Our appreciation of current issues in the dispute resolution world was deepened when we attended the Singapore 2016 Global Pound Conference Shaping the Future of Dispute Resolution and Improving Access to Justice. The more we learn about contemporary dispute resolution, the better we understand how our role as consulting (dirty) or independent (clean) expert fits into the process as a whole and the better we can assist our clients.
The opening address by Sundaresh Menon, Chief Justice of Singapore on the impact of globalization on dispute resolution set the tone for the two days of the conference. Menon looked at globalization in terms of three major socio-economic shifts that are taking place:
Legal systems have to respond to these pressures and can do so in three main ways:
Perhaps not surprisingly, Menon finished by emphasizing the qualities of Singapore as a forum for international dispute resolution. In addition to its well-known Singapore International Arbitration Centre, it now also boasts the Singapore International Mediation Centre and is pioneering a process where mediation and arbitration are combined. The most recent addition to Singapore's dispute resolution menu is the Singapore International Commercial Court, of which Menon appeared to be very proud. He sees this as an alternative to international arbitration, with parties agreeing to be bound by its jurisdiction at the outset. The proof of the pudding will be in the eating, however. So far the SICC has only heard a couple of cases.
|Posted in:expert witnessdispute resolutionADRLitigation Support|
Since the early 2000s the accountancy profession has been experiencing a relentless push towards global convergence of standards in accounting, auditing and ethics. Globalization affects the regulatory context in which we do our work as the standards in use are increasingly the same around the world. Convergence has become increasingly necessary to cope with businesses operating in multiple jurisdictions and reporting to multiple regulators. Accounts need to be understandable to a variety of readers and users need to be able to trust that those accounts have been audited to acceptable standards, wherever they were issued from Adelaide to Zurich.
What started as a gradual move towards harmonization of standards gained momentum with the announcement by the EU that all listed companies within it would prepare their accounts under International Accounting Standards from 1 January 2005. This deadline encouraged other countries to follow suit with Australia also adopting the 2005 deadline and New Zealand adopting from 2007. Numerous other countries have followed and the world is falling into two camps IFRS on the one hand and US GAAP on the other.
Similar moves were afoot in auditing and assurance and the standards drafted by the International Auditing and Assurance Standards Board (IAASB) form the basis of auditing standards used in major jurisdictions around the world. In 2006, the Australian Auditing and Assurance Standards Board (AUASB) issued the IAASB's standards as legally binding Australian standards with minor modifications. At this time the IAASB was in the process of redrafting its standards to make a clearer distinction between standards and guidance (the Clarity rewrite), which were issued, operative from 1 January 2010. Australia issued the Clarity standards operative from the same date and keeps up to date with amendments as they are issued by the IAASB.
The International Ethical Standards Board for Accountants (IESBA) is doing similar work on the ethical and professional standards to that of the IAASB, issuing high quality standards that can be adopted by ethical boards around the world. Again, Australia uses the standards of the IESBA as the basis for its own standards issued by the APESB.
While the context within which we do most of our work is becoming increasingly standardized, operating across jurisdictions has its complexities and can have a very direct impact on what we can do as experts. While parent company and subsidiary auditors are applying the same standards, even where they share a brand, they may be separate firms for legal purposes. As a result, access to actual working papers for the audit of an overseas subsidiary, as opposed to a memo from the subsidiary auditor, can be problematic where the subsidiary is in a country with a very different legal system. Harmonisation of the standards is only part of the issue and increased cooperation between legal systems is vital. In our next blog, we will talk about some of the things we learned about globalization and dispute resolution on our recent trip to the Singapore 2016 Global Pound Conference, Shaping the Future of Dispute Resolution and Improving Access to Justice.
|Posted in:IASBIFRSFinancial Reportingexpert witnessdispute resolutionAuditAuditorIAASBinternational auditing standardsIESBA|
The ICAEW's February Economia magazine published an article The Best Defence, which touches on a number of aspects of professional negligence suits that we have seen in our practice as forensic accountants. It surveys situations that can increase the risk of a dispute erupting, such as complex areas of the audit being done by inexperienced staff, and lack of clarity surrounding the terms of the engagement, which can lead to the client relying on informal communications from their accountant which turn out to be inconsistent with the final report or to the client receiving a surprise bill for unanticipated work.The impetus for the article was the issue by ICAEW in October 2015 of revised guidance on Managing the Professional Liability of Accountants. The paper takes members through a series of areas and looks at how to minimize their risk. It looks at client and engagement acceptance, the importance of the engagement contract and the implications of electronic communication, and risks that can arise during the engagement. Its guidance is as applicable to professional accountants around the world as it is to ICAEW members.
Under risks inherent in client acceptance, the paper suggests that practitioners consider issues such as the reputation and integrity of the client, and the client's expectations do they align with what the accountant can provide with the resources available to him or her? In an increasingly globalized world, an overseas client, with all operations and records overseas, may be seeking a listing on an established stock exchange to lend respectability to a venture. The auditor may not be able to access the underlying records with sufficient confidence to be able to sign an unmodified audit opinion. Either situation in an audit situation can result in a limitation of scope that makes it impossible for the practitioner to do the audit. We have seen more than one instance where the auditor has been prevented from looking into the private side of a client business and so has not understood the full impact of related party transactions until the client has collapsed and the liquidators investigations have started.
|Posted in:engagementNegligenceexpert witnessdispute resolutionAuditAssuranceLitigation Support|
|Posted in:GovernanceIASBIFRSLeasesRevenueFinancial Reportingnot-for-profitexpert witnessdispute resolutionAuditMaterialityAssuranceLitigation SupportReporting|
The IASB's materiality paper The Application of Materiality to Financial Statements blows a breath of fresh air through financial reporting. By refocussing directors' and other preparers' attention on financial reporting as communication, the paper will help in getting rid of "clutter" - unnecessary disclosures that only serve to blur the message. In the words of the IASB: "The concept of materiality acts as a filter through which management sifts information to ensure that financial statements include all the financial information that could influence users' investment decisions. It also enables management to present material information in a clear and effective way, excluding information that is not material."
Westworth Kemp's submission is supportive of the IASB's initiative. In our view, clearer communication between organisations and stakeholders is essential and this paper, specifically addressed at management, rather than just accountants and auditors, will help. We would like to see the document given greater prominence in the accounting literature, perhaps as part of the Conceptual Framework, rather than a Practice Statement.
|Posted in:GovernanceIASBExposure draftMaterialityReporting|
The winds of change are blowing through audit reporting globally, with the issue by the IAASB of the first tranche of standards in its auditor reporting project. These standards have now been issued by the AUASB as exposure drafts with a view to having them operative in Australia from 1 January 2016 like their international counterparts.
We have prepared a summary for auditors, audit committee members and others involved in the audit process to help them prepare for a new way of doing things.
|Posted in:AASBExposure draftAASB 101LiabilitiesReporting|
|Posted in:AASBIFRSLeasesRevenueAmending standardsExposure draftReporting|
Improved disclosure of financing activities and liquidity to support the statement of cash flows is a welcome development, as we said in our submission to the AASB and IASB on Australian ED 258 Disclosure Initiative (Proposed amendments to AASB 107), which incorporates the IASB's ED/2014/6 Disclosure Initiative (Proposed amendments to IAS 7).
The increased reconciliation requirements would highlight non-cash movements in debt balances, but unfortunately, the proposed disclosures do not extend to circumstances where entities in the financial sector treat their borrowings as operating rather than financing activities. We suggest that they should.
|Posted in:NewsCash flowsReporting|
Chris and Stephanie act as consultants and experts (“clean” and “dirty” experts) in the context of dispute resolution on a variety of financial reporting and audit issues.
Westworth Kemp Consultants can provide support to businesses, professional practices and regulators seeking to implement systems designed to foster compliance
Independent advice on the interpretation of auditing (or assurance) and accounting (or financial reporting) standards can be hard to find.