
WHAT IS INTEGRATED REPORTING?
The IIRC describe the process of reporting
as an evolutionary one. The diagram below
depicts the changes in the nature of reporting.
From the 1980s reporting has been
considered in four separate spheres that have
increased in complexity and size. The IIRC
is concerned at this trend and proposes an
integrated report that is more compact and
accessible.
Concern arises not only because of the
size, but also due to siloed nature of each of
these spheres.
The IIRC discussion paper suggests two
key difference between integrated reporting
(IR) and sustainability accounting: IR is
explicitly embedded into an organisation’s
strategy; and IR appears to have a greater
institutional mandate. See diagram below.
WHAT IS THE RELEVANCE OF INTEGRATED
REPORTING?
While no such IR mandate exists in New
Zealand, the support from international
bodies may have indirect, and at times direct,
impact on the New Zealand environment.
For example, last year the Johannesburg
Stock Exchange required its listed companies
to produce an IR effective as of 2011. This
means that over four hundred listed companies
must produce one report that covers off the
traditional financial information, along with
social and environmental information.
This move was unprecedented given that
few of the world’s major exchanges provide
guidance on the reporting of non-financial
information.
Such mandatory obligations create
visibility at an international level and
prompt standard setters, such as the
International Accounting Standards Board
(and International Financial Reporting
Standards) to take a more strategic view of
financial reporting, potentially culminating
in further significant change.
A second reason that IR initiatives may be
of relevance to New Zealand accountants is
the unexpectedly high level of interest that
already exists. A Sustainable Future Institute
survey of New Zealand’s top 200 CFO’s
found that 23.7% of respondents have
already published an IR.
While definitional issues of what
constitutes an IR may provide the basis for
future discussion, the indication that such a
number of CFOs made such a statement is
of interest.
On the filing front, the New Zealand
exchange is currently considering mandatory
reporting around gender, which is likely
to be an element of IR as it details social
implications. While gender reporting only
constitutes one element of IR, this suggests
that exchanges around the world are closely
following international trends and acting
accordingly.
NZICA AND INTEGRATED REPORTING
Elements of integrated reporting have been
discussed within a New Zealand context and
include discussion papers and a taskforce
report from NZICA (NZICA Sustainability
Development Reporting Taskforce 2002).
These papers and reports initiate discussion
as to how non-financial information is
captured, presented and audited. Such
issues are also being considered by several
international bodies. NZICA is part of an
A
Sustainable
Future
Institute
survey
of New
Zealand’s top
200 CFO’s
found that
23.7% of
respondents
have already
published an
IR
international trend of actively working
on non-financial reporting issues, with a
specific focus on integrated reporting. One
such activity is the formation of an NZICA
Integrated Reporting Working Group that
will be assisting NZICA make a submission
to the IIRC on its IR discussion paper.
Other NZICA initiatives include the
recent establishment of the Corporate Sector
Advisory Group, chaired by Gary Swift CA.
One of the group’s first initiatives was the
launch of a research report into sustainability
and non-financial reporting within New
Zealand.
This research, conducted by the University
of Waikato, specifically notes the potential
for accountants to perform a key role with
regard to integrated reporting.
WEBINAR ON INTEGRATED REPORTING:
KEY TRENDS AND CONCEPTS
The development of integrated
reporting (IR) prompts a range of
questions that have the potential to
significantly change the reporting
landscape in New Zealand. Here we
focus on the key concepts behind IR
and what it will mean for you.
Highlights
• The fundamentals of IR
• Key features of the International
Integrated Reporting Committee
discussion paper
• Details of how IR has been
implemented in other countries
• The implications for New
Zealand
• The challenges associated with IR
• Details on further resources
• Information
on
NZICA’s
submission
Who should attend?
Public practitioners, accountants
working in the area of strategy
for both private and public sector
organisations.
Online:
10am, 25 Nov 2011
NEWS
business
INTEGRATED REPORTING ESSENTIALS:
• Organisational
strategy
and
associated reporting are strongly
linked within one document or
medium.
• This linkage means that the
preparation of an annual report
with sustainability reporting
attached is unlikely to perform
the same function.
• Integrated Reporting typically
makes greater use of technology.
For example XBRL is being
considered as a way to provide a
more dynamic account that can
be easily accessed by a broader
user base.
• IR discussion paper produced by
International Integrated Reporting
Committee was founded by GRI,
The Prince of Wales Accounting
for Sustainability Project, IFAC,
and now a includes a cross
section of leaders from corporate,
investment, accounting, securities,
regulatory, civil society and
standard-setting sectors.
• IR is currently voluntary within a
NZ context
FUTURE DIRECTION AND RESOURCES
The intention to explore better ways
to communicate value means that
the IIRC has committed to a full
workplan over the next two years.
The first major piece of work will
22
be the launch of a reporting pilot
programme to encourage innovation
among organisations.
The second major aspect will
build on the pilot programme and
the comments from the current
discussion paper to develop an
International Integrated Reporting
Framework Exposure Draft.
In addition to these activities,
the IIRC intends to work with
regulators and standard setters to
explore opportunities to harmonise
reporting requirements within and
across jurisdictions and to conduct
regional roundtables.
In seeking a response to the
problem of communicating value
the IIRC discussion paper prompts
a range of questions that have the
potential to significantly change
the reporting landscape in New
Zealand.
This has raised questions for the
International Accounting Standards
Board, which has included a
question on IR in its Agenda for
Consultation paper.
There is a clear international
mandate to address the challenges
of communicating value in the 21st
century and it is important that
the views of NZICA members are
known.
It is for this reason that NZICA
will maintain an informed position
and act as a conduit for members
with an interest in this area.
In preparing NZICA’s submission
on the discussion paper, the NZICA
Technical services Team welcomes
feedback from members by 25
November 2011.
These can be submitted through
our online submissions survey at
surveymonkey.com/s/IIRCDiscPaper
or directly to our Technical Services
Team on submission.feedback@
nizica.com.
FURTHER RESOURCES
A full copy of the IIRC discussion
paper is available at www.theiirc.org.
Members may find it useful to review
a selection of examples of early
adopters of integrated reporting .
Philips
and
BASF
are
two
organisations that have embraced
this reporting model and, as detailed
below:
• The chemical company BASF
is considered to provide a good
example: www.report.basf.com
• Further examples also include
Philips technology company www.
annualreport2010.philips.com and
healthcare company, Novonordisk
annualreport2010.novonordisk.
com
Prepared by the NZICA Technical
Services Team, NZICA.
Accuro
BPs
New
NEWS
business
Changing landscape of
“permanent establishment”
An updated definition of permanent
establishment in the 2010 double tax
agreement between New Zealand and
Australia presents opportunities and
potential concerns for enterprises
operating on either side of the Tasman.
by RICHARD MCGILL ACA
S
ince
it came into effect on 18 March 2010, the
double tax agreement (DTA) between Australia
and New Zealand has altered the definition of permanent
establishment (PE) in several significant areas.
Key changes for practitioners to be aware of include
those relating to activities undertaken in the exploration
or exploitation of natural resources, operation of
substantial equipment and the activities of dependent
agents acting on behalf of an enterprise. There is also
a new deeming provision which captures services
performed in the other country that exceed a time threshold. This
article explores these changes and discusses some opportunities that
have arisen in applying the new definition as well as some other more
problematic consequences.
EXPLORATION OR EXPLOITATION OF NATURAL RESOURCES
An enterprise that is resident in one country is deemed under both the
old and new treaties to have a PE in the other country if it engages in
activities in the exploration for, or exploitation of, natural resources.
24
However, the wider range of activities
captured under this deeming provision of
Article 5 has been reduced in the wording
of the 2010 treaty. While the 1995 treaty
captured activities which “are connected
with” the exploration for, or exploitation
of, natural resources, this “connected with”
phrase has been omitted from the current
Article 5. The impact of this is to only
deem a PE to exist where an enterprise is
undertaking activities directly relating to
the exploitation or exploration of natural
resources, increasing certainty for enterprises
with an indirect connection to such activities
that previously faced a PE risk.
For example, under the 1995 treaty a
factory ship engaged in the processing of
fish within New Zealand’s territorial waters
would have constituted a PE, as it would
be performing activities “in connection
with” the exploration for or exploitation
of natural resources, regardless of whether
the fish being processed were caught within
New Zealand’s territorial waters. Under the
2010 treaty, the omission of the words “in
connection with” would indicate that the
factory ship’s processing activities would not
constitute a PE.
However, it should be noted that Inland
Revenue (IR) has not indicated its position on
the distinction between activities considered
to consist directly of exploration for, or
exploitation of, natural resources (creating
a taxable presence), and those which are
merely “connected with” such activities (not
creating a taxable presence of the enterprise).
Some guidance from the IR would be very
welcome in this area given the substantial
increase in Australian enterprises providing
support services to entities engaging in the
exploration for or exploitation of natural
resources in New Zealand.
OPERATION OF SUBSTANTIAL EQUIPMENT
Under the 1995 treaty, an enterprise would
be deemed to have a PE in a country if
substantial equipment was being used in that
country “by, for or under contract” with
that enterprise. Under the 2010 agreement,
only entities involved in the “operation”
of substantial equipment for a period or
periods exceeding in the aggregate 183 days
in a 12-month period will constitute a PE.
The effect of this change is to substantially
narrow the scope of the deeming provision,
both through the introduction of a six-month
time threshold and through the change in the
wording of the clause. Many activities that
would be considered to constitute the use
of substantial equipment “by, for or under
contract” with an enterprise would fall
outside the scope of “operating” substantial
equipment, thus no longer constituting a PE
of an enterprise under the 2010 agreement.
A common example is the provision of a
“dry” lease of substantial equipment by a
non-resident lessor. A “dry” lease is a lease
of equipment only, without providing for
staff or other support facilities in the foreign
country. Under the 1995 treaty, such a lease
arguably deems the non-resident to have a
PE by virtue of the equipment being used
“by, for or under contract” with the nonresident entity.
While the IR has not issued any
guidance on the application of the new
provision, the Australian Taxation Office
(ATO) has considered the meaning of the
words “operation” and “operates” in the
Explanatory Memorandum (EM) to the
new treaty, clarifying that only active use by
the non-resident will be captured. The IR is
likely to hold a consistent view with that of
the ATO. Thus, under the 2010 treaty, a PE
is unlikely to be created by a lease without
the provision of staff or other facilities in the
country in which the equipment is to be used,
and where the lessor has no control over the
use of the substantial equipment in the other
country. Only non-resident entities which
are involved in the active use of substantial
equipment should be deemed to have a PE.
DEPENDENT AGENTS
Under the deemed agency PE of the
1995 agreement, a person (not being an
independent agent) who habitually concluded
contracts on behalf of an enterprise in
the other state caused a PE to arise in that
other state. Under the wording of the new
agreement, a PE will now also arise where a
person habitually exercises in the other state
an authority to “substantially negotiate” a
contract on behalf of the enterprise of the
other state.
Depending on your view, this either widens
or confirms the position that if a person
substantially carries out the negotiation
work on a contract, but doesn’t actually
conclude it, the enterprise will, nonetheless,
be deemed to have a PE. This change has also
been made in other new DTAs (eg SingaporeNew Zealand (not yet in force) and TurkeyNew Zealand (not yet in force).
Such a change in the wording of this
provision lends itself to a discussion of what
the IR considers to constitute the “substantial
negotiation” of contracts, which to date
remains an uncertain area.
Key
changes for
practitioners
to be aware
of include
those relating
to activities
undertaken
in the
exploration or
exploitation
of natural
resources,
operation of
substantial
equipment
and the
activities of
dependent
agents acting
on behalf of
an enterprise
SERVICE PROVISIONS
Under the new definition of PE in the 2010
treaty, a PE will be deemed to exist where an
enterprise of one country performs services in
the other country for a period exceeding 183
days in any 12-month period, where these
activities generate over half of an enterprise’s
active operating revenue in this period, or
where the activities engaged in over this
period are on a single or connected projects.
Services performed through an individual
who is present for five days or fewer are
generally disregarded for this purpose.
The addition of these paragraphs extends
the existing PE definition to include the
performance of services in the other country
that exceed the time threshold regardless of
whether they are performed through a fixed
place of business.
In applying the 183 day test, services
performed by individuals of an enterprise
and individuals of associated enterprises on
the same or on connected projects in the host
state will be aggregated, such that it is the
cumulative time of all associated enterprises,
including those enterprises resident in the
host state. Multinationals should be wary
of the potentially harsh outcome of this
aggregation clause, illustrated in the below
diagram.
DEEMED SERVICES PE UNDER THE 2010 TREATY
Australia Management Services Ltd
Australia
100% Shareholding
Project 1
New Zealand
Management Services (NZ) Ltd
NEWS
business
Suppose Project 1 spans one year, and that
Australia Management Services Pty Ltd (an
Australian resident entity) has contracted
to provide ongoing consultancy services in
relation to this project. Now suppose that
Management Services (NZ) Ltd (a New
Zealand-resident subsidiary of Australia
Management Services Pty Ltd) is contracted
to provide services to Project 1 for a fourmonth period only.
If Management Services (NZ) Ltd were
not associated with Australia Management
Services Pty Ltd, its four-month contract
would not constitute a PE in Australia, as
the services fall within the six-month time
limit. However, due to the association
between the two entities, the effect of the
aggregation clause is to deem Management
Services (NZ) Ltd’s activities in Australia
on Project 1 to be one year, rather than
four months, and as such the activities
of Management Services (NZ) Ltd will
constitute a PE well short of the six-month
threshold.
The aggregation clause was designed to
prevent a non-resident from “splitting”
contracts between associated entities
so as to avoid breaching the six month
threshold. However, given the clause has no
geographical limitation (ie it applies to all
associated entities in and outside the country
where the services are performed) it has the
potential to deem a PE to exist in genuine
cross-border commercial arrangements
involving multinational enterprises. It
would seem that such an outcome is clearly
at odds with the general intent of services
PE provision which is to deem a PE to exist
if the services are provided in country for a
period greater than six months.
More worryingly, the ATO recently
released an interpretation decision which
confirms that the aggregation principle has
no geographical limitation and can apply
in the example cited above. The IR’s treaty
team is aware of this issue, but is yet to make
a formal statement as to its position on the
matter.
CONCLUSION
The revised PE definition in the 2010 treaty
has arguably raised the threshold of what will
constitute a taxable presence in situations involving activities performed in connection
26
with the exploitation and exploration of
natural resources and the lease of substantial
equipment. However, for multinational enterprises utilising dependent agents, or those
engaged in the provision of services, there is
now an increased risk that those activities
will constitute a taxable presence.
Richard McGill ACA is an Associate Director at
Deloitte.
For
multinational
enterprises
utilising
dependent
agents,
or those
engaged in
the provision
of services,
there is now
an increased
risk that those
activities will
constitute
a taxable
presence
Bridge the ditch
Are you, your business or a client
thinking about expanding across the
Tasman? If so, NZICA has designed a
one-day conference just for you.
Put together in collaboration with the
Institute of Chartered Accountants
Australia, the programme has been
tailored to cover all of the tax issues
that businesses making the move into
Australia need to be aware of.
Doing Business in Australia: Helping
you bridge the ditch
25 November, NZICA Auckland offices
8.5 hours NZICA Verifiable CPD
Ensure your clients or your organisation
are fully aware of the tax issues,
considerations and implications of
setting up and operating a business in
Australia. This one-day conference is
packed with key information you needto
know before embarking on this venture,
including:
• an introduction to the Australian
taxation system, including residence,
taxation of companies, partnerships
and trusts, CGT, GST, tax losses and a
variety of tax fundamentals
• an introduction to employment taxes
and obligations, including FBT,
superannuation, PAYG and employee
entitlements
• a review of international tax, including
the DTA between New Zealand
and Australia, withholding taxes,
transfer pricing, thin capitalisation,
and incentives and concessions for
investment into Australia
• state taxes
• corporate law and other legal
considerations.
Case studies on selling goods and
services into Australia will reinforce
learning outcomes. Additionally, during
lunch the co-founder of 42 Below Vodka,
Justine Troy, will discuss her experience
setting up a business across the Tasman.
A smorgasbord of online learning
New to the NZICA e-Learning programme, online modules and recorded webinars allow
you to learn when it’s convenient for you. Designed to support learning as and when you
demand it, you can access courses from the comfort of your home, desk or on the move.
Your pace, your time, your development
Putting you in control nzica.com/ondemand
NEWS
business
Farm manager Willi Manuel hand feeds salmon on
one of Akaroa Salmon’s production farms.
28
01
business
1
NT
ERBURY 2
NEWS
Support for Canterbury SMEs
The Canterbury Recovery Trust has
helped more than 160 SMEs get back to
business after February’s earthquake.
by JENNIFER BLACK
L
ouise
Edwards CA used to
work on the first floor
of the Pyne Gould Corporation
building in central Christchurch.
Formerly chief executive of Perpetual
Trust, she left the role just before
the September earthquake. When
the building was badly impacted in
the February earthquake, Edwards
immediately volunteered to help
out.
“I spent several months helping with the
bereaved families and injured people. It was
a heartbreaking experience given these were
people I’d employed and worked with.”
She has continued to help with the city’s
recovery and rebuild, now as executive director
of The Canterbury Business Recovery Group,
also known as Recover Canterbury.
“I was really keen to be involved in the
rebuild of Christchurch, doing something
positive in rebuilding the business community.
The recovery of small and medium businesses
is vital to keep jobs and people in Canterbury
as well as rebuilding the fabric of our
community.”
Recover Canterbury and the Canterbury
Recovery Trust were set up in March to
provide earthquake recovery assistance to
Canterbury businesses.
“Recover Canterbury is a joint venture that
brings together the expertise and resources
of the South Island’s two largest business
support agencies, Canterbury Development
Corporation and Canterbury Employers’
Chamber of Commerce, along with several
government agencies involved in business
support,” Edwards says.
She is responsible for building the fund
through donations, then distributing the
money to help small/medium businesses.
“It was
a heartbreaking
experience
given these
were people
I'd employed
and worked
with”
~ Louise Edwards
Seeded with $2.5 million from the
government, the Trust more than doubled that
through donations from corporates.
“We have now financially assisted 163
businesses, employing nearly 1,200 people. A
total of $2.5 million has been paid out.”
Assistance is capped at $100,000 per
organisation.
“Most but not all payments under $30,000
are treated as grants while amounts in excess
of that are generally advanced by way of an
interest-free loan.”
Businesses must meet a range of criteria
including being able to demonstrate that the
proposed application for funding has the
potential for that entity to recover successfully
from the impact of the Canterbury earthquakes
and that it has no other efficient support
options available.
“We have a strong desire to help any business
that we believe can succeed, but unfortunately
have had to turn down a number of entities
that were either failing prior to the earthquakes
or had no prospect of getting back on their feet
due to their current circumstances.”
Edwards says there are still many more
businesses applying for help.
“I believe there is likely to be another wave
when business interruption insurance starts to
run out over the coming months.”
She says applicants are extremely grateful
for the help provided.
“The feedback we are receiving is that the
grant or loan has made a big difference to a
business in their recovery.”
But she says it is not just about the money.
“Recipients are grateful for the recognition
and confidence that we believe in their
business.”
She says the government wage subsidy
given in the initial stages after the earthquake
helped many businesses survive and provided
breathing room for them to make decisions,
and then focus on rebuilding.
Recover Canterbury welcomes donations
from any individual, trust or company, onshore
or offshore.
“We are a charity so all donations are tax
deductible.”
Most of the staff are Cantabrians, many of
whom are successful business people who have
put their own careers on hold to help out for
a fixed period and contribute to the rebuild of
Christchurch.
CA
NEWS
business
AKAROA SALMON
A staff member from The Fitting Room assists a customer.
THE FITTING ROOM
The Fitting Room, formerly U Fit In, is a
specialist lingerie store for fuller cup sizes
and women who have had breast cancer and
need breast prostheses.
The Fendalton shop was badly damaged in
the September earthquake and has since been
demolished. For the past year The Fitting
Room and its staff of nine has been based in
the company co-owner’s home.
The business recently approached Recovery
Canterbury for help with marketing and
branding in a challenging environment.
They got support with marketing, staff sales
training and director development. Recover
Canterbury helped The Fitting Room
develop a plan for a name change and rebrand to reach a new group of customers.
The business also received funding from the
Canterbury Business Recovery Trust for this
re-branding and for website development to
help tailor customer service.
The Fitting Room launched its new name
and brand in October, sending a strong signal
to Canterbury women that the company is
still committed to providing excellent fitting
and beautiful products for many years into
the future.
The company’s goals are to continue
to survive and thrive as a business in their
temporary location and to build a solid
brand for future growth, while rebuilding on
the old site.
A resource consent application for
rebuilding has been lodged and the company
hopes to be in its new shop by early to mid
2012.
30
“The
feedback we
are receiving
is that the
grant or
loan has
made a big
difference for
a business
in their
recovery”
~ Louise Edwards
Akaroa Salmon was established as a sea-cage
farming operation in Lucas Bay, Akaroa
Harbour, in 1986 by the Bates family. The
operation is now fully vertically integrated,
having a stake in a salmon hatchery,
producing over 220 tonne of salmon from its
farm in Akaroa. The business also processes
and markets Akaroa salmon products from
its Christchurch factory.
Akaroa Salmon sells most of its fish to
restaurants and cafes, both locally and
throughout New Zealand and the brand is
recognised as high quality salmon.
In the February earthquake the company
suffered damage to both its factory in
Christchurch and the farm in Akaroa. The
business has continued to operate but has
been significantly impacted by the closure
of many of Christchurch’s inner city
restaurants and cafes.
The loss of local markets necessitated a
change in strategy and Managing Director
Duncan
Bates
approached
Recover
Canterbury shortly after the earthquake.
With the help of the Business Recovery
Coordinator a business plan was developed
to upgrade Akaroa Salmon’s food safety
programme so the company could get
an export license.
Funding from the
Canterbury Business Recovery Trust made
this happen.
The company is now exporting to top
restaurants in Singapore and looking to
further develop its export market.
Akaroa Salmon factory staff working with freshly filleted salmon.
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NEWS
business
Westpac
e think you deserve
special treatment.
BPs
(Next to Resene advertorial)
New
7KDW·VZK\ZH·UHJLYLQJ\RXDQDPD]LQJ
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As NZICA’s banking privilege partner, Westpac are proud to have
you with us. To celebrate we’d like to offer you this very special
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32
Interest rate is current as at 18th October 2011 and is based on a 5.00% p.a interest rate on a Choices Everyday home loan and is subject to change at Westpac’s
discretion. You must be a current member of NZICA to be eligible for this special rate. Westpac’s current home loan lending criteria and terms and conditions apply.
An establishment
fee may apply. An additional fee or higher interest rate may apply to loans if the application is accepted but does not meet standard lending criteria.
CHARTERED ACCOUNTANTS JOURNAL
NOVEMBER 2011
Westpac New Zealand Limited.
ADVERTORIAL
Colour trends
for 2012
Like music, colour can be a
powerful and instant mood
transformer.
As we emerge from the
depths of the winter and
recessionary blues still linger,
many of us yearn for a little
colour in our lives.
This
season,
strong
colour features not only on
accent walls. Appliances
and homewares are getting
an overhaul too. Toasters,
mixers, fridges, rangehoods,
ovens and other homewares
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with
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Music is has a strong link with some of this season’s
new colours.
Resene Wild Thing is a star-bright yellow gold that’s
bold, energetic and frivolous and for the adventurous,
could be paired with black or a blue such as Resene
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with its gentle combination of green, brown and mustard
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Resene Ayers Rock is a modern take on burnt orange
and teams well with reptilian olives (such as Resene
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Blue instils confidence and promotes an overall sense
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34
Nature takes last season’s greens to a whole new
level, with a broader, fresher, more back-to-earth
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emerald greens such as Resene Zeal and Resene
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to blue, such as Resene Free Spirit.
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Off-whites are pure and uncomplicated, and there
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FEATURE
Auditor Oversight
The Auditor Regulation Act 2011
From July 2012, a new licencing and oversight regime will be in force for auditors
of issuers. Under the regulations, NZICA will be required to licence members and
register firms that undertake relevant audits, in partnership with the Financial
Markets Authority, which has a responsibility for oversight of the sector. Intended
to shore up investor confidence in the financial systems, how will the new regime
work in practice?
FMA OVERVIEW by Elaine Campbell
Under the Auditor Regulation Act 2011 the Financial Markets Authority (FMA) has the ultimate
responsibility for establishing and maintaining effective oversight of auditors performing audits of
New Zealand issuers.
The FMA is the standard setter, setting the
criteria for licences and the conditions under
which they will be issued and renewed. In
setting the standards we will consult widely
and will work closely with audit firms,
accountancy bodies such as NZICA, and
other affected parties. We expect to release our
first consultation paper in November this year.
From July 2012, NZICA, as an accredited
body under the Act, will use the FMA’s
standards to assess applications from New
Zealand-based individuals and firms and issue
licenses and register firms.
In addition to licensing New Zealand
based auditors, NZICA will also have
responsibility for monitoring compliance of
its member auditors and firms with the terms
and conditions of their licenses and taking
disciplinary action where necessary.
The FMA will separately license and register
overseas auditors and audit firms performing
audits of New Zealand issuers, and will ensure
that they are subject to adequate oversight by
regulators in their jurisdictions overseas.
The FMA’s role will also include checking
that NZICA has adequate regulatory systems
for auditor oversight and is performing these
functions effectively. The FMA will publish a
report annually on NZICA’s performance and
has the power to issue directions that address
our concerns if we consider NZICA’s systems
are inadequate.
The FMA will also consider any applications
from other organisations to become accredited
bodies.
Audit firms
and licensed
auditors are
subject to
a quality
review at
least once
every four
years
The Act requires that the FMA ensure that
audit firms and licensed auditors are subject to
a quality review at least once every four years.
FMA can choose to perform this function
itself or delegate this to a suitably qualified
party. The review will focus on ensuring the
audit firm’s systems are adequate in terms of
promoting high-quality audits. The costs of
these reviews will be set through regulations
and are payable by the audit firms.
Investigations into the performance of
New Zealand-based auditors will typically be
undertaken by accredited bodies. However, in
some circumstances FMA can also undertake
investigations.
If NZICA or FMA finds that licensed
auditors or firms have not performed their
duties to a satisfactory level, FMA can issue
orders to vary the terms of their licences, or
suspend or cancel them.
A lot of work needs to be done before the
Act comes fully into force. FMA’s focus is to
ensure that transitional arrangements will
enable continuity for issuers yet also address
the key objectives of the Act.
FMA encourages everybody with an interest
in the new regulatory arrangements to study
our consultation papers when they are issued
and to take part in the debate.
All papers will be published on our website,
and we encourage you to subscribe to our
website updates at fma.govt.nz.
Elaine Campbell is Head of Compliance
Monitoring at the FMA.
FEATURE
Auditor Oversight
CONSTRUCTIVE OVERHAUL by Hon Simon Power
NZICA has played a constructive role in the government’s regulatory overhaul of the financial
system.
With my retirement from politics looming,
this will be the last time I address you as
Minister of Commerce.
With that in mind, I’d like to begin
by thanking NZICA for its constructive
contribution to the government’s regulatory
overhaul of the financial system.
As you’ll be aware, the government’s
priority in this area over the past three years
has been to restore mum and dad investor
confidence in our financial markets after the
global financial crisis and the collapse of
finance companies.
And after the Registrar of Companies
identified audit failure as a contributing
factor in the finance company collapses, it
was clear the regulation of auditors would
be an important piece of the regulatory
jigsaw.
We achieved that by way of the Auditor
Regulation Act which received its third
reading in May and comes into force in July
next year.
This Act aims to enhance audit quality
and facilitate recognition of auditors in
overseas jurisdictions.
Under the Act, NZICA will play a
central role in the licensing and oversight
of auditors, which will be overseen by the
Financial Markets Authority (FMA).
I’d like to take this opportunity to thank
the Institute for consistently supporting
this Act through the legislative process
and making valuable contributions to the
development of the new regime.
I’m advised that the Ministry of Economic
Development, the FMA, and NZICA are
working together to implement the regime
and that the Institute has been active at both
the operational and oversight levels of the
implementation programme.
I’m also advised that you have played a
constructive role in initial discussions with
Australian officials and regulators regarding
the trans-Tasman mutual recognition of
licensed auditors.
36
Under the
Act, NZICA
will play
a central
role in the
licensing
and
oversight of
auditors
You may also be interested in Cabinet’s
recent decisions on proposed changes to
the financial reporting framework. The
Financial Reporting Amendment Bill is in
the process of being drafted and the aim is
to introduce it to parliament next year.
Under the changes, non-issuer companies
which do not meet the definition of large
companies – annual revenue of more than
$30 million, or assets of more than $60
million – will be asked to prepare targeted
reports for tax purposes, rather than
financial statements under the Companies
Act.
Once those changes are in place the
number of companies required to prepare
general purpose financial reporting will
be reduced from 460,000 to less than
10,000, and this is expected to cut business
compliance costs by $90 million a year.
I am very pleased that the Institute has
said it plans to develop robust and simple
financial reporting guidelines for SMEs.
I’d also like to thank the Institute
for the outstanding contribution to
standard setting over the past 40 years.
Previously, two of your boards held the
major standard setting responsibilities.
But in order to promote strategic policy
coherence and coordinated service delivery,
the government transferred the standardsetting responsibilities to the External
Reporting Board in July.
I would like to thank NZICA for the
professionalism it has displayed throughout
that transition.
It’s been a pleasure working with you
over the past three years and I’m sure you
will continue to work well with the next
Minister of Commerce, whoever that may
be.
Hon Simon Power Minister of Commerce,
Justice, Consumer Affairs, Responsible for
the Law Commission, Associate Minister of
Finance.
NZICA’s co-regulatory role by Richard Moon
NZICA is retaining an important role in the frontline regulation of its members who audit issuers.
Under the new auditor oversight regime,
NZICA will license members and register
firms that meet the prescribed minimum
requirements set by the FMA, says Richard
Moon, General Manager, Compliance, Quality
and General Counsel. It will also continue to
investigate complaints against its members.
Auditors of issuers will have a new
relationship with NZICA.
“We will seek to understand more about
their experience, practice and clients.
Ultimately, we will also need to form a view of
their competence.”
Moon says that, while the standard of
auditing in New Zealand is high, the global
financial crisis cast a shadow over the financial
services industry and, by implication, auditing.
“It’s hard to generalise about the reasons
for corporate collapses as they are many and
varied, but audit failure is not usually amongst
them.”
Under the new regime, stakeholders will
expect NZICA to raise its game as a coregulator and the public will expect the
quality of audit to be higher. He warns that
compliance costs are also likely to increase in
this area.
“The government’s working assumption is
that the costs of the new regime will be passed
on to issuers.”
While the
standard of
auditing in
New Zealand
is high,
the global
financial
crisis cast a
shadow over
the financial
services
industry
and, by
implication,
auditing
Moon does not believe NZICA’s
responsibilities to its members and its role as
co-regulator will create and any conflict with
the FMA.
“The roles and responsibilities of each
party are well defined in the legislation. We
are working closely with the FMA to ensure
a smooth implementation and we are both
working towards the same goal – to maintain
and enhance the quality of audit.”
NZICA has been keen to promote a
consistent approach to all auditors of New
Zealand issuers, whether they are working
locally or overseas. Overseas auditors will be
required to hold a license and will have to meet
the same standards as their local counterparts.
Simply being a member of a particular overseas
body will no longer be sufficient.
“There should now be a level playing field
in relation to overseas auditors” Moon says.
“The introduction of this new regime is
also an important step to having our audit
professionals recognised overseas, particularly
in Australia.”
The new environment will mean little
change for practitioners who do not audit
issuers. However, NZICA will be consulting
its members early next year about a
broad regulatory framework for members
undertaking statutory audits.
FEATURE
Auditor Oversight
MAINTAINING CREDIBILITY by Simon O'connor FCA
The new regime will impact smaller firms more than the Big 4.
Ernst & Young, like other Big Four firms, does
not expect to see a significant impact from the
Auditors Regulation Act when it comes into
effect next year.
Our policies and processes are set globally
and prepared in accordance with the
requirements of established markets such as the
UK, Europe and the United States. So we would
expect them to stand up to New Zealand's new
regulatory requirements to license and register
those who audit securities issuers, including
banks and insurance companies.
Regulation and registration will bring
New Zealand into line with international
jurisdictions of good repute. The legislation
was necessary to ensure there was sufficient
credibility within the New Zealand framework
and is arguably overdue.
We're pleased with the legislation and with
the oversight powers of the Financial Markets
Authority (FMA).
But the new framework is likely to widen
the gap between the Big Four and smaller
accounting firms as non-Big Four firms may
struggle to comply with the registration and
regulatory requirements.
For example, a smaller firm, with a limited
number of small issuer audits, might decide to
spend the several thousands of dollars required
to register its audit partner(s) but may not have
the quality control systems and processes in
place that would be expected of a registered
audit provider when the firm gets reviewed in
due course.
In New Zealand, we've obviously got
critical mass among the Big Four but looking
at the non-Big Four, with smaller clients, fewer
people and less money to invest in systems and
processes, it is much harder.
So regulation and registration might be
a dissuader to having a larger number of
registered auditors in the smaller firms.
The new regime will do nothing to address
38
If you're
auditing
an issuer
and it fails,
someone at
some point
will try to
blame the
auditor
the so-called “expectation gap” between the
true purpose of an audit (providing assurance
to a defined group of people about the work of
others) and its perceived purpose in the minds
of some market players (that it gives a clean
bill of health to the company concerned on an
ongoing basis).
The legislation is all about meeting an
international benchmark and enhancing
confidence in the New Zealand securities
market. But, from a practical perspective, if
you're auditing an issuer and it fails, someone
at some point will try to blame the auditor. I
don't think that's going to change significantly
under the new regime.
The big issue which remains unresolved
by the legislation is limitation of liability. But
there have been clear indications from the
government that this will be reviewed. This is
critically important because it is an area where
New Zealand is out of step with most other
jurisdictions.
Ultimately, how well the new system works
will depend on individuals involved – the
relationships they build in the market and the
way the regulators consult with issuers and
professional advisers to drive better market
practice. It doesn't mean, however, that the
regulator will not be prepared to make the
tough calls when it has to.
There is every indication the FMA is
prepared to take this balanced and consultative
approach and Ernst & Young is pleased with
its establishment.
Simon O'Connor FCA, Managing Partner
(Auckland), Ernst & Young New Zealand.
This article provides general information, does
not constitute advice and should not be relied on
as such. Professional advice should be sought
prior to any action being taken in reliance on
any of the information.
The implications of auditor oversight by Mark Hucklesby FCA
Audits will continue to be “world class” under the new oversight regime.
Grant Thornton is one of a number of audit
firms operating in New Zealand that belongs
to an international network.
Through our network we receive many
audit referrals. Clients with a global presence
are acutely aware of the audit efficiencies,
and hence lower cost, that result from
appointing an organisation with the same
audit methodology, software and operating
protocols around the world.
To optimise the quality of our audits,
Grant Thornton invests significantly in
regular peer reviews to bring consistency
and accountability to the audit process. In
turn, we send our partners and staff to visit
overseas offices around the world to witness
first hand how others approach audits and
bring best practice back to our firm in New
Zealand. Now that International Standards
on Auditing have been adopted by so many
countries around the world, our ability
to share knowledge and benchmark audit
performance is much easier to do today than
it has been in the past.
We signalled support for auditor oversight
in our submission to the government on this
topic.
The cornerstone of any audit is having
trust and confidence in the audit findings.
Balancing knowledge and judgement against
a backdrop of continually changing risk will
always be demanding.
Just as our clients want someone completely
independent to ensure that the judgements
they have made in bringing together their
financial statements are reasonable and
appropriate, so do audit firms. The only
difference is that we want confirmation
that we have exercised good judgement
and correctly applied all the professional
standards appropriate to the circumstances.
Although the Financial Markets Authority
(FMA) will be directly responsible for
It will be
interesting
to see if
the market
aligns the
designation
of “licensed”
and
“unlicensed”
auditor with
quality. On
this, only
time will tell
auditor oversight in this country involving
issuers, NZICA will continue to have a
significant role in not only monitoring,
but also evaluating the quality of the other
types of audits undertaken in the country.
It will be interesting to see if the market
aligns the designation of “licensed” and
“unlicensed” auditor with quality. On this
matter, only time will tell.
While no one can deny that some poor
quality audits have been conducted in the
past, our view is that the vast majority of
audits undertaken in New Zealand have
been, and continue to be “world class”.
Our view is that the recent legislative
changes will not change this, but what it
will ensure is that if the quality of audits
undertaken by an individual falls away,
appropriate corrective sanctions can be
taken by the FMA to rectify the situation
to maintain investor confidence in the audit
process.
All seven Grant Thornton audit partners
intend to become “licensed auditors”. We
currently have no concerns about satisfying
minimum hour requirements, experience,
rotation requirements or the significant
costs associated with licensing (potentially
$7,900 per annum) because we are
fortunate enough to have the critical mass
to deal with each of them.
As a former Prime Minister once said:
“Bring it on”. So far as auditor oversight
is concerned we share the same sentiment
because, whether we like it or not,
perception is reality, and had New Zealand
ignored what to many were reasonable
requests for change, we would have ended
up helping no one.
Mark Hucklesby FCA is National Technical
Director, Grant Thornton New Zealand Audit
Partnership.
FEATURE
Auditor Oversight
Risk of “elite” capture by Graeme Lynch CA
There is a risk the new auditor oversight regime could create a barrier to second-tier firms.
What concerns me is the regulations could
produce an elite group licensed to audit
issuers, and a market perception may develop
that these licenced auditors should be first
choice for a wider range of audit engagements.
The first factor relates to the “high bar”
that has been set for auditor licensing. The
currently proposed minimum standards
include eight years of experience – after
qualification as a CA – to become a licensed
auditor. That means that people will have
to work for 11 years to meet the minimum
requirement. The second factor is how
demanding will be the yet to be defined
ongoing competency requirements.
Compliance
costs
may
also
be
proportionately more onerous on second tier
firms. Alongside the costs of initial licencing
there are the ongoing costs of licence renewals,
ongoing competency, and quality reviews.
These factors might create an elite group
of people who are qualified to undertake
issuer audits and may close out people who
currently work effectively in the audit sector.
It is not simply an issue of the licencing and
competency requirements.
There is also a risk that a perception will
develop in the market that “we should use a
licensed auditor” for various other types of
engagements, beyond issuer audits.
I think of it as analogous to the difference
between a GP and a specialist. Clients who can
get good quality, competitively priced, service
from a GP (for example for statutory audits)
could be influenced to opt for a specialist
(licensed and registered to audit issuers).
In those circumstances, the development
of an elite club of licenced auditors could
then have a significant impact on the audit
market and we could see a loss of audit work
40
We could
see a loss of
audit work
among firms
that have
performed
effectively
among firms that have performed effectively
as auditors in the past.
In New Zealand, we don’t have a large
number of issuers that need to be audited.
From that perspective, we don’t need a large
number of auditors licenced to audit them. So
the minimum standards have been designed to
set a particularly high bar – higher than the
minimum standards in Australia or the UK.
But the high bar is probably too high.
Our overriding concern is that second tier
firms may become excluded. That would
not be good for the firms, or the business
community.
Yes, this regime will appropriately sideline
a few firms that have minimal experience
with auditing issuers. But on the other hand,
had this regime been in place five years ago it
may not have stopped the auditors of many
of the failed finance companies from having
those engagements. The firms may still
have been doing the audits, and the finance
companies would still have collapsed. If
audit failure contributed to those collapses it
was of secondary importance to the actions
of directors, I believe.
While the new regime may improve
investor confidence, I don’t think it will
improve the quality of audit.
PFK Ross Melville is part of PKF
International which is a member of the
“Forum of Firms”.
PKF International
requires that we apply systems and processes
which ensure compliance with international
auditing and quality control standards. The
drivers of quality are already in place. The
quality bar is already high.
Graeme Lynch CA, Partner, PKF Ross Melville
Audit Chartered Accountants.
NEWS
Key changes in the new
auditing standards
International Standards on Auditing
(New Zealand) are in effect – are
your auditing practices up to speed?
by CRAIG FISHER FCA and JASON STINCHCOMBE CA
A
s
all auditors should now be very well aware New
Zealand has a new suite of mandatory auditing
standards, the International Standards on Auditing
(New Zealand) otherwise known as ISAs (NZ). From
balance dates commencing after 1 October 2009 and
after, New Zealand auditors of financial statements are
now required to apply the complete suite of ISAs (NZ).
This is the most significant change in auditing in New
Zealand since the introduction of the suite of Codified
Auditing Standards back in 1990. It has been followed
with a change of responsibility for the standards from NZICA to the
new independent Crown entity; the External Reporting Board (XRB),
which came into being on 1 July 2011.
Other than some minor modifications made to wording of the
standards when these shifted from being the responsibility of the
Institute’s Professional Standards Board to the XRB, it is unlikely we
will see significant further changes to NZ auditing standards in the
near future.
The ISAs (NZ) are characterised by being longer and more explicit
than the auditing standards they replace. In some cases this is due to
them containing increased guidance, in others it is the result of new
and more specific requirements being imposed on auditors. This can
y the following
g comparison
p
y requirements.
q
be seen by
in mandatory
Old
New
Codified
Auditing
Standards
International
Standards on Auditing
(New Zealand)
Number of standards
28
36
Mandatory “black
letter” requirements
221
519
Number of pages
250
700
The standards and other helpful guidance can be freely accessed at
xrb.govt.nz
The challenge for many auditors is to be clear on what are the key
changes they need to be aware of in their everyday audit practice.
This is especially likely to be an issue if the chartered accountant is an
occasional, rather than a full-time auditor.
From practical application of these standards in the audits of a
business
wide range of New Zealand entities, as
well as acting as peer support for other
auditors, the following are some of the more
significant changes we at Hayes Knight
Audit have noted as areas where confusion
is common or where the requirements of
the standards are not well implemented by
occasional auditors. We stress these are not
all the changes. However they do represent
some of the more common ones that appear
to be tripping up some auditors.
1. Increased formality of communication with
management and the governing body
There are now explicit matters that
must be formally communicated to the
governing body in every audit. Examples
include whether there have been any
significant difficulties encountered during
the audit, significant matters discussed with
management etc.
For audits of issuers there are further
communication requirements such as
whether there are any potential threats to the
auditor’s independence related safeguards
applied etc. This has had the impact of
lengthening the auditor’s management letter
to the governing body at the conclusion of
the audit.
The other notable change is the need
for auditors to explicitly communicate
any adjustments and any uncorrected
misstatements. Other than trivial ones, these
are required to be communicated prior to
the signing of the audit report. Management
must agree with these formally via their
representation letter.
2. Increased planning requirements
One of the most noticeable impacts in
the change to ISAs (NZ) in relation to
planning is an increased number of explicit
requirements.
For example the explicit requirement from
ISA (NZ) 300: Planning an Audit of Financial
Statements for the engagement partner
and other key members of the engagement
team to be involved in the planning of the
audit and to discuss this with all other
members of the team. While this may not
seem extraordinary for many reading this,
the challenge for auditors is to ensure they
clearly document that this has occurred and
the resulting impact on their audit approach.
NEWS
business
3. Documentation expectations
increased
The increase in the explicit
requirements in the audit standards
brings with it a corresponding
increase in documentation required.
This is in order for the auditor to
have evidence on their audit file
to be able to show that they have
complied with the requirements.
4. Audits of group financial statements
If the audit of group financial statements includes relying on the work
of component auditors then there
are much greater responsibilities
upon the group auditor. These increased requirements mainly involve
the level of communication required
regarding planning, approach, documentation and evidence.
5. More care required around the audit
report wording
There is more to go into the new
audit reports and most significantly
the content variations can be much
greater. This means the days of
hauling out the audit report standard
wording and using it for 95% of
your audits is over. Much more
specific case by case consideration
is required – and the changes to
wording required impact more than
just the final opinion paragraph.
6. Modifications of audit reports rather
than qualifications
Some terminology changes. Previously anything other than a clean
audit opinion was known by most as
a qualified opinion. Now the standards talk of unmodified and modified opinions. Modified opinions can
be:
• a qualified opinion – auditor
disagrees with some limited areas
or a limitation of scope over part
of the financial statements
• an adverse opinion – serious
disagreement with treatment
which makes the financial
statements misleading
• a disclaimer of opinion – limitation
42
of scope so significant that cannot
express any opinion.
7. Separate opinion in accordance
with laws or regulations within audit
reports
Auditors sometimes have specific
legislative reporting requirements
in addition to the audit of financial
statements. A common example is
that an audit under the Financial
Reporting Act 1993 that requires the
auditor to explicitly state whether:
• they have obtained all the
information and explanations
they have required; and
• whether proper accounting records have been kept by the company.
Such legislative requirements are
now to be disclosed under a separate
heading after the auditor’s opinion
on the financial statements.
8. Greater pull through of prior year
audit qualifications
The impacts of audit report
qualifications in prior years are now
required to be given much greater
consideration under the new audit
reporting standards. Often this will
mean that if an audit report was
qualified in the prior year then that
fact and the potential impact on the
comparability of comparatives needs
to be mentioned in the audit report
for the current period.
Hence in most cases any
qualification of an audit opinion will
now impact two years, albeit that
the wording will change from year
to year, rather than just appearing in
the current year.
9. More work required around special
purpose financial statements
Some clients are able to and choose
to prepare special purpose financial
reports instead of preparing a
general purpose report by following
all applicable financial reporting
standards. If this is the case then
there is now a much more explicit
requirement on the auditor to assess
the appropriateness of use of that
special purpose prior to agreeing the
terms the engagement. This situation
also has audit reporting implications.
10. Specific requirements for
“significant” risks
Significant risk, those material risks
that “in the auditor’s judgement, require special audit consideration”,
have a number of specific requirements – so it is important for the auditor to clearly articulate which risk
these are in their audit documentation.
If the auditor determines that
a significant risk exists, they are
required to obtain an understanding
of the entity’s controls relevant to
that risk.
Auditors need to ensure their
response is appropriate in the context
of the ISA (NZ) requirements:
• The nature of evidence obtained
needs to be appropriate – the
response to a significant risk must
include substantive procedures –
analytical procedures alone will
not be sufficient for significant
risks.
• There are a number of areas
that have specific requirements
for significant risks identified,
including fraud, related parties
and estimates.
• The absence of controls over a
significant risk is itself a significant
deficiency in internal control as
requires inclusion in your reporting
to the governing body.
Craig Fisher FCA is Chairman of
Hayes Knight NZ Limited and an
Audit Director at Hayes Knight Audit.
He was formerly a chair of NZICA's
Professional Standards Board and
is a member of the NZ Auditing and
Assurance Standards Board.
Jason Stinchcombe CA is an audit
manager and technical specialist at
Hayes Knight Audit.
They are also authors of the Practical
Auditing Manual.
reports, emails, forms and meeting minutes.
For many of them, the speed at which they
can process this information has a very direct
impact on their earning ability.
In this article I examine two productive
technologies that might help many businesses
to increase their productivity and improve
their bottom line.
SPEECH RECOGNITION
007 for 2011
They might seem like props
from a James Bond movie, but
some “new” technologies have
the potential to help businesses
increase both productivity and profit.
by ALAN CHEW CA
I
n
my 25 years advising clients on how
to better use their IT to improve their
bottom lines, I spend quite a bit of time
talking about “new” technologies.
By “new” I don’t necessarily mean
technologies that are just coming into
circulation. Mostly, I talk to them about
technologies that have been around a
while but which my clients are unaware
of, or which have improved recently.
My customers come from all walks of
life and industries. Many are professionals
including accountants and lawyers, some are
manufacturers and distributors, yet others are
district councils and utilities. However, they
all share one common challenge – on a daily
basis they invest an enormous amount of time
and effort into handling information which
has to be entered into computer systems. These
include client notes, timesheets, proposals,
Most people
can speak at
least three
times faster
than they
can type
Speech recognition converts your spoken
word into typed text as you speak.
There is nothing new about speech
recognition. I first encountered it over 16
years ago, when it seemed extraordinarily
clever but almost unusable because of its
immaturity as a product.
The oldest and largest seller in the world
is Dragon from Nuance (nuance.com). The
first time I was comfortable recommending
speech recognition to clients was when
Dragon Version 10 was released about
two years ago. That release of the software
astounded me with its ability to translate
accurately what I said within minutes of my
installing it.
Most people can speak at least three times
faster than they can type. Thus, if speech
recognition can translate with great accuracy,
it makes sense to speak rather than type. That
is exactly what Dragon can do today – it
translates your speech highly accurately. Most
users are able to become productive after
training for no more than two or three hours.
The software starts at $120 plus GST
but most business users pay about $440
plus GST for a bundle that includes a
high-quality noise-cancellation Bluetooth
headset.
Today I type infrequently; this article was
entirely dictated using Dragon.
DIGITAL PENS
A digital pen is a device that captures the
handwriting of a user and digitises it. When
coupled with a paper technology called
Anoto (anoto.com), the pen is transforming
the way we keep and retrieve meeting notes
or do data collection.
One of the latest digital pens is the
LiveScribe SmartPen (livescribe.com). This
device has the potential to transform the
way we keep and retrieve meeting notes.
The SmartPen ($400 plus GST for the
NEWS
business
most expensive model) looks like any other
pen. It writes like any ordinary pen, on
paper that looks and feels like ordinary
paper. The difference is that it hides a tiny
infrared camera at the tip that captures what
you write and contains a microphone that
records any sound. The paper you write on
(called Anoto paper) is printed with millions
of microscopic dots. The handwriting and
sound recordings are stored in the pen’s
internal memory.
When the pen is docked to your PC, the
recordings are transmitted automatically.
Exact replicas of your handwritten notes
appear and you can view them like you
would view any picture.
The big difference lies in the power of the
software. It allows you to search any of your
handwritten notes by simply typing one or
more keywords into a search window.
You can also convert the handwriting into
typed text and export into Word or Outlook
using a US$30 handwriting recognition
program that is tolerant of even doctors’
handwriting.
You can replay the sound recording by
either tapping on the paper notes with the
pen or clicking your mouse on the electronic
image of the note on your screen. As you
tap each note, the system plays back an
audio recording of exactly what was being
spoken when the note was made.
The special paper can be purchased
cheaply (an A4 notebook costs $8 plus
GST) or you can print it yourself on your
colour laser printer.
I now take my SmartPen and notebook
44
to all meetings. Instead of struggling to
annotate everything spoken at the meetings,
I focus on the proceedings and simply take
bullet points and turn on the microphone to
record what was being said.
DIGITAL PENS – THE NEXT LEVEL
When the pen
is docked to
your PC, the
recordings are
transmitted
automatically
A highly innovative firm in the US called
Adapx (adapx.com) has taken digital pen
technology several steps further by designing
a range of products that allow the user to
capture data from forms. The software
allows the user to design any form (such as
timesheets or sales orders, etc) using Excel as
a word processor.
Once the form is designed, it can be printed
onto ordinary paper on a colour laser printer.
The users of these forms then use a digital
pen to write information onto the forms.
The pen records the writing into its memory
and this data can then be transmitted to a
PC either via a Bluetooth mobile phone
or by docking the pen into a cradle. The
handwritten data is then dis played on the
original Excel spreadsheet and converted into
typed text. Once this step is completed, the
data is seamlessly exported from the Excel
spreadsheet into whatever database the data
is collected for (such as an ERP package or a
payroll program).
This technology is ideal for industries that
find that pen and paper are still the best
means of capturing data. It costs $2,000 plus
GST per user for a licence.
Alan Chew CA is the founder of Houston
Technology Group. alan@htg.co.nz
ANNUAL REPORT
For the full NZICA annual report go to nzica.com
very big year...
2011 ANNUAL REPORT New Zealand Institute of Chartered Accountants
PRESIDENT’S REPORT
Ross Jackson FCA
NZICA President 2011
New Zealand Institute of Chartered Accountants 2011 ANNUAL REPORT
busy and
successful...
Graham Crombie FCA
NZICA Board Chair
a year of
significant
achievement...
Ter y McLaughlin
Terry
McLaughl
McLa gh FCA
NZICA Chief Executive
NZICA’s strategic objectives
OUR YEAR – A PLAN IN ACTION
Relevant Products and Services
•
•
Member engagement increases
Introduction of e-learning programme and webinars
•
International collaboration helps members
•
Responding to member requests for tools and templates
Membership Growth
•
•
•
Membership reaches 32,733
Student Affiliate numbers grow
Presentations to more than 3,000 prospective members at secondary schools
Co-regulation
•
•
Successful transition of accounting and auditing standard setting to the XRB
Establishment of NZICA as the co-regulator for auditor oversight
Regional Alliance/Powerbase
•
•
•
Announcement of NZICA-ICAA collaboration
Joint Chartered Accountants Program agreed with the ICAA
Tripartite agreement on resources with ICAA and CIPFA
International Leadership
•
•
•
Warren Allen FCA made Deputy President of IFAC
Keith Wedlock FCA made Deputy President of CAPA
Lead role in IASB project to reduce disclosure requirements in financial statements
Exemplar SME
•
•
•
Alignment of strategy, business plans and individual performance
New website draws increased web traffic
New Member Privilege Programme launched
Note
Parent
2011
Parent
2010
Group
2011
Group
2010
1
31,940
28,677
35,118
33,299
32,066
27,337
34,332
31,731
Surplus/(deficit) before income tax
(126)
1,340
786
1,568
Surplus/(deficit) after income tax
(126)
1,340
786
1,568
Revenue
Total expenses
JOHN HAYLOCK ON PUBLIC PRACTICE SECTOR
Filing percentages
showing improvement
Tax agents are getting better at managing
their workloads.
I
’VE PREVIOUSLY BEEN CRITICAL of the overall performance of tax
agents with respect to getting their tax returns filed on time.
For example in a June 2009 Journal article I noted that: “Extension
of time is a huge privilege for tax agents in this country. Yet the
performance of many tax agents against their filing targets has been
poor.”
At that time the percentage of tax returns filed through tax agents by 31
March had flatlined for several years at around 92-93%. This is considerably
lower than the Extension of Time target of 100%.
The good news is that over the past two years there has been a considerable
improvement with particularly strong performance to 31 March 2011. This
year 95.80% of tax returns were filed by 31 March. This followed an improved
94.79% the year before which was then the best result achieved since 1996.
When looked at over the longer term the trend now appears encouraging.
PERCENTAGE OF TAX RETURNS FILES BY TAX AGENTS BY 31 MARCH
54
The keys to achieving 100%
returns filed on time remain the
same as they have always been.
1. Select your clients carefully. You
can’t file returns for clients who
won’t supply you with information
on time. You are better off without
these types of clients.
2. Ensure you have good training for
your team and consistent systems
for them to use.
3. Prepare a capacity plan. Tax
agents are very fortunate in
having a relatively predictable
flow of work. This means there
is the opportunity to match your
capacity with your demand and be
aware of issues as far in advance as
possible. This means that you can
take action if you have a shortage
of capacity.
4. Ensure you are getting good
quality information from clients
and check it thoroughly before
jobs are started. Encourage your
clients to use systems that are
appropriate for their level of
accounting ability.
5. Turn each job around as quickly
as possible. In particular, focus
on minimising opportunities for
jobs to be held up and on keeping
your number of open jobs at a
minimum. Monitor the jobs at
query and at review very carefully.
6. Plan to achieve your 100%
returns filed well before 31 March.
Despite your best management
things will still occasionally go
wrong. You need spare capacity to
be able to handle the unexpected.
Don’t leave it to the last moment.
There are probably a number of factors at play here.
1. I understand Inland Revenue account managers are placing more pressure on
under-performing practices to improve their performance.
2. Tax agents are managing their work better. Awareness of workflow
management best practice has improved significantly in recent years along
with access to better workflow tools.
3. The weaker economy since 2008 has helped reduce pressure on tax agents.
The growth rate of new businesses has slowed at the same time as the demand
for other services supplied by agents has slackened. A weaker job market has
also meant it is not as hard to fill vacancies as it was from 2005-2008.
Making
these
sorts
of
improvements won’t just help you
achieve your filing targets. Getting
through your work quicker will
delight your clients. It will also make
your practice a better place to work
and a more successful business.
While 95.80% of returns filed is an improvement it is still short of the 100%
legally mandated target.
One hundred percent of returns filed on time is possible.
John Haylock is Practice Performance
Manager at BankLink. john.haylock@
banklink.co.nz
PETER ISAAC ON BANKING
Tobin tax
The EU could have a financial transactions tax
in place sooner rather than later.
T
HE TOBIN TAX or “Robin Hood tax” concept which has
been approved by the EU is a gathering force in the northern
hemisphere.
It now deserves the earnest attention of chartered
accountants in these latitudes too. It is likely to appear on
the local agenda sooner rather than later because most of
New Zealand’s banking capacity is Australian. Australia is a member of the
G20 which is due to meet before the end of the year and the tax on banking
transactions will be high on the agenda.
The tax is one levied on bank-to-bank or financial entity-to-financial entity
transactions. The plan is for a tax of 0.05% or 0.1% to be paid on each
financial transaction in wholesale bond, stock and foreign exchange markets.
In the absence of a capital gains tax, plus the absence of an ad valorem
or GST type of tax on financial transactions, plus the abolition in 1999 of
stamp duties here, the notion of a wholesale transaction tax in recent years
has begun to arouse the interest of NZ tax gatherers.
In the sterling and euro zones the renewed interest in such a tax centres on
the continuing recession and on the financial practices thought to have caused
it in the first place – and which are now seen as prolonging it.
The focus now is on computer-driven high frequency trading (HFT),
an active world of millions of transactions each day. Driven by computer
modelling, this automated process is divorced from real-world fundamentals
and often participants hold tradeable assets such as money for just minutes,
or even seconds, before passing the parcel.
These millions of trades all rely on ultra-thin margins, meaning that one key
way to reduce their number is a small tax on each transaction.
There are though now very strong signs that the tax will be introduced in
some form on a UK-EU axis and that this would be enough to have Australia
follow suit. The argument in favour goes something like this.
Banks have become more powerful than states that are supposed to govern
them. The tail wags the dog, in other words. It's time to call their bluff, which
amounts to their moving elsewhere to more tax-friendly havens.
A halt also has to be made to the practice of moving money simply for profit
– and benefiting no one else in society. Instead of banks being a service to the
rest of mercantilism, it is the rest of industry and everything else that now
must respond to the acquisitive whims of the banking system.
Such a tax would defuse the current volatility of markets, especially
volatility engendered by computer-driven systems that exist simply to make
profit by microsecond trading operations.
There is now a consolidated opinion that the banks held firm in Australasia,
and Canada for example because they remained a service business. In contrast,
banks routinely failed in the United States and Great Britain, and in several
European countries, simply because they had become “the business”.
This point of view holds that these banks had become not so much too big
to fail as too powerful as economic entities to regulate.
In 1936, when Keynes first proposed a financial transaction tax, he wrote:
"Speculators may do no harm
as bubbles on a steady stream of
enterprise. But the situation is serious
when enterprise becomes the bubble
on a whirlpool of speculation.”
The late James Tobin of the United
States codified this view and laid the
groundwork for the tax that now
bears his name.
Although the sterling and euro
zones are now looking hard at Tobin,
the concurrence of the United States
seems only a distant possibility.
But the public mood in the US is
becoming increasingly ugly in regard
Banks have
become more
powerful than
states that are
supposed to
govern them
to the role that Wall Street played in
this recession.
Jose Manuel Barroso, the president
of the EU announced that Brussels
had adopted the idea of a financial
transaction tax (FTT) following
backing from Germany, France and
a number of other members of the
euro zone. An FTT could be in place
by 2014, according to Barroso.
Under Barroso's proposal – which
he claims has the support of 65% of
European citizens – a minimum tax
rate on trading of bonds and shares
would be set at 0.1% and at 0.01%
for derivative products, and be
levied on trades where at least one
of the institutions is based in the EU.
Even by the standards of the
global economy, 2014 seems fairly
imminent. Chartered accountants
should start following Tobin now.
It may be amongst us sooner than
anyone anticipates.
Peter Isaac is a financial journalist and
author.
55
GRAHAM HAMBLY IN THE UK
funding remains expensive and
difficult to obtain for many
businesses. Finance teams have
to ensure they strike the right
balance between risk and reward.
4) Process
improvements
–
technology is the key to helping
finance teams to do “more with
less”.
BIG 4 UNDER ATTACK
New rules and responsibilities
CFOs face new strategic challenges and the
rules around audit are under revision in the UK.
U
K COMPANY directors are increasingly turning to their
finance teams to develop a strategic plan for growing the
business and to manage this process, says a new report by
Robert Half UK.
Following a series of high-level roundtables it was revealed
that corporate boardrooms are now relying on the finance
function to manage and support growth strategies “in a way that would have
been unthinkable a generation ago”.
That means finance departments are moving from being principally reactive,
internal business operations, to taking a wider view of a business and the
market in which it operates.
Likewise, CFOs and finance directors are more frequently being tasked with
developing future business strategy.
GMAC’s CFO Mark Tweed said that finance is now expected to be the
facilitator of growth. “My role is to cascade this through the department so
that team members can become growth leaders too.”
Diageo Europe Supply’s FD, Richard Bee, stressed that he sees finance’s
future role in terms of owning delivery of exemplary performance instead of
just supporting it.
Those attending the roundtables agreed there are four main themes facing
finance leaders:
1) Leadership is now key – as organisations prepare for growth there is a real
opportunity for senior finance professionals to provide genuine leadership.
2) Building future finance teams – existing employees will need to assume
additional responsibilities, and existing staff will need additional training
and development to cope.
3) Guarding the bottom line – margins continue to be squeezed while debt
56
The European Commission looks
set to shake up the UK accountancy
profession to its core.
A leaked draft of the European
Commission’s green paper on audit
apparently proposes to end the
selling of non-audit services by the
audit firm, mandatory rotation of
auditors and even dual audits of the
biggest companies.
Internal markets commissioner
Michel Barnier is the man behind
the report. He says: “There are
weaknesses in the way the audit
sector works today. That’s why the
European Commission will make
ambitious proposals in the coming
weeks to overhaul the audit sector.”
PwC’s chairman Ian Powell
reacted by saying if implemented the
proposals risk undermining quality
and confidence in the audit market.
“You do not solve any perceived lack
of auditor independence by moving
to audit only firms,” Powell says.
The EC paper is due to be formally
unveiled in November and follows
the Office of Fair Trading giving the
green light for an investigation by
the Competition Commission into
the Big 4’s stranglehold on the audit
of listed companies. The House of
Lords also reported recently that
“something drastic had to be done”.
STAY AT HOME
Almost two out of three UK-based
CFOs would not relocate abroad,
even when offered a “dream
package” of the right career
opportunity
and
remuneration
package.
Research carried out by a leading
recruitment consultant found that
only 16% of those surveyed have
relocated abroad during their career.
For those CFOs who would
consider relocating overseas, the
primary driver would be career
progression (36%) or a higher salary
(30%). A better quality of life would
attract 27% of CFOs to move abroad.
NEW AUDIT RULES FOR UK SMES
The government has proposed new
rules to save SMEs millions of pounds
in reporting and accountancy fees.
The consultation on “Audit
Exemptions
and
Change
of
Accounting Framework” sets out
plans to allow more small companies
and subsidiaries to decide whether
the UK small companies must fulfil
both the balance sheet and turnover
criteria. Under the new proposals
UK SMEs would be eligible for audit
exemption by meeting any two of
the three criteria, saving them an
estimated £206m per year.
The government is also proposing
to introduce legislation in 2012 to
A leaked draft of the European Commission’s green paper on audit
apparently proposes to end the selling of non-audit services by the
audit firm
The top financial cities that would
attract those CFOs prepared to
relocate were New York, Sydney and
Hong Kong.
However, the results show that
most CFOs believe that Britain is still
an extremely attractive environment
to live and work.
or not to have an audit.
Current EU rules mean that to
classify as small for accounting
purposes, a company must comply
with two out of three criteria relating
to their turnover, balance sheet total
and number of employees. However,
to obtain an audit exemption in
exempt most subsidiary companies
from mandatory audit, provided
their parent is prepared to guarantee
their debts. Savings here are
estimated at £406m per year.
Graham Hambly is a British journalist
and editor of PQ magazine.
Tax Manager - Advisory
Wellington based
We are looking for a Tax Manager to join ANZ’s Tax Advisory team. This role involves being part of a premier in house tax team, providing
pragmatic tax advice to the business.
The Tax Manager will:
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To be successful in the role, we are seeking a candidate with good knowledge of New Zealand tax legislation and 4+ years tax experience.
The candidate should have demonstrated practical analytical skills and sound judgement. In addition, the candidate should have a strong
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Join our team today by visiting www.anz.co.nz/careers and search for reference NEW003765 to apply for this position, or to view other opportunities.
Applications close Friday, 18 November 2011.
ANZ National Bank Limited
57
NEIL MILLER ON POLITICS
The shape of the next
government
Neil Miller makes his 2011 election predictions.
T
HERE IS A FAMOUS saying that economists have predicted eight
of the last three recessions.
Similar arguments can be made in the field of political
science where picking election trends and poll results can be
problematic. It is particularly fraught when there are still over
40 days to go at the time of writing. If a week is a long time in
politics then five weeks is an age, particularly when it encompasses the end of
the Rugby World Cup and essentially the serious election campaign. To date, it
has just been political skirmishing.
This column sets out predictions about how each party will go and the likely
strengths and weaknesses of their respective campaigns. All parties will be
given an expected percentage of the vote and a predicted number of seats, both
electoral and list.
NATIONAL
The incumbent National Party is a runaway leader in the polls, currently
averaging around 55%. Even in a global downturn and the aftermath of the
Christchurch quakes, Prime Minister John Key has unparalleled approval
ratings and a strong majority of New Zealanders believe the country is heading
in the right direction.
Despite the talk of National being able to govern alone, National itself does
not expect that. National has already indicated it would look to conclude a
number of support agreements with other parties even if it did have the seats
to govern alone.
58
National has set a target of 48%
of the vote, a commanding figure in
the modern era. Senior party figures
know that keeping above 50% is
unlikely for a number of reasons.
There is usually a natural narrowing
of the polls in the election as Labour
and the minor parties get more media
coverage.
New Zealand voters paradoxically
tell pollsters that they dislike
MMP because it creates “weak”
governments but at the same time
they do not want any one party to
dominate. National is also expecting
a couple of attempted knock-out
blows from Labour.
As
frontrunner,
National’s
campaign is likely to be relatively
risk-averse but considerably more
attacking than 2008. John Key is
clearly the party’s greatest asset
and he will be prominent in every
advertisement, billboard, brochure
and speech. The campaign theme is
“Building a Brighter Future” which
follows on from the 2008 campaign
theme “Choosing a Better Future”.
Key policy planks will be building
stronger economic growth, rebuilding
Canterbury, building better value for
money in public services and building
a safer New Zealand. National will
look to portray itself as being in the
centre between the “extremism” of
Act and the “failed policies” of the
Left. The party will want to be seen
as fiscally responsible and inclusive.
In their favour is popularity in
Auckland and Christchurch with
young males and, crucially, with
women. Over half of National
supporters are women, something
which did not occur in the Bolger,
English and Brash eras. National
will be targeting the provinces,
Wellington, young people and
pensioners.
Realistically, National can only be
de-railed by significant mistakes or
proven scandal.
Because John Key is critical to
the success of National, Labour will
target him strongly in the campaign
and accusations will doubtless fly. If
Labour can dent the Key brand, they
will damage National.
LABOUR
Election 2011 will be critical for
Labour. Few people expect the party
to win but it has to at least remain
competitive and relevant. The polling
trends for Labour this year started
bad and have steadily gotten worse.
However, it is almost certain they will
improve in the run up to the election.
On the positive side, Labour will
receive increased media coverage,
leader Phil Goff will have more
chances to go head-to-head with the
PM and they will be able to unveil
a number of new policies and new
candidates. The country has had a
rough year economically and people
are hurting. There should be some
resonance for a change message.
The leadership question is settled for
now and Phil Goff is an experienced
campaigner who can be expected to
lift his performance in the campaign.
Historically, Labour has saved up a
huge policy or scandal to unveil late
in the campaign. In 2005, this was
the interest-free student loans policy
which swung the election. In 2008,
it was the failed attempt to link John
Key to the H-Fee scandal, largely
because he was not involved.
There are many challenges. Poor
polling can become a self-fulfilling
prophecy as National found out in
2002. Segments of Labour voters are
heading off to National or the Greens.
There is a lack of consistent focus
on key issues with too many themes
being pursued on a seemingly daily
basis. Even early in the campaign a
worrying number of Labour MPs are
getting into trouble about their signs
and advertising.
Interestingly, those signs do not
feature Phil Goff at all.
Though the financial information
is confidential, Labour is unlikely
to have the bulging war chest they
enjoyed in the Clark years. Many
voters still wonder if Labour MPs have
re-connected with the people or still
consider the 2008 result a “mistake”.
Finally, the Labour hierarchy
will be concerned that spurned MP
Chris Carter’s promised tell-all book
will come out in the middle of the
campaign.
Labour will do best if they run a
focussed campaign, target the Prime
Minister and stick to a small number
of issues important to mainstream
National has
set a target of
48% of the vote,
a commanding
figure in the
modern era.
Senior party
figures know that
keeping above
50% is unlikely
voters – the high cost of living (“are
you better off then you were in
2008”), job creation, a capital gains
tax and no asset sales.
GREENS
The Greens are the only minor party
in New Zealand political history to
have consistently polled over 5%.
They are also the only minor party not
to have been in coalition and the two
statistics appear to be related.
Green polling has been high all
year and they will enter the campaign
looking for at least 15 MPs this time.
That would give them considerable
clout in the House.
Globally, the Green brand is
incredibly strong. Many people are
naturally positive towards the Greens
even if they are sometimes sketchy
on their actual policies. This year, the
new younger co-leadership team is
consciously playing up their economic
policies as well as their traditional
environmental credentials. Green
billboards exhort voters to vote “for
a richer New Zealand” and one of
their flagship policies is the promise of
100,000 Green Jobs.
How convincing these economic
arguments are remains to be seen with
widespread criticism of the economics
behind the jobs policy. There is also
a danger that voters in stretched
financial circumstances might see the
environment as a luxury and focus on
hip pocket issues.
That said, the Greens can expect a
strong result but, as tends to happen
with their vote, fall short of their own
target and end up slightly less than the
average polls.
MAORI
Being in government with National
for three years is a mixed blessing for
the Maori Party in 2011. It has given
them two seats at the Cabinet table
and the opportunity to advance a
number of key policies including the
Foreshore and Seabed, Whanau Ora
and anti-tobacco measures.
Conversely, the arrangement has
been unpopular with some Maori
voters and it makes it harder for the
Maori Party to criticise the government
or promote new policies. People can
rightly ask “you were in Cabinet, why
didn’t you do something then?” This
is a hard question to answer and all
coalition partners have struggled with
it in the past.
Given the high regard Pita Sharples
and Tariana Turia are held in by
Maoridom and the comparative
weakness of Labour and Mana, the
Maori Party are likely to hold at least
four Maori seats with a reasonable
chance Labour will pick up one at
their expense.
ACT
In April, former National leader
Don Brash took control of Act in an
extraordinary coup – while not even a
member of the party. At that time, he
confidently predicted Act would reach
10-15% by the election and even
59
sceptical commentators felt that 5-7%
was attainable. (Brash’s 2004 Orewa
speech as National leader saw a 17%
point jump for National, the largest
monthly increase ever measured.)
However, since the coup, Act has
been distinctly “untidy”. Bizarrely,
none of the current MPs are returning
to parliament even though one, even
more bizarrely, will be campaigning in
an electorate for the party vote only.
This is unheard of for a departing
politician.
The party still seems divided,
leaks profusely and had a falling out
with their talented but controversial
creative director John Ansell.
Act is also limited by its lack of
appeal with female voters and those
outside of Auckland.
Rumours of their imminent demise
are exaggerated and they will be in the
next parliament. In four of the past
five elections, polls have consistently
understated Act’s actual performance
by 1-2%. The party still has
considerable resources at its disposal.
In the campaign, Don Brash will have
to start talking more about economics
which is his, and Act’s, strength.
Finally and most importantly,
National voters in Epsom will
strategically vote and push John Banks
across the line at the last minute. This
means Act will not need to reach the
5% threshold.
National voters in Epsom want to
see their seat return to the blue team
but they are deeply pragmatic. If they
consider three Act MPs would be more
useful to the government than one
National MP they will strategically
vote in great numbers.
MANA
The newest party in parliament is the
Mana Party lead by breakaway Maori
MP Hone Harawira. He has lined
up a number of well-known political
faces including union organiser Matt
McCarten and former Green MPs
Sue Bradford and Nandor Tanczos.
Veteran protestor John Minto gave up
a self-proclaimed lifetime of political
neutrality to join the party in a senior
role.
Despite the big names, their mix of
Maori nationalism and far-left policies
is unlikely to attract much support.
They may pick up a few disaffected
voters from Labour, the Greens or
the Maori Party but will more likely
be hovering up voters who previously
went for fringe parties.
National and Labour have already
ruled out working with Mana so the
new party has no chance of being part
of the next government.
Dunne is almost certain to return
alone. After the last election, United
Future’s chief of staff revealed they
had very little funding and virtually no
party infrastructure outside of Ohariu
and parts of Auckland. He even
concluded there probably was not a
place for a centrist, liberal party under
MMP. When Dunne goes, United
Future will likely follow shortly after.
In 2014, it may well be Chauvel
against Shanks again with both parties
determined to “regain” the plum seat
of Ohariu.
PROGRESSIVES
Former National
leader Don Brash
took control of Act
in an extraordinary
coup – while not
even a member of
the party. At that
time, he confidently
predicted Act would
reach 10-15%
Harawira will likely hold his seat
and they will come tantalisingly close
to getting enough support for a second
MP.
UNITED FUTURE
United Future leader and sole MP Peter
Dunne, as always, has been a safe pair
of hands in Cabinet, more than useful
in the House and occasionally floated
his own ideas. Dunne faces a stiff
challenge in his own electorate as he is
up against two sitting MPs – Labour’s
Charles Chauvel and National’s Katrina
Shanks. All three claim to be ahead in
their internal polling. It is likely that
National will give their voters a nod
and a wink to return Dunne rather than
risk splitting the centre-right vote and
allowing Labour in. The long-suffering
Shanks will have to wait another term
before having a full tilt at the seat.
This will definitely be the last election
for Jim Anderton’s Progressive Party,
a party formed when the Alliance split
in 2002. It’s founder and sole MP is
stepping down from parliament.
Although the party will be listed on
the ballot papers, no candidates have
been selected, they did not apply for
a broadcasting allocation, only one
policy has been released and no-one
else is mentioned on their website.
The party exists primarily so that
Anderton can be treated as a party
leader in parliament, even though
he has been a de facto Labour MP
for many years. Removing the party
from the ballot paper would have
raised questions about whether the
Progressives were a legitimate party.
Anderton has shown his hand by
writing to constituents urging them to
vote for the Labour candidate and even
door-knocking with her. His letter has
been referred to the Chief Electoral
Officer on the grounds it appeared
to be an election advertisement. On
November 26, the pretence will finally
be over.
NZ FIRST
New Zealand First is attempting to
come back after being knocked out of
parliament last time by the narrowest
of margins.
After a long quiet hiatus, Winston
Peters has re-emerged and started
pushing the same old buttons while
flashing the same old grin. He may be
a little more wrinkled these days but
his party managed to stay at around
2.5% in the polls without actually
doing anything.
Their billboards sport the vaguely
threatening slogan “we win – you win”
and Winston will feature prominently
on all their election material.
While there will still be sections
of the electorate receptive to his
simple populist messages, Peters
faces the challenges of a shaky party
organisation, a lack of money, the
loss of incumbency and, critically, a
question of trust. He has to convince
5% of voters he can be trusted back
into parliament. New Zealand First
will threaten but ultimately fall
short, a good result for National but
potentially fatal news for Labour.
Labour is basically resigned to being
the second largest party in parliament
after the election but is pinning its
hopes on being able to cobble together
an extended coalition of LabourGreens-Maori-NZ First to scrape
over the line. This already appears
deeply unlikely but New Zealand First
getting 3-4% would be ideal for John
Key’s party as those NZ First votes,
which could have only gone towards
supporting Labour, will be wasted.
look to get some space to redefine
themselves because Labour should
be much stronger in Maori seats next
time.
On November 27, it will be
abundantly clear how accurate these
predictions actually were.
THE NEXT GOVERNMENT
It is hard not to see a strong National
Party forming the next government.
As they did in 2008, they will look
to enter into agreements with other
parties even if they don’t need them. A
coalition with United Future is a given
and likely with Act.
There will be greater engagement
with the Greens though MP Catherine
Delahunty’s comments she would
resign if the Greens go into Cabinet
with National complicates their
position.
The Maori Party will be offered
a similar deal to 2008 but may not
take it. If the Maori Party feels it has
been excessively damaged by its close
relationship with National, it may
PREDICTIONS
(Totals more than 100% due to
rounding)
NATIONAL – 48% (58 seats)
LABOUR – 32% (38 seats)
GREENS – 10% (12 seats)
MAORI PARTY – 3% (4 seats)
ACT – 3% (4 seats)
MANA – 1%
(1 seat – just short of two)
UNITED FUTURE – 0.5%
(1 seat – well short of two)
PROGRESSIVES – 0.5% (0 seats)
NEW ZEALAND FIRST – 0.3% (0 seats)
Neil Miller is a Wellington writer and
contributor to National Radio’s The
Panel.
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PETER SWITZER IN AUSTRALIA
Optimism in Aussie
Economic readings are picking up over
the Tasman.
I
T MIGHT BE SURPRISING to some Kiwis but there was no bleating
across the ditch when your beloved All Blacks gave us a belting in the
semi-final at Eden Park. We were “done” by a better team, who really
turned up to win, and congratulations.
However, there will be plenty of whingeing on Melbourne Cup Day –
no, not if a Kiwi horse wins the Cup as we are used to that – but if the
Reserve Bank does not deliver us an interest rate cut.
Until the second week in October, the negative economic data was piling
up: confidence, lending and employment were all diving nearly as fast as the
popularity of our Prime Minister, Julia Gillard, and her party.
(By the way on the latest party polling from Herald/Nielsen, the Labor
Government would attract 30% of the primary vote compared to the Coalition
on 48%.)
Adding to the sinking feeling over here for business and investors has been the
turmoil on global financial markets with the nincompoops in Europe generally
and Greece in particular undermining stock prices. By early October, nothing
was going right and the economists started changing their tune, at long last, with
more and more predicting a rate cut on the first Tuesday in November or Cup
Day as we call it over here.
Regular readers know I have been ranting and raving against our central bank
for being too heavy handed with interest rates. Reserve Bank boss, Governor
Glenn Stevens, has argued that our historically high terms of trade was set to
pump up inflation. He says his and his board’s decision to push up the cash rate
to 4.75%, creating a home loan interest rate around 7.5%, was a pre-emptive
strike before inflation got out of hand.
The RBA has a target band for the underlying rate of inflation in the 2-3%
band and the latest readings were in this groove but were tending to the top of
the range. However, other private inflation indicators have been pointing to a
lessening of inflation and in concert with the weaker economic readings shortened
the odds of a cut on Cup Day.
Interestingly, the Westpac/Melbourne Institute consumer confidence reading
has picked up over the past two months but the revelation has been that the big
driver for the improved confidence (which is still in negative territory) has been
the expectations that a) there might be a rate cut coming up, but b) economists’
predictions of three more rate rises ahead over the next year, are now being ruled
out.
The promise of no more hikes or even a cut explains why economic readings
have picked up in early October.
All of this has been helped by a 10% rebound on the stock market and so all
that was bad has been turned into good, to put it simply. But can it last?
Putting his twopence in is our Federal Treasurer, Wayne Swan, who was recently
named by EuroMoney magazine as the best finance minister in the world.
(We are not carried away with the accolade as he was up against little opposition,
given the dullards who have been running countries in the OECD and I reckon
the guy who deserved it was the Chinese finance minister, whoever he or she is!)
62
Anyway, Swan is looking at the
Euro-debt mess and its potential
impact on global economic growth
and warning that his budget surplus
might not turn up on schedule.
He has promised his GFC-created
deficits would swing into surplus
next financial year, just in time for
the next election. However, he looks
like he is softening us up for a miss,
which he quite rightly blames on the
Europeans.
I reckon this is not his first attempt
to create some excuses for a possible
miss on his budget surplus plan but
it could be a public message to the
Reserve Bank that with external
negatives starting to pile up against the
Aussie economy, it might be time for
some internal relief and stimulation.
All of this comes as we’re told by
an Ernst & Young survey that we are
among the hardest working employees
in the developed world averaging 44hour weeks, but we are one of the
least productive. Somehow, wasted
wages on unproductive endeavours is
costing us a whopping $109 billion a
year.
All of this comes out of the first
ever Australian Productivity Pulse
survey which talked to employees
who sheeted the blame home to
people management (54%), then the
organisation structure (23%), lack of
innovation (15%) and old technology
(8%) for our poor productivity.
Well, that’s the workers’ views but I
suspect many bosses would argue that
recent changes to industrial relations
under the Labor Government have not
helped their pursuit of productivity.
What was a really worrying finding
was that some 32% of employees
plan to leave their current place of
employment in the next 12 months.
The retraining effect of a much
more mobile workforce could have
something to do with the 10-year
slide in Australia’s productivity. But
that could be just a baby boomer
excuse to blame poor young Gen-Y.
Peter Switzer is a financial commentator.
Leadership Awards
Roderick
W
OOOKK NNOOW
BBO
Who will be 2011’s Best in Business?
Join us in shining a light on the best of business 2011 NZICA Leadership Awards Dinner
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The winners of these prestigious awards will be announced at a gala dinner on Wednesday 30 November at the Town Hall Wellington.
Tickets are limited, so book now. Tickets cost $169 per person or $1,450 for a table of ten. All prices include GST of 15%.
Book your tickets now.
Email: leadershipawards@nzica.com
63
Image matters
PEOPLE JUDGE OUR PROFESSIONALISM BY THE WAY WE LOOK
Wayne Hartley has been the
Owner and Director of Shape
Hair Design in Wellington city
since 1985. He is one of New
Zealand’s top hairdressers,
specialising in providing
hairstyling and colour services
to professional consumers.
shape.co.nz
Rebecca Connor of “Boutique
Mobile Styling" is a Wellingtonbased freelance makeup and
hair stylist. She specialises in
weddings, balls and portfolio
shoots. Rebecca also stocks
and sells Jane Iredale Mineral
Makeup and offers training and
makeup parties in her Brooklyn
studio or as part of her mobile
service.
rebeccaconnor.co.nz
Marlena Neilson has worked
for Annah Stretton since May
2010, establishing herself as
an important cog in the fashion
wheel. Each season Annah
Stretton creates a collection
unlike the last – 100% New
Zealand made garments with
provocative undertones and a
hint of luxury which are also
very wearable.
annah.stretton.co.nz
STYLISTS’ TIPS
A
Amanda Chow, Prov CA, Auditor, BDO Wellington
CLOTHING: Marlena chose a “smart and sassy” look for
manda Chow contacted Image Matters because she
was sick of wearing too much black, and “looking like
every other person walking down Lambton Quay”.
“I don’t want to look like the boring accountant who
always wears black. My wardrobe consists of black,
black, black. When I do put some colour in, it’s my
grey or navy top.”
Amanda says when she goes shopping she always
finds black looks best as it’s “safe”, slimming and
doesn’t date.
The dress code at her work is corporate as there are
regular client meetings.
While Amanda usually thinks about what to wear to
work the night prior, sometimes it is “in the morning
in a mad rush”.
“If I’m going to be out seeing a client I’ll dress more
professionally, but if I’m in the office my clothing is
tidy but a bit more comfortable.”
She tends to wear high-waisted skirts and pants with
blouses.
Amanda hopes to have a lot more colour in her
wardrobe after the makeover and feel more confident
mixing and matching items.
She was also keen to get makeup tips.
“To achieve a carefree look covering redness on
my face without having to spend too long in the
mornings because I just don’t have time – often
I’m running so late I have to do my make-up on the
train!”
She says she had lots of fun getting a makeover
and describes her new look as “professional and
flattering”.
“The combination of hair, makeup and clothing
helped achieve a professional, presentable look. It
will now be easier to wear my hair out and not put
product into it.”
She plans to dress using a lot more block colour and
use accessories to add colour to an outfit.
Amanda, with an imperial purple top to complement
her skin tone.
“With Amanda we needed to give her some shape
while keeping a longer line on her slight frame. I used
a tunic that framed her beautiful face and wrapped
around her waist.”
Marlena says the choice of slimline trousers in a dark
shade added some extra length to her leg.
“Jewellery and a belt are the accessories used in areas
where we want to draw attention to – the belt to bring
Amanda in at the waist and the gorgeous jewels to
bring the eye back up to that gorgeous smile.”
Marlena says in the work place attention should be
drawn to the face.
“Always wear accessories that can do this – earrings,
strong coloured or bright necklaces and brooches will
do this. Try not to go over the top as this can cause a
distraction.”
She says accessories should be used to tie the outfit
together rather than just wearing “pieces”.
“We also used an Obi belt on Amanda to do this. It
added more colour and showed off her tiny waist,
giving her great shape.”
Her tip for Amanda: “Don’t be afraid of colour.”
Amanda before her Image Matters makeover.
64
MAKEUP: Rebecca chose a professional look for
Amanda “with a bit of a bounce to it”. She applied
a natural looking base aimed at making Amanda’s
foundation look a second skin using Jane Iredale’s
Purepressed Powder.
“This is a mineral foundation. It boasts a four in one
concept offering foundation, concealer/sunscreen and
powder. As it is pressed it does not go everywhere and
with a sunscreen in it too, you couldn't ask for more.”
She highlighted Amanda’s eyes with eyeliner and
neutral coloured eyeshadows, then accentuated the
shape of her lips with lipstick.
Her tip for Amanda is to use a fun lipstick for a quick,
simple, effective look.
Wella System
Professional Hydrate
Shampoo
RRP $34
Wella System
Professional Hydrate
Conditioner
RRP $34
Wella System
Professional Perfect
Ends
RRP $34
Saphire necklace
$60
Small pearls
$35
Imperial Bars top
in purple
$340
Heart to Heart vintage necklace
$110
HAIR: Amanda liked the length of her hair so Wayne
Obi belt in gold
kept it long and added layers for more shape and
texture. He also strengthened her fringe and cut the
layers so they would help frame her face.
Wayne used Wella Colour Touch, a demi colour that
also helps to condition hair and add shine. He used a
cool dark brown that will not throw as much warmth or
look dry as the colour fades.
Wayne recommends Amanda use Wella System
Professional Hydrate Shampoo and Conditioner to
moisturise her hair and protect it from drying out.
Wella System Professional Perfect Ends is a great hair
treatment for Amanda as it seals any split ends and
leaves a smooth, shiny finish.
$45
Pigeon pant in
black
$220
Do you know an Image
Matters candidate?
Please send a full-length
photo and details to:
imagematters@nzica.com
INSTITUTE
shelf life
What’s new in the library
Business Information Librarian Kamala Bain takes a look at what’s
new on the library shelves.
Here is a selection of new items available from the library. To request, please contact Library and Information Services, email
library@nzica.com or phone 04 474 7882, citing the item’s identification number.
ACCOUNTING FIRMS
BUSINESS MANAGEMENT
COMMUNICATIONS
Value-based fees:
Cash management
Internet marketing
how to charge – and
toolkit for small &
for accountants, by
get – what you’re
medium businesses:
Nick Holliday,
worth: a guide for
piecing together cash
CreateSpace, 2010
serious consultants,
management for New
by Alan Weiss,
Zealand SMEs, by
Pfeiffer, 2008
Outlines the author's approach to
charging value-based consulting fees.
Discusses how to establish value-based
fees, and addresses: fee objections, the use
of retainers, when and how to raise fees,
ethics and fees, and setting fees for nonconsulting opportunities.
ID No: 34481
i Also available as an Ebook
ASSET TESTING
Asset planning – the impact of
Jeffrey D Sherman,
NZICA, 2011
Provides a step-by step guide to the cash
management process. Discusses planning,
monitoring and controlling cash, and dealing
effectively with your bank and banker.
Provides tips for improving operations to
maximise cash generated and minimise cash
required. Works through an in-depth case
study to reinforce the concepts discussed.
[Note that the accompanying CD-Rom this
book is sold with is not available for loan.]
Aims to assist advisors who manage
client’s expectations around asset planning.
Outlines what can and cannot be achieved
in order to be eligible for residential care
subsidies.
ID No: 34458
Zealand context, by
Provides an
introduction to the political, economic,
social and cultural environment in which
New Zealand managers operate: New
Zealand's recent economic and business
history; legislative, institutional and cultural
frameworks; and the emerging issue of
resources and sustainability in the business
sector. Concludes with a discussion on the
future of New Zealand business. Includes
case studies.
ID No: 34485
organisational
storytelling, by Wade
Jackson, 2011
ID No: 34567
Aotearoa New
July 2011
practical guide to
2011
Management: the
Donnelly, New Zealand Law Society,
Stories at work: a
Glyndwr Jones, Wiley,
MSD's means assessment for
Theresa Donnelly and Colleen
ID No: 34498
Provides a practical
guide for business leaders
on how to become a memorable storyteller.
Includes interviews with 12 leaders – many
from New Zealand – about how they use
organisational storytelling in their roles.
ID No: 34571
residential care subsidies, by
Provides a short guide
to internet marketing
for accounting firms.
Discusses how to build an
effective website, use social media such as
blogs and Facebook, and set up pay-per-click
advertising.
INFORMATION TECHNOLOGY
VBA and macros:
Microsoft Excel 2010,
by Bill Jelen and
Tracy Syrstad, Que,
2010
Provides a step-by-step
guide to using Visual
Basic for Applications (VBA) and macros
to import data and produce reports in
Microsoft Excel 2010.
ID No: 34507
66
FRAUD AND FORENSIC ACCOUNTING
Fatal risk: a cautionary tale of AIG's
corporate suicide by Roddy Boyd,
Wiley, 2011
Relates the role of global insurance
company, AIG, in the 2008 global financial
FEATURED BOOK
LEADERSHIP
PROPERTY LAW
crisis. Argues that the company's collapse
was "an inside job" and not the result of
collateral calls made by Goldman Sachs on
AIG's Financial Products unit.
ID No: 34511
VALUATIONS
The leadership
Cradle to grave: the interface
Valuation:
challenge, by James
between property and family law,
measuring and
M Kouzes and Barry Z
by Juliet Moses et al, Auckland
managing the value
Posner, Jossey-Bass,
District Law Society, March 2011
of companies, by Tim
2007
Provides the complete set of
presentations from a 2011 Auckland
District Law Society seminar on the
interface between property and family law.
Koller, et al, Wiley,
Identifies and
describes ten essential
behaviours that
successful leaders employ. Draws on
research by the authors into how people
behave when they are at their personal
best in leading others, and identifies a
series of distinct leadership practices
which are consistent across industries and
professions.
ID No: 34503
The truth about
leadership: the
no-fads, heart-ofthe-matter facts you
need to know, by
James M Kouzes and
Barry Z Posner,
Jossey-Bass, 2010
Identifies and discusses what the authors
describe as ten fundamental truths
about leadership and being an effective
leader. Written from the perspective of an
emerging leader.
ID No: 34501
ID No: 34450
TAX
The big kahuna: turning tax and
welfare in New Zealand on its head,
by Gareth Morgan and Susan Guthrie,
Public Interest Publishing, 2011
Argues that New Zealand's current
welfare system should be abolished and
the tax system radically overhauled in
order to achieve a more coherent and
fair system of redistributing income and
wealth. Outlines the authors' approach to
achieving this, including the introduction of
an unconditional, tax-free basic income to
replace current income support measures.
ID No: 34581
Company tax, by Richard Burge and
Michelle Dykes, TEO Training, 2011
Briefly outlines recent legislative
changes in the area of company tax.
Considers a range of typical scenarios
affecting privately owned companies in
case study format.
2010
Explains the
core principles of value creation and
demonstrates practical ways for companies
to implement these principles in their
decision making. Describes different
valuation frameworks with detailed case
studies. Explores the challenges of valuing
in special situations such as valuing
high-growth companies, and companies in
emerging markets.
ID No: 34502
Valuation workbook: step-by-step
exercises and tests to help you
master valuation, by Tim Koller, et
al, Wiley, 2011
Provides a range of exercises to test
the reader's knowledge of valuation.
Exercises include multi-choice questions,
lists and table completions, and calculation
questions. Includes a short summary of
each topic. A companion volume to library
ID: 34502.
ID No: 34562
ID No: 34374
A more comprehensive list of new items can be found in The Informed
Professional – Latest Articles and Publications, which is published monthly to the
Library section of the Institute’s website – nzica.com/library
67
INSTITUTE
shelf life
Latest readings – auditing
Business Information Librarian Daniel Gray surveys recent key
articles on environmental reporting.
To request any of these items or a specific subject search, contact Library and Information Services. Email: library@nzica.com,
or phone 04 474 7882, citing the item’s identification number or your topic of interest.
ARTICLES
Building relationships, by Richard
Chambers, Internal Auditing, 36 (6)
July 2011
States that internal auditors must
become adept at building great
relationships to maximise their
effectiveness. Discusses the reasons
why this is so and outlines six personal
attributes that internal audit leaders must
possess.
ID No: 34495
Bribery risk goes global, by Leon
Gettler, Charter, 82 (6) July 2011
Emphasises the importance of global
companies having systems in place to deal
with bribery and corruption. Discusses
anti-bribery and anti-corruption laws,
the potential consequences of a bribery
or corruption charge and the role of the
company audit committee.
ID No: 34488
Does CEO duality constrain board
independence? Some evidence
from audit pricing, by Mark A Bliss,
Accounting and Finance, 51 (2) June
2011
Reports the results of a study into
whether CEO duality (ie the CEO and
board chairman being the same person)
affects board independence and demand
for higher quality audits. Also discusses the
relationship between board size and audit
fee pricing.
ID No: 34362
68
Getting the most out of external
Hypocritical oaths? by Nicole Dando,
audit, by Hanif Barma, Internal
Internal Auditing, 35 (1) February
Auditing, 35 (4) May 2011
2011
Discusses the steps an audit committee
can take to measure the effectiveness of an
external audit.
States that although some companies
have codes of ethics that set out their
commitment to conduct business ethically,
these organisations can still fall prey
to risks that arise when ethical lines
are crossed, or corporate responsibility
principles are ignored. Asserts that the
internal audit team plays an important role
in systematically managing and monitoring
ethical performance. Describes how to carry
out an ethical assurance process.
ID No: 34355
The importance of an independent
standard-setting process,
International Journal of Government
Auditing, 38 (2) April 2011
Makes a case for the need for an
independent standard-setting body for
government financial reporting.
ID No: 34175
ID No: 34298
BOOKS
Internal audit: how to develop
professional scepticism, by Nicole
McCoy, Royce D Burnett, Mark E
Friedman, and Marc Morris, Journal
of Corporate Accounting & Finance, 22
(4) May/June 2011
Argues that in the current difficult
economic climate, an issue that concerns
top level management is how to produce
highly regarded financial statements while
minimising external audit costs. Highlights
the problems associated with companies
choosing to use their internal audit
departments more during the external
audit process. Provides a companywide
framework for developing and maintaining
the professional scepticism of internal
auditors when contributing to the external
audit process.
ID No: 34294
Auditing cloud computing: a
security and privacy guide, by Ben
Halpert, John Wiley & Sons, Inc 2011
Provides a guide to auditing the security
and privacy of cloud computing services.
Consists of a series of white papers by
cloud computing experts.
ID No: 34580
Audit quality in practice, by David
Chitty, Wolters Kluwer (UK) Limited,
August 2011
Examines the concept of “audit quality”
– a term that the International Audit and
Assurance Standards Board acknowledges
does not have a universally recognised and
accepted definition.
ID No: 34570
The fraud audit: responding to
Internal control of fixed assets: a
Accounting information systems,
the risk of fraud in core business
controller and auditor's guide, by
by Marshall B Romney and Paul J
systems, by Leonard W Vona, John
Alfred M King, Wiley, 2011
Steinbart, Prentice Hall, 2011
Wiley & Sons, Inc 2011
Provides a step-by-step guide to
developing a system of internal controls
for fixed assets. Topics covered include IFRS
versus GAAP, capitalisation and expense
of fixed assets, depreciation for books and
taxes, contingent assets and liabilities, and
internal auditing. Written from a United
States perspective.
Provides a textbook on accounting
information systems. Divided into five
key topics: conceptual foundations of
accounting information systems, systems
control and audit, systems applications,
the REA data model, and the systems
development process. Discusses new IT
developments such as virtualisation, cloud
computing, the use of RFID tags to track
inventory, and the adoption of XBRL for
financial reporting. Includes real-world
examples, hands-on Excel exercises,
problem questions and cases, and chapter
quizzes.
Provides a guide to fraud auditing in
core business systems such as procurement,
disbursement and payroll. Discusses
professional fraud auditing standards,
fraud scenarios, the role of brainstorming in
identifying fraud risks, building a fraud audit
programme, data mining for fraud, fraud
audit procedures, and document analysis.
Concludes with a chapter on conveying the
impact of potential fraud to management.
ID No: 34428
ID No: 34377
A guide to forensic accounting
investigation, by Steven L Skalak,
Thomas W Golden, Mona M Clayton,
New Zealand audit manual and
Jessica S Pill, Wiley, 2011
toolkit 2011: for auditing small
Presents a detailed step-by-step
guide, written by forensic accounting
and auditing experts, that is designed to
assist in understanding the complexity
of fraud deterrence, detection, and
investigation. Discusses strategies ranging
from basic techniques to intricate tests
and technologies. Covers issues such
as common fraudulent schemes, the
psychology of the fraudster, the key value
of professional scepticism, responding
to whistleblowers, working with lawyers
and prosecutors, and electronic data
interrogation.
ID No: 34244
ID No: 34304
ID No: 12172
and medium sized entities, by
New Zealand Institute of Chartered
Accountants (NZICA) 2011
Provides practical guidance to
practitioners conducting audits for small and
medium sized entities (SMEs), including the
application of the International Standards on
Auditing (New Zealand). Part A of the toolkit
provides an overview of the entire audit and
a discussion of key audit concepts, while
Part B focuses on how to apply the concepts
outlined in Part A. Part B uses two fictional
case studies to provide examples of how
to apply the various ISA (NZ) requirements
discussed in each chapter. Developed by
NZICA in response to member demand.
Handbook for internal auditors, by
Charles H. Le Grand, Matthew Bender,
2011
This manual is designed to assist internal
auditing departments in understanding
and complying with the "Standards for the
Professional Practice of Internal Auditing",
issued by the Institute of Internal Auditors.
Secondly, the manual provides step-bystep audit approaches for completing
the department's internal audit mission.
Includes a CD rom of forms and checklists.
ID No: 34389
For these articles, books and other new items in the library this month subscribe
to the Informed Professional Bulletin by email: library@nzica.com
69
INSTITUTE
news
Notice of decision and order of the Professional Conduct Committee
At
a meeting of the Professional
Conduct
Committee
of
the New Zealand Institute of
Chartered Accountants (NZICA)
held in private on 12 July 2011,
the Committee considered matters
relating to the conduct of Donald
Norman Finlay of Auckland, a
Chartered Accountant in public
practice.
The Committee found that the
following matters would otherwise
warrant being referred to the
Disciplinary Tribunal.
In his role as a Chartered
Accountant in public practice and
in relation to a complaint by “the
Complainant”, Mr Finlay:
1) In performing the audit of Entity
A, an issuer, for the year ended
31 March 2009, failed to comply
and/or document evidence that he
had complied with one or more of
the following auditing standards:
a) AS-202 – Agreeing the Terms
of an Audit Engagement in
that there was no engagement
letter; and/or
b) ISA(NZ) 300 – Planning an
Audit of Financial Statements
and/or
ISA(NZ)
315
–
Identifying and Assessing the
Risks of Material Misstatement
Through Understanding the
Entity and its Environment and/
or AS-304 – Audit Materiality
and/or ISA(NZ) 330 – The
Auditors Response to Risk
in that there was no planning
documentation; and/or
c) ISA(NZ) 240 – The Auditors
Responsibilities Relating to
Fraud in an Audit of Financial
Statements in that there was no
assessment of risk; and/or
d) AS-500 – Audit Evidence in that
there was no audit evidence to
confirm bank accounts and/or
other material balances; and/or
e) AS-510 – Related Parties in
that there was no verification
70
of related party advances; and/
or
f) ISA (NZ) 540 – Auditing
Accounting
Estimates,
including fair value accounting
estimates,
and
related
disclosures in that there was
no supporting documentation
to support investment property
values and/or the licence to
occupy liability; and/or
2) Failed to appoint an engagement
quality reviewer to perform an
engagement quality control review
on Entity A, an issuer, in breach of
paragraph 42 of AS-220 – Quality
Control for Audits of Historical
Financial Information and/or
paragraph 141 of PS-1 – Quality
Control;
3) Failed to comply with paragraph
8 of ISA (NZ) 230 – Audit
Documentation in that your
work papers for Entity A failed to
document:
a) The nature, timing and extent of
the audit procedures performed;
and/or
b) The results of the audit
procedures performed and the
audit evidence obtained; and/or
c) The conclusions reached; and/
or
4) Performed the audit of Entity
A, an issuer, when he did not
have the competence necessary
to perform such an audit to
the expected technical and
professional standards, in breach
of the Fundamental Principle of
Competence of the Code of Ethics;
and/or
5) In
performing
compilation
engagements Mr Finlay failed to
comply and/or document evidence
that he had complied with SES2 Compilation of Financial
Information; and/or
6) Failed to source and/or source
in a timely manner Professional
Indemnity Insurance appropriate
to the nature and scale of the
accounting services which Mr
Finlay’s practice offers to the
public in breach of:
a) Clause 2.10 of Appendix X of
NZICA’s Rules (being the Rules
in force up until 9 November
2009)
b) Clause 2.10 of Appendix IX of
NZICA’s Rules (being the Rules
in force since 10 November
2009); and/or
7) Offered accounting services to
the public without holding a
Certificate of Public Practice:
a) prior to 30 October 2008, in
breach of Rule 18.2 of NZICA’s
Rules and/or the Fundamental
Principles of Integrity and/or
Professional Behaviour of the
Code of Ethics; and/or
b) On or after 30 October 2008,
in breach of Rule 18.2(a) of
NZICA's Rules and/or the
Fundamental Principles of
Integrity and/or Professional
Behaviour of the Code of Ethics;
and/or
8) Was a director (from 5 August
1993 to date) and/or shareholder
(from 1992 to date) of Gouldsbury
& Associates Limited, a company
which offers accounting services
to the public:
a) without the consent of Council,
in breach of Rule 19.2(c)(i)
of NZICA’s Rules (being the
Rules in force prior to their
amendment on 30 October
2008) and/or the Fundamental
Code of Ethics; and/or
b) without the consent of Board,
in breach of paragraph 2.2(c)
of Appendix IX (being the
Rules in force since 30 October
2008) and/or the Fundamental
Code of Ethics.
With the written consent of Mr
Finlay, the Professional Conduct
Committee made the following
orders, which shall be entered on his
record:
1. In accordance with Rule 21.6(d)
(v) he be severely reprimanded;
(vi) he pay to NZICA the sum of
$10,000;
(vii) he pay costs to NZICA of
$1500.
The Committee also sought
and accepted Mr Finlay’s written
undertaking in accordance with
Rule 21.54A (b) that he resign from
NZICA once his interim suspension
has been lifted by the Disciplinary
Tribunal.
The Professional Conduct Committee considered it was in the public interest to direct publication of
its decision and the orders made,
with full mention of the Member’s
name and locality but without any
identifying details of third parties.
Details of the decision and the
Professional Conduct Committee’s
orders are published in the Chartered
Accountants Journal, the New
Zealand Herald and on NZICA’s
website www.nzica.com/dt.
DJ Barker
Chairman
Professional Conduct Committee
Accountants
15 August 2011
Notice of decisions of the Disciplinary Tribunal
from membership of the Institute as
previously ordered by the Disciplinary
Tribunal on 14 April 2011.
(MEMBER SUSPENDED)
At a hearing of the Disciplinary
Tribunal of the New Zealand
Institute of Chartered Accountants
held in private on 17 August 2011
the Disciplinary Tribunal considered
an ex-parte application from the
Professional Conduct Committee
under Rule 21.11 of the Rules of the
Accountants for the interim suspension
from membership of the Institute of
John Lawrence Hibbard a Chartered
Accountant of Christchurch.
Reasons
The Tribunal are satisfied that
it is necessary and desirable that
the member be suspended from
membership of the Institute to protect
the interests of the public, his current
and prospective future clients and on
the basis that he has admitted stealing
a significant amount of money.
Orders of the Disciplinary Tribunal:
(a) Pursuant to Rule 21.20 (a) of the
Rules of the New Zealand Institute
of Chartered Accountants, the
Disciplinary Tribunal ordered
that John Lawrence Hibbard be
suspended from membership of
the Institute until further order of
the Disciplinary Tribunal upon
the grounds that it is satisfied that
it is necessary and desirable to do
so having regard to the interests
of the public and the financial
interests of the member’s current
and prospective future clients.
(b) Pursuant to Rule 21.20 (b) of the
of Chartered Accountants, the
Disciplinary Tribunal ordered that
after 14 days have elapsed notice of
the suspension be published in the
Christchurch Press, the Chartered
Accountants Journal and on the
Institute’s website with mention of
the member’s name and locality.
R J O Hoare
Chairman
Disciplinary Tribunal
Accountants
17 August 2011
(REVOCATION OF SUSPENSION)
The Disciplinary Tribunal of the
Accountants resolved unanimously
pursuant to Rule 21.21 of the Rules
of the New Zealand Institute of
Chartered Accountants issued under
the New Zealand Institute of Chartered
Accountants Act 1996 on 19 August
2011 to revoke the suspension of
Donald Norman Finlay of Auckland
Orders of the Disciplinary Tribunal
The Disciplinary Tribunal resolved
that:
(1) Pursuant to Rule 21.21 of the
of Chartered Accountants the
suspension of Donald Norman
Finlay be revoked;
(2) Pursuant to Rule 21.35 of the
of Chartered Accountants the
notice of revocation of suspension
be published in the Chartered
Accountants Journal, the New
Zealand Herald and on the
Institute’s website with mention of
the member’s name and locality.
Upon the grounds that:
Mr Finlay has agreed to resign his
membership of the Institute once the
suspension is revoked and this is with
the agreement of the Professional
Conduct Committee.
Refer to the Professional Conduct
Committee’s decision dated 15 August
2011 at www.nzica.com/dt
R J O Hoare
Chairman
Disciplinary Tribunal
Accountants
26 September 2011
71
CPD ADVANTAGE
CPD ROADSHOW TO INCLUDE SMALL TOWNS
An upcoming CPD roadshow covering Penny and Hooper and the abolition of gift duty will
travel to a number of small towns, despite the risk of low attendance numbers.
“Where
possible,
NZICA should
endeavour
to take its
courses to
the smaller
centres as a
service to its
members”
NZICA’s new Director of
Professional Development
Frank Owen CA has an
affinity for small accounting
firms in small towns, having
begun his accounting career
in Balclutha, Otago. This is
one the reasons why an upcoming CPD road
show includes smaller places, where
attendee numbers might not be high.
“But more importantly, our members are
busy and time is very precious. Where
possible, NZICA should endeavour to take its
courses to the smaller centres as a service to
its members,” Owen says.
“The other side of that is that we need
the support of members in those smaller
centres to ensure the course breaks even.”
The upcoming road show offers two timely
courses, one on Penny and Hooper and the
other on the abolition of gift duty.
The road show will travel off the beaten CPD
track to take in places including Greymouth,
Westport, Timaru, Oamaru, Cromwell and
Whakatane.
Senior staff from government departments
closely involved with the subjects will assist
in preparing and presenting the courses.
“For Penny and Hooper we are being
joined by senior legal and technical Inland
Revenue staff. For the abolition of gift duty
we have input from the Ministry of Social
Development on issues around gifting and
eligibility for rest home subsidies and other
benefits.”
Owen brings a wealth of tax and training
knowledge to NZICA.
Most recently he was Tax Advisor to the
Minister of Revenue and has held roles
including Chair of KPMG’s National Tax
Practice. He also founded TEO Training Ltd in
1996, running the company for six years in
New Zealand and Australia.
“At the time the Institute had introduced the
mandatory 20 hours CPD requirement. I had
always enjoyed preparing and presenting
continuing education courses and it seemed
a good opportunity to have fun running my
own business doing something I enjoyed.”
He has been running courses for NZICA
since 1984.
“For some years I felt that NZICA was
capable of providing a better CPD product
than its competitors and this role gives me
the opportunity to put my thoughts into
practice.”
He says training and professional
development appeals to him because the
world is constantly changing, and it is
imperative people keep up.
“There are huge constraints on our
members’ time and this means it becomes
difficult to do all that is required to keep up.”
“This is where well-researched, welldocumented courses can assist members
enormously.”
Owen says accountants have a huge
responsibility in the organisations they work
for.
“In the case of CAs in public practice they
have a duty of care to the members of the
public who rely on their advice. Failure to
keep abreast of new developments places all
accountants at risk of getting it wrong and
this can be both a painful and an expensive
process.”
BRANCH SOCIAL EVENTS
NORTHLAND BRANCH
Annual golf tournament and
Christmas function
Wednesday 7 December
4.45pm assembly for 5pm tee off
The Pines Golf Course
Parua Bay, Whangarei
The Northland Branch invites you to an
Ambrose golf evening, followed by dinner.
Members are welcome to bring partners,
friends, staff and colleagues.
Tournament prize pool and a spot prize draw
on the night. Register by 30 November.
AUCKLAND BRANCH
57th annual golf tournament
Friday 18 November
Pukekohe Golf Course
Registrations 11.30am
Packed lunch and dinner provided. Nonmembers and guests welcome.
WAIKATO-BAY OF PLENTY BRANCH
Waikato-Bay of Plenty annual golf day
11 November
ASB Cambridge golf course, Hamilton
The annual golf tournament provides an
opportunity for serious golfers to compete
for the Best Net, Best Gross and Stableford
trophies. It is also a great social occasion for
the less competitive golfer.
Waikato-Bay of Plenty amazing
accountants race
11 November
Hamilton
Form a team and compete against other
accountants, undertaking tasks and
challenges around Cambridge. The race will
be a fun day out with friends while testing
your knowledge and stamina.
Coastal women’s network
Restyle, refresh and revamp with Repertoire
23 November 5.30–7pm, Tauranga
This event will be a fun-filled evening of
styling and summer fashion trends. Bring
a friend – non-members welcome. To
register your interest please email sarah.
rundstrom@nzica.com
Waikato women’s network
Vino at Vetro
24 November 5.30–7pm
Hamilton
Enjoy champagne and nibbles on arrival,
then wine tasting and a chance to buy some
high quality Mediterranean and European
products for your Christmas entertaining.
Bring a friend – non members welcome.
CENTRAL SUB-BRANCH
Central sub-branch corporate challenge
16 November 6–8.30pm, Rotorua
Join last year’s champions and quiz masters
from Red Stag Timber for this annual
evening of fun and friendly rivalry.
HAWKE’S BAY BRANCH
Family Christmas Picnic
16 December, 5pm
Clive Park (Hastings side of Bridge)
Bring your family and a picnic. Enjoy a huge
bouncy castle, a magician and a visit from
Santa.
Email Petrina.hibben@nzica.com to register
your interest.
MARLBOROUGH-NELSON BRANCH
Family Christmas Party 2011
3 December, 10.30am–noon
Nelson
Join other branch members and their
families at The Grape Escape Cafe for the
annual children’s Christmas party, with face
painting and a visit from Santa. This is a free
event put on by the Marlborough-Nelson
Branch. Contact lea.hart@nzica.com for
more details.
WAIRARAPA SUB-BRANCH
Wairarapa Golf day and Christmas dinner
18 November
The Wairarapa Sub-Branch Committee
extends a warm invitation to all members,
partners and solicitors to attend the
branch’s golf function and Christmas dinner.
MANAWATU BRANCH
Manawatu Branch Biennial Gala Dinner
7 December
The Biennial Gala Dinner is the highlight of
the season for the Branch. Come and catch
up over a glass of wine and some great food.
All events can be found at nzica.com
INSTITUTE
74
shelf life
J011
75
Privilege Partner News
New Partnership with BMW
NZICA is excited to welcome BMW as our latest Member Privileges
partner. A world leader in automotive manufacturing, BMW’s
globally recognised values of quality and excellence make it a
natural fit with NZICA and our members.
Many members will remember BMW through our work with
them on NZICA’s EQ Appeal earlier this year, when we auctioned off
a BMW 320d Touring Edition Sport to raise funds for Christchurch.
We’re pleased to be entering into a closer working relationship that
will see a range of privileges for members, including an exciting
contribution by BMW to the NZICA Leadership Awards.
This year the lucky winner of the Westpac Outstanding New
Member of the Year Award will walk away with a one-year lease
on a fully loaded 2011 BMW 123d Coupe, including insurance. In
addition to this fantastic prize, the new partnership will include
exclusive discounts on new BMW vehicles and opportunities to
take part in BMW events such as Driver Training Courses and Head
to Head, which pits BMW against its two key competitors, Audi and
Mercedes.
Stay tuned for details on BMW offerings in the Member Privileges
section of our website: nzica.com/privileges.
Vero invites members to spend a relaxing day at sea
As a special offer to NZICA members, Vero CIS is offering the chance
to win a fantastic day out on the water to the value of $2,000!* Sit
back and take a cruise, challenge your mates on a fishing charter or
yacht race or perhaps invite friends aboard for an exclusive soirée at
sea - the choice is yours. It’s easy to get on board, simply take out one
or more insurance policies with Vero CIS (excluding travel insurance)
before 20th December 2011 to go in the draw.
Vero specialises in home, contents, travel, car and boat insurance,
and as a NZICA member you have access to these policies at specially
negotiated rates. Choosing Vero CIS for your insurance needs ensures
you’re getting the very best service as well as some of the most
comprehensive insurance cover on offer. For a quote call Vero CIS on
0800 505 905 or visit nzica.com/privileges/vero.
Please note: Due to the ongoing situation in the Canterbury region
Vero are unable to accept new business in Christchurch or the
surrounding area.
*Terms and Conditions apply.
Limited time transfer terms from Accuro
Accuro Health Insurance is offering NZICA members special transfer
terms, but only for a limited time. From now until 20 December
2011, you could transfer from your existing medical insurance with
another provider to Accuro SmartCare without the need for further
underwriting*. Plus enjoy your 10% NZICA member discount on
Accuro’s already competitive premiums and a further 2.5% discount
if you pay by direct debit.
So dust off that old policy, and find out why Consumer has
given Accuro SmartCare Hospital and Surgical plan the tick for
the third year running. To get a quote and find out more, visit
nzica.com/privileges/accuro.
*Terms & Conditions apply.
Hot Deals
WIN! A trip for two to Queenstown
with ORBIT HOLIDAYS
Are you in need of a holiday? Book your next break with Orbit Holidays by
31 January 2012* and you will be entered in an exclusive NZICA draw to
‘WIN a holiday for two to Queenstown.’ Prize includes: Return flights,
2 nights hotel accommodation and 3 day car rental.
WIN A HOLI
DAY
TO QUEENSTO
WN...
EXCLUSIVE D
RAW
FOR NZICA
MEMBERS O
NLY!
Contact Orbit Holidays - Book your next holiday with us and provide your NZICA Membership ID to be entered in the
draw. *Full terms and conditions apply – ask Orbit Holidays for further details or visit: www.nzica.com/privileges/hotdeals
Orbit Holidays | Phone: 04 496 3288 | Email: holidaytravel@orbit.co.nz | www.orbitholidaytravel.co.nz
Comes with:
superb handling.
10%
OFF
FOR NZICA MEMBERS *
APPLY NOW for an
NZICA CardPlus Shell Fuelcard
and enjoy savings on fuel and
other special offers.
It’s why travelling
with us just
feels better.
Visit avis.co.nz or call 0800 655 111
*Valid until 30 November 2011. AWD number – R035200 to
be quoted at the time of booking. Further conditions apply.
Visit www.avis.co.nz or call 0800 655 111 for full details.
Visit
www.nzica.com/privileges/cardplus
Check out the latest Member Privileges at nzica.com/privileges
CLASSIFIEDS
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Thinking of Selling?
Don’t leave it too late!
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www.accountingpractices.co.nz
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Tel: 0800 180 400
Go to www.cfooncall.co.nz
then click “Become a CAD partner” link
Murray Keane licensed agent REAA 2008
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Your client may be software
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services.
To speak to me in confidence:
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Mercury IT Ltd
DDI (04) 471 6155 or 021 431 561
Peter.macleod@mercuryit.co.nz
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Phone 0800 89 13 70
be seen here
The Chartered Accountants Journal reaches around 25,000 business professionals in NZ and 4,000 worldwide
To book classifi
fied advertising space please contact
Rosie Payne
rosie.payne@nzica.com
09-917 5931
78
CLASSIFIEDS
ACCOUNTING PRACTICE
OPPORTUNITY
SOUTHLAND
Sole practitioner is seeking a staged
retirement and is looking for a
competent professional with great
client relationship skills and a high
level of integrity with a view of a
gradual taking over of client base.
Alternatively, this may suit an existing
firm interested in an amalgamation
of practices or a firm wishing to
expand.
All potential arrangements
considered.
Confidential replies to: B603
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PO Box 11-342,
Wellington
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bbe seen hhere
The Chartered Accountants Journal reaches around 25,000 business professionals in NZ and
4,000 worldwide
To book classifi
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Rosie Payne
rosie.payne@nzica.com
09-917 5931
WELLINGTON
Centrally located with a fantastic view over Wellington Harbour, the Wellington Conference Centre
features a variety of rooms available for hire. All rooms have natural lighting and have been
architecturally designed with a contemporary feel. Accommodating up to 110 people, the centre
is ideal for a variety of corporate events, from small meetings to all-day workshops, seminars and
after-work cocktail functions.
CONTACT:
The Conference Centre Manager
on 04 474 7896 or conference.centre@nzica.com
or complete a booking request online at
www.nzica.com/wellingtonconferencecentre
79
NEWS
EWS
opinion
The changing face
of insurance
Transparency, communication and
clarity are required if the insurance issue
is to be resolved in Christchurch.
by TERRY MCLAUGHLIN FCA
T
o
say the frustration with the insurance industry is high
among Christchurch business people is understating it.
For more than seven months Christchurch businesses
have been contending with a number of issues around
property and leases, cash flow and banking relationships,
tax concessions and employment matters.
But the largest and most commonly cited problem is
insurance and the minefield that is insurance claims.
Claims are only slowly being paid. Approximately $1bn
has been paid out to date from an estimated claim pool of
$15bn.
The information flow from insurance companies is also slow and
the lack of new insurance policies being issued is hampering the quake
recovery.
80
This has huge implications for Canterbury
businesses and the wider New Zealand
economy. Without insurance, banks are
unwilling to lend and so business recovery
stalls. Many businesses or individuals
looking to move to Christchurch to aid the
rebuild are unable to do so.
More disturbingly, the longer this goes on
the greater the risk of capital flight from our
second largest city.
The New Zealand Institute of Chartered
Accountants (NZICA) and the New Zealand
Law Society (NZLS) are concerned with these
issues, not only on behalf of our members
but also of our members’ clients. Uniquely,
NZICA and NZLS members service more
than 90% of businesses in New Zealand
and our members are keen to support the
recovery plan.
With this in mind, NZICA and the
NZLS recently convened a meeting with
the insurance industry – heads of insurance
companies, brokers, loss adjusters, the
Insurance Council of New Zealand and
CERA – to address these issues and to look
for long-term business solutions.
In evidence was a willingness to engage and
work together to rebuild Christchurch. A
forum that could have very well turned into
a finger-pointing exercise, and a defensive
insurance industry, was in fact a frank
discussion, a sharing of information – from
the frustrations of our members and their
clients to the issues the insurance industry
are facing and reasons behind the delays.
Make no mistake, the issues the insurance
companies are facing are vast and will take
time to resolve. There is no silver bullet
for this situation. Identifying the blockages
in the system enabled the forum to look at
potential solutions and it is clear that there
is a desire to ensure successful resolution of
claims.
The insurance industry understands the
cost implications of delayed payments are
huge. Supply chain choking points, inflation
and the rising cost of the rebuild will not be
in the insurance industry’s favour. They are
not reluctant to pay out, but are reluctant to
act in haste while we are still in the middle of
an event. The continuing aftershocks in the
region is one issue that unfortunately is out
of all of our control.
Saying that, the forum made it clear that
greater transparency, communication
and flow of information is required
from the insurance industry.
Businesses are encouraged to
talk to their brokers or banks in
the first instance. As a professional
body, NZICA has been committed
out there for businesses. Progress
payments can be issued on business
interruption insurance while the
claims are in the process of being
settled. There are also new insurance
options available for businesses
in Christchurch – businesses are
everyone within New Zealand.
There is still a long way to go in the
rebuild of Christchurch but by coming
together to help work through issues
and provide greater transparency
to the business community, the
insurance industry will go a long way
Disturbingly, the longer this goes on the greater the
risk of capital flight from our second largest city
to educating our Christchurchbased chartered accountants with
seminars and training since February.
Following this meeting, we have
agreed to work more closely with the
loss adjusters in order to ensure our
members are clear and understand on
behalf of their clients the information
required in order to expedite a claim.
Moreover, there are options
encouraged to speak to their broker
or their bank. Each business will be
assessed on its own risk but there are
options available and not the closed
shop we have all been led to believe.
The face of the insurance industry
is changing, albeit slowly. Insurance
of the future is going to be more
sophisticated and ultimately more
costly, not only to Cantabrians but to
to relieving the frustrations currently
faced.
NZICA is encouraged by the initial
conversations and hopes this is the
start of an ongoing dialogue aimed at
getting Christchurch businesses back
on the road to recovery.
Terry McLaughlin FCA, Chief Executive
of NZICA.
Worth its weight
The 2011 NZ Audit Manual & Toolkit, has
been specifically developed to give practical
assistance for auditing small and medium
sized entities.
Much more than a manual – a simple ‘how
to’ approach is provided through case studies
and over 100 internationally recognised tools,
templates and work papers, making the
application of your skills and capability to an
audit even easier.
To order your Audit Manual & Toolkit visit
nzica.com/publications or call 0800 4 NZICA

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Transcription

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