Home' A Plus Magazine : August 2013 Contents 8 August 2013
Large companies in the United Kingdom should put their accounting work up to
tender every five years, the Competition Commission proposed last month, as part
of its investigation into competition in an audit market dominated by the Big Four.
The requirement for FTSE 350 companies to regularly put their audit work to
tender every five years would be a shift from the 10-year re-tendering period, cur-
rently required by the independent U.K . accounting regulator Financial Report-
ing Council. The commission’s plan would also introduce a postponement period
of up to two years granted in exceptional circumstances.
The commission, however, stopped short of proposing audit firm rotation on a
“ We gave careful consideration to other measures, including mandatory
switching, but we think that the measures that we have provisionally chosen will
be the most effective and proportionate way to address the problems we have
found,” Laura Carstensen, chairman of the commission’s audit market investiga-
tion Group, was quoted as saying by Accountancy Age. “ We do not see a competition
problem with audit firms retaining business if they do a good job, but they will
have to demonstrate this on a regular basis.”
Deloitte noted that five-year tendering was unlikely to improve audit quality or
increase competition, while EY said competition between audit firms was already
healthy, reported Reuters.
In February, the commission found that 31 percent of FTSE 100 companies
and 20 percent of FTSE 250 companies have had the same auditor for more than
20 years. The final report of recommendations is reportedly due in October.
FRC calls for probe on
U.K . accounting rules
The Financial Reporting Council in the United
Kingdom last month ordered “a number of par-
ties” to inspect whether International Financial
Reporting Standards are in line with U.K . com-
pany law, The Daily Telegraph reported. The
move comes after a group of investors called
for an urgent review of IFRS after seeking legal
opinion from leading U.K . lawyer George Bom-
pas QC, who found that the standards had sub-
stantial legal flaws, according to the newspaper.
NAO head opposes
The head of Britain’s National Audit Office,
Amyas Morse, qualified his audit opinion on
the Ministry of Defence’s 2012-13 accounts after
saying it failed to properly comply with Interna-
tional Financial Reporting Standards on leases
and impairments. He said it was “likely” that the
department omitted a material value of lease as-
sets and liabilities, required under IFRS, from its
Australia urged to join
global tax crackdown
Australia’s Department of the Treasury admit-
ted last month that it is unable to stop multi-
national companies evading tax. It added that
the country should focus on an international
crackdown led by the G20 and the Organization
for Economic Cooperation and Development’s
plan on preventing companies shifting profits
overseas. According to Melbourne newspaper
The Age, the treasury cited data limitations as
making it difficult to measure losses from the
corporate tax base.
Deloitte faces penalties
over MG Rover advice
Deloitte will face sanctions and a fine after the
British accounting regulator ruled that the firm
fell short in its role as an adviser to car manu-
facturer MG Rover. A Financial Reporting Coun-
cil tribunal said the British unit of Deloitte, led
by now-retired corporate finance partner
Maghsoud Einollahi, failed to meet expected
standards of objectivity in its work prior to MG
Rover’s financial collapse in 2005.
IBM stands behind cloud accounting
practices amid SEC probe
International Business Machines Corp., said on 1 August that it stands by its
accounting methods, amid an investigation by the United States’ Securities and
Exchange Commission into how the company reports revenue from offsite cloud
“I BM ’s reporting of cloud revenue is the result of a rigorous and disciplined
process, and we are confident that the information we have provided has been
consistently accurate,” Ed Barbini, a spokesman for IBM, wrote in a statement
amending its second-quarter 2013 quarterly report to the SEC.
In May, the multinational technology and consulting corporation announced
that the SEC had begun a formal investigation into its cloud accounting practices.
The company said that it was fully cooperating with the probe.
IBM books its revenue from cloud ser vices, such as storing customers’ data and
software applications remotely, in accordance with generally accepted account-
ing principles, Barbini said in the statement.
Analysts believe that the investigation underlines uncertainties regarding
how cloud revenue should be accounted for, Accounting Today reported.
U.K . competition watchdog
urges audit market shake-up
Regulator pulls back on mandatory switch of auditors
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