Audit fee rules debate heats up
Whether it is taxation or technology, the world of accountancy never seems far from disruption. Rumblings about conflicts of interest in the area of company audits/consultancy roles are another source of controversy in the profession.
Scott Knight, head of audit at BDO, the UK's sixth largest audit firm, is the latest high-profile operator to contribute to the audit fee debate.
He wants to see more restrictions on the range of services auditors offer clients.
Audit fee rules change
The issue is that auditors can be tempted to overlook client difficulties so that they can continue raking in the high fees from other services, such as tax advice, that they provide for the same client.
The EU tried to address the problem in 2016 with new regulations restricting non-audit fees.
But Knight says there are too many grey areas. “The rules are too confusing and it’s too easy to trip up. I would love there to be a really clear black line. The rule should be if you do the audit, you can only do audit and audit-related work. Audit committees should have a really clear demarcation,” he tells the Financial Times.
Failed construction group
The issue came to light recently with the Carillion collapse. Each of the Big Four accounting firms, EY, Deloitte, PwC and KPMG, had provided non-audit services to the failed construction group.
Prem Sikka, professor of accounting at the University of Essex, agrees with Knight.
He tells the FT: He said: “Instead of 125 pages of verbal gymnastics we need a very simple rule — that auditors should act exclusively as an auditor — and that means no consultancy services of any kind for audit clients.
Leads to unfair competition
"That rule should apply to public and private companies, though small and medium-sized businesses could be exempt.
“The provision of non-auditing services by auditing firms leads to unfair competition. Auditing firms have used audits as loss-leaders in the hope that having got a foot-in-the-door, they will then secure lucrative non-auditing work.
"This is an abuse of the external audit function and disadvantages those businesses who cannot use audits as a market stall for selling other wares.”
Sponsors for the British Accounting Marketing Awards
The first British Accounting Marketing Awards, which will feature at Accountex in just three weeks, will be sponsored by MyFirmsApp.
The awards will showcase the best marketing from accounting firms across the UK and recognise those that that have made the biggest impressions and impact over the past 12 months.
Experts from accounting and marketing industries will form the judging panel and include:
- Steve Pipe, speaker and marketing strategist.
- Richard Woods, digital marketing specialist and BBC Apprentice finalist.
- Kelvin Golding, CEO MOST Marketing.
- Steven Briginshaw, business coach and mentor.
- Gary Das, entrepreneur.
- Zoe Lacey-Cooper, Accountex event director.
Winners to be revealed at Accountex
The winners will be announced at Accountex, the accounting profession’s leading exhibition for accountants on Wednesday, 23rd May 2018.
“This is the first time that the profession will be able to see what others are doing in terms of pro-active marketing to win new clients and raise the profile of their practices,” commented Joel Oliver, CEO, MyFirmsApp. “Sharing best-practice and what really works will make a huge difference to accountants that want to develop their marketing potential.”
Amanda C Watts, the founder of TwentyTwo Agency and the British Accounting Marketing Awards says: “Marketing can seem like something that has not been needed in the profession to date, as many firms have chosen to just rely on referrals.
"However modern marketing enables you to build deeper relationships and trust with prospects and clients. I saw a massive gap for Accounting Practices to be recognised for their hard work and dedication."
Mel Stride looks into the future of taxation
What better way to warm up a cold and damp start to the week than with a few comments about taxation from Mel Stride, financial secretary to the Treasury.
On the tax system and the changing face of business in the not too distant future, he says: "Who knows where it’ll end up.
"I’ve just had a very interesting discussion session with the All-Party Parliamentary group on tax and somebody said, 'What’s the world of tax going to look like in 10 or 20 years' time?' And the honest answer to that is I haven’t got a clue.
Artificial intelligence and robots
"It might be all the companies being run by artificial intelligence and robots and driverless cars and in fact very few people working, and it’ll be thinking less about taxing things and more about how to distribute the wealth that’s being created in this extraordinarily different economy.
"So it’s a bit of a rollercoaster ride to try and work out exactly where its all going."
On IR 35 going private: "We are going to consult on it and we will await to see what comes back from the consultation. What we do know is that the cost to the Treasury of people being non-compliant with IR35 is very significant, we think, in the private sector, certainly north of a million pounds in lost revenue.
It's an issue of fairness
"So it’s an important thing. And once again, it's an issue of fairness. We’ve already got it in the public sector and it seems to have worked well there. But we have an open mind and it’s certainly something we will be looking at the consultation responses very carefully on and not rush into any early judgments."
And on MTD making life easier: "It should do, and that should be the test of it. There was a time we used quills and parchments and carrier pigeons and things, and I’m sure there were advantages to that but no one would seriously say we should carry on like that now. So I think we’ve got to leap into the 21st century.
Easier for the tax authorities
"But it’s got to work for businesses as well as for HMRC, and that’s the bit that I really get. It can’t just be something that makes life easier for the tax authorities or we collect more tax as a consequence.
"We’ve got to do that because we’ve got to eliminate error, its costing about £9billion per year, through people making oversights and filling things in incorrectly, we’ve got to try to squeeze that down. But equally it’s about making a much better experience and saving time for businesses, that’s really important."
You can the read the excellent full interview by Alia Shoaib of Accountancy Age here...
Accountants expect clients will need more help with VAT
Welcome to Friday, and a bit of interesting MTD research. Accountants reckon they'll provide VAT submission services for even more clients following next April's VAT deadline.
Software group IRIS has found that accountants do not believe their clients are willing to continue to spend time keeping their books up to date and would prefer their accountants to do the bookkeeping.
Around 58 per cent of accountancy practices expect to provide bookkeeping services for clients from 2019. Nearly 73 per cent will continue to carry out submissions for clients when HMRC’s online VAT service ends for businesses with a turnover above the VAT threshold. And nearly two-thirds would make quarterly VAT submissions using bookkeeping software in April 2019.
Stepping up the MTD campaign
The news comes as HMRC is working with industry software suppliers like IRIS and KashFlow in the controlled beta phase of the MTD VAT programme, stepping up its campaign to educate accountants and businesses as the programme enters public beta later in the summer.
Sion Lewis, CEO of IRIS, says, “The IRIS survey confirms MTD for VAT is likely to increase demand from UK businesses for accountancy practice compliance services.
Digital journey
"As the digital journey for businesses reaches this next landmark, we see accountants increasingly transform their practices to businesses that are more digitally enabled and client-centric.
"Accountants need to retain the compliance loop at the core of their practice but they should also use them as the springboard for value-added services, enabling to stay relevant in the coming years."
The survey was conducted among 553 IRIS Software and Keytime accountancy practices in March 2018. The size of practice ranged from sole practitioners to practices with more than five partners.
In other news...
- Credit Suisse is aiming to recoup about £322million from the HMRC that the investment bank paid as part of the 2010 bonus levy. It says the levy had an “arbitrary impact”. The bank’s 400 UK managers saw their pot cut by 30 per cent to help fund the tax. The bank, which is creaking under assets of $billions, cut its global bonus pool by 5 per cent. Should be a good court battle. And I know who's side I'm on!
- Philip Hammond, chancellor, has been getting a little hot under the collar over the HMRC/Lycamobile/Buzzfeed shenanigans. The whole thing is probably just a storm in a teacup. Probably.
- On the subject of teacups, I'm trying to make the transition from being a regular consumer of takeaway coffee in paper/plastic cups to using my own non-disposable cup. And I've been inspired to take action by the Big Four! Read what they and other big accounting firms are doing about reducing/ending plastic pollution in an interesting feature here.
Accounting's regional pay shocker; hurray for Accountex Summit North
The good folk over at Accountancy Age have been busy lately preparing some interesting statistics on UK accounting employment and salary trends.
Their latest effort looks at regional salary differences in the profession and, from where I'm sitting, it uncovers one or two surprises.
Not so much that London and south-east England are at the top of the pay table. Even that Yorkshire and Humberside are among the highest UK payers (well maybe a little bit).
Shocking aspect of the survey
But the most shocking aspect as far as I can work out is the difference between the highest paying area and the lowest.
So that would be the average accountant salary in London is £79k-plus. Whereas in Wales that's a relatively meagre £41k. That's 63 per cent! Below is the Accountancy Age regional survey table:
So what does it all mean? In a nutshell, it's a pretty big gap that shows Londoners are getting a much better deal. But is it worth sharpening up the LinkedIn profile and scouring the job ads? Not necessarily.
For a start, commuting ... Take Southern Railway (aargh!). And property prices for London in particular and the south-east in general are stupidly high.
Perhaps you absolutely love your job
As the Age points out: "Your own individual experiences and preferences are also important. The salaries in the table are simply an average, and may not be reflective of how well you are doing or have the potential to do with your current company.
"Perhaps you absolutely love your job now, and wouldn’t change it for anything, whether more money is involved or not."
From my own personal point of view... I worked in London for about 20 years. And my advice would be: Don't do it!
Hurray for Accountex Summit North!
And while we're on the subject of regional differences. Here's a great piece of news for Accountex Summit North, which held its first conference at Manchester Central in March.
The hundreds who attended are not the only ones who thought it was a great event. The north's No 1 event for accounting and finance professionals has been nominated for three AEO Awards (events industry gongs) for Best launch, Best Conference and Best Innovation.
Event director Zoe Lacey-Cooper says: "The team couldn’t be happier!"
Date for the diary. Accountex Summit North will return to Manchester Central Conference Centre next year on 10 September. You can register your interest here.
British Accounting Marketing Awards reveal finalists
Organisers of the inaugural British Accounting Marketing Awards have revealed the shortlist of finalists.
The winners will be announced at the leading exhibition for accountants, Accountex 2018 on 23 May 5pm in Keynote Theatre 2.
The Bamas will showcase the best marketing achievements from accounting practices, giving national recognition for those who have made the biggest impression and impact over the past 12 months.
Ever-changing landscape of the accounting profession
With the ever-changing landscape of the accounting profession and the opportunities that marketing now brings to accounting practices small and large, marketing has never before played such an important role.
Amanda C. Watts, the founder of TwentyTwo Agency and the British Accounting Marketing Awards says: “I am very excited to be running the British Accounting Marketing Awards.
"Marketing can seem like something that has not been needed in the profession to date, as many firms have chosen to just rely on referrals.
Pioneering the way forward
"However Accounting Practices who are pioneering the way forward need to be recognised for their contribution to the profession and how they are leveraging marketing to deepen their impact.
"Running the awards, in association with Accountex, sponsored by technology company My Firms App, means that we can demonstrate just how far marketing for accountants has come, and how innovative, interesting and inspirational it can be."
The British Accounting Marketing Awards finalists:
Event Marketing
- The Wow Company
- Burgis and Bullock
- Spicer & Co
Rising Star
- Souring Falcon Accountancy
- Gooding Accounts
- Level Accountants
Content Marketing
- RanddUK
- Menzies
- Fitzgerald & Law
Brand Building
- AV Cloud (Ad Valorem)
- Spicer and Co
- Seymour Taylor
The judges of the awards come from a variety of backgrounds including the accounting industry, veteran marketers, and respected industry leaders.
The line-up is: Richard Woods – BBC The Apprentice Finalist 2015; Kelvin Golding - multi-award winning Chartered Marketer; Zoe Lacey-Cooper - Event Director for Accountex; Steven Briginshaw chartered accountant and best-selling author; Gary Das, podcaster and best-selling author; and Steve Pipe who is known as the number one influencer in the accounting profession.
Welcome to Marketing Monthly with Amanda C. Watts
Welcome to the first edition of Marketing Monthly, where our resident marketing expert Amanda C. Watts answers your questions. We've had a few questions from Accounting Insight News readers for the founder of the Pioneering Practice Programme. And as we're all turning our attention to Accountex 2018, Amanda has decided to go with the event theme and answer this question:
“I am exhibiting at a local event this month, and was wondering... How do I make the most of my time and financial investment?”
- Define your key objectives – is it brand awareness, promoting a new service, signing up clients on the day?
- Advertise the fact that you will be exhibiting at the event weeks before it starts. Share your stand number and let people know that you want them to come and talk to you.
- Think about your stand design. If you have a table-top stand this will be a barrier for people to engage with you. While it might make you more confident, you will stop people from starting a conversation with you. Ditch the table or stand in front of it - and remember to smile and look welcoming.
Talk with everyone
- Don’t be afraid to talk with everyone. If the event has a small footfall get out and speak to other exhibitors, remember they too could be your ideal client.
- Have a sign-up form/inquiry form and nice branded literature. Don’t go to an event without a way to sign up a client/book meetings for when you get back to the office.
- Follow up on any leads within three days of getting back to the office. Better yet, follow up the same day so that people remember speaking with you.
Raise your visibility
- Speak up – there are often opportunities to speak at events, volunteer if you can. It is a great way to raise your visibility and if you record the talk you have some online marketing material you can leverage.
- Look your best, but be approachable. I have to be honest, I truly trust someone more if they look smart and are not wearing ripped jeans and a tatty t-shirt. While accountants are being encouraged to dress down, I personally do not want my accountant looking like they work in a creative agency. I bet many other business owners feel the same way, too. Feel free to take off the tie but, remember, you don’t get a second chance to make a first impression... so think before you dress down.
Hard work... but worth it
- Make sure you have more than one person on your stand. Running an exhibition stand is hard work. If the event attracts a large footfall you won’t have time for a bathroom break if you are on your own. Also, if you are on your own you will miss opportunities to speak with people, as they will move on if you are already in a conversation with someone.
- Evaluate the return on investment – both time and money. Exhibiting at events are hard work, so make sure they are worth it.
See you next time!
Amanda has a busy Accountex ahead. She'll be presenting the British Accounting Marketing Awards in Keynote B theatre on Wednesday 23 May, at 5-5.45 am and delivering a session entitled How To Gain New Clients and Build A Strong Digital Brand, on Thursday 24 May at 2-2.45pm in the Sales and Marketing theatre.
HMRC... it giveth and it taketh away, apparently
Good morning everyone, and welcome to Tuesday's dip into the news from the worlds of accounting and finance.
First up today is HMRC. This headline stood out by some considerable distance: "Accountants face increased HMRC demands for client information."
According to Accountancy Daily: "HMRC requests to accountants and other advisers for confidential information on clients it wants to investigate for suspected tax crimes has hit a new high, with over 1,500 production orders issued last year, according to professional services firm RPC."
Tax crime probes
Requests were up 19 per cent, from 1,276 in 2015-16 to 1,507 in 2016-17. The spike follows the 2015 decision to provide an extra £800m for a target of tripling the number of tax crime probes by 2020.
On the face of it, fair enough. But, as RPC's Adam Craggs says, it's quick and easy for HMRC to issue the orders. For the accounting firms involved? Not so much.
"It is a huge burden... These investigations can take several years to complete and can cause serious business disruption to both suspects and their professional advisers," he says. And, of course, failure to comply with an order is not a smart move.
Money-laundering claims
So that's that headline out of the way for the time being. Next up is this one: "HMRC accused of blocking probe into Tory donor Lycamobile... taxman rejects French request to raid telecoms group on money-laundering claims."
This all comes to light after an investigation by news website Buzzfeed (France) claimed to have found all sorts of financial wrongdoing at Lyca. The company denies everything and is suing the site for libel.
But it does appear that HMRC refused to help France's authorities a couple of years ago, saying, in correspondence with the French tax authority, that the group in question was a significant Tory party donor. And it was, to the tune of £2.1million. To be fair, HMRC also said the French case lacked substance.
Completely inappropriate
Nicky Morgan, Tory MP and Treasury committee chair tells the FT: “This clearly raises all sorts of questions and is completely inappropriate. I would expect the committee to look into this as part of our economic crime review and to have some early questions for HMRC about the correspondence that they sent.”
HMRC says the content of the correspondence is "regrettable". “We never take political donations into account when working out how to work with other countries, or indeed on our own, in enforcing the tax law. But I can see how this is open to being read that way, which is why that should not be in there.”
Making tax digital
OK, that leads us nicely to Making Tax Digital.
Intuit QuickBooks has prepared a great guide for accountants. It's called: "Start preparing your clients for Making Tax Digital." And this is what it offers: "Our free marketing kit has been designed to equip you with the tools that will help your clients successfully tackle MTD."
It seems to do what it says on the tin. Check it out here.
Video: how can accountants scale the value ladder?
Accountancy business mentor and networking expert Itzik Amiel will be delivering two keynote sessions at Accountex 2018.
Check out the video preview of Itzik's keynotes here.
GDPR – why do we need it? And what to do about it?
GDPR Day, May 25, is approaching fast. For most of us, conversations are under way, but have action been plans put in to place? Are staff are being trained? Is there a data protection lead in place?
The processes seem arduous, but this is for good reason. The new regulation is an update to the 1998 Act that was created out of the EU Data Protection Directive in 1995. So why change it now?
The world was a different place 20 years ago. Amazon launched in July 1995 and, in September of the same year, eBay was launched. The first time you could send a text message with predictive text was in 1993. And most computers had 8MB ram – with an additional 4MB ram costing $400. Since 1995 we’ve seen the launch of Facebook (February 2004) and Twitter (March 2006) among many other platforms we have merrily been handing personal data to.
Cusp of giant disruption
Interaction with our personal data, where it was hosted, and our buying habits were on the cusp of giant disruption. We didn’t think about where our data was, who was using it or even if it was being bought and sold as a commodity.
Comparing our world with now, it’s easy to see why the previous laws are outdated and the reason GDPR is coming into force - to replace and strengthen the Data Protection Act.
There are several requirements for GDPR, but these can be grouped into three principal areas:
1. Preparation
Train staff to ensure they understand the regulations and make the practice compliant - it is the responsibility of everyone who deals with personal data. To put it another way if a client phones and asks where their personal data is held, would everyone know?
Assign a data protection lead to ensure someone has GDPR front of mind and has the authority to make changes and advise the managers to implement change, as well as provide ongoing training. Everyone in a practice also needs to understand how to respond if a ‘data breach’ occurs.
2. Assess
Auditing existing processes determines how data is used, handled and shared within the practice and clients.
Ensure passwords and documents are securely stored (including those on laptops and smart devices) and client engagement letters have been updated.
Accountancy practices should also look at policies to correctly identify callers and ensure there a process to prevent incorrectly sharing information with the wrong clients.
3. Resolve
Making an action plan with deadlines is a must. This should include the creation of data processing records, a data protection policy, a security audit and seeking re-consent where necessary.
You must document what personal data you hold, where it came from, who you share it with and what you do with it. After the audit is complete, it will help resolve any short comings to ensure GDPR compliance.
Once policies are defined they need to be documented, shared with staff and become the new ‘business as usual’. It’s good practice to keep your clients aware of the progress you have made.
Resources
There is a plethora of resources available to help with compliance. The Information Commissioner’s Office (ICO) provides good general business advice including templates to document where all personal data is stored. For accountancy practice specific information, there are plenty of specific guides and resources with the IRIS GDPR hub.
Food for thought
Finally, while there are many practices (and businesses) that worry about GDPR being onerous, it’s worth comparing with food hygiene standards. All food establishments no matter their size, must comply with hygiene standards.
No one would eat at a café playing fast and loose with hygiene and the same could be said for practices that don’t protect their clients’ data.
The new data protection regulation is now just around the corner, deciding when to act is not an option. Deciding what to action this week is a priority. We don’t want anyone getting food poisoning, do we?
GDPR in 10 questions...
- As a decision maker are you aware the law is changing with GDPR?
- Can your company and employees apply the principles of personal data?
- Does your company have the correct procedures to ensure you deliver the rights of individuals under GDPR?
- Is your company holding sensitive data in your systems?
- Does your company have processes to provide all data you hold on a client if requested?
- Can your company demonstrate you have the necessary basis to hold the client data in your systems?
- Do you have the right procedures in place to detect, report and investigate persona data?
- Have you implemented appropriate technical and organisational measures to carry out data protection principles?
- Have you designated a data protection lead in your organisation?
- Outsourcing activities – is your supplier agreement aligned to GDPR?
The gig issue; mental health and accountants; scourge of presenteeism...
One of the issues that seems to crop up a lot in the world of accountancy is the growth of the self-employed sector.
This is seen as an opportunity for accounting software companies that provide labour- and accountant-saving bookkeping technology.
And for accountants? Well they can tap in by being able to emphasise their skills as business advisers as oppose to "simply" bookkeeping experts.
Why do I say all this? Well the FT has produced an interesting video on the changing world of work and how the gig economy is fracturing the relationship between employers and employees. Check it out here.
Mental health attention
Mental health is another issue that, quite correctly, seems to be starting to get the attention it deserves.
A study finds that about half of accountants think their employers aren't doing enough to help with employee stress, anxiety and other mental health problems. And around 60 per cent think the government should be doing more about wellbeing.
Westfield Health's survey found 75 per cent of accountants were looking for better support from their companies.
Pressure to work late
‘The total number of UK working days lost to stress, anxiety and depression resulting from long working hours is 12.5m days," says Westfield's David Capper .
So it's really interesting when you read reports like this. And then the next minute you see a headline like this: "Accountants feel pressured to work late."
Totaljobs finds 45 per cent of accountants feel pressure to work overtime, just behind IT professionals (56 per cent) and HR (46 per cent).
Younger workers feel particularly pressed, with 58 per cent of those aged 18 to 34 years old worrying their boss or colleagues might think they aren’t working hard enough if they leave on time.
It's the scourge of “presenteeism” and it's most common in those earning over £50,000.
A Myanmar deal
And finally, the Association of Chartered Certified Accountants (ACCA) and the Myanmar Institute of Certified Public Accountants (MICPA) have agreed a "capacity building programme" to develop the profession in Myanmar.
ACCA chief executive Helen Brand says: “We will create an action plan for MICPA’s membership of IFAC, working closely with the Myanmar Accountancy Council and Office of the auditor general throughout the project.”