message 550

The Securities Commission report that you have hooked on to is a public document. If it uncovered any accounting malpractice something would have been done about it.

Somebody like who? This is an example of the "rely on somebody else" cover-up strategy. The issues have got to be faced. - Editor.

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message 551

Yes the 1999 Annual Report of the Institute of Chartered Accountant of NZ supports your allegations. There are incredibly subtle shades of grey. A bit hard to read but Oh so sophisticated. They seem to take themselves so seriously. The cost of it was $131,000, $33,000 above budget (page 42). What you would expect from the Master Printers Federation. Their website is in a similar vain, it cost $357,000, $235,000 over budget (page 23). A budget is no constraint when it comes to style.

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message 552

The Statement of Service Performance of the Institute of Chartered Accountants of NZ is of 20 pages of which half a page (page 31) relates to control over Professional conduct. This gives an idea of their Expertise to Integrity ratio. 128 complaints plus 9 on fees of which 22 were resolved by mediation. But what sorts of things were the complaints about ? How many were justified? How many strike-offs? There is nothing offered. This statement is an excuse not to have a committee report and so disclose practically nothing.

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message 553

With regard to the report of the Institute of CAs of NZ report on professional conduct. There revenue was $60,000 over budget. Utilising their new powers to fine I suspect. The trouble is the fines tend to be imposed after the member has already been dealt with by the Court in full measure. The offending can't be denied at this stage so the Institute has to show how disgusted it is. Not fair if it takes money off other unsecured creditors. I might be speculating a bit here but with a decent report I wouldn't have to. Their fines should be for offences that are not bad enough to go before the Courts.

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message 554

Style is what it is all about. Not your scruffy site. Plenty of style and a little bit of mumbo-jumbo and the public are fully satisfied, and that's all that counts.

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message 555

You have to be very very careful before making allegations of fraud. It would be terribly terribly unjust if accountant lost a high status job only because they were highly highly incompetent.

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message 556

Yes these big 5 partners have no qualms about passing judgement on the abilities and usefulness of any accountant who happens to pass by their way, regardless of the consequences for the people concerned. The mechanism has got to work both ways if the right people are to get to the top.

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message 557

Its easy to sense that certain comments in the 1990 BNZ working papers were not the work of the auditors. Seem like perfectly designed, well dressed, innocent mistakes. I have seen that work before.

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message 558

There needs to be many more accountants of the 1985 - 92 boom bust cycle brought to account for misdeeds. Its still pretty much a taboo subject for the C A Institute, only the odd sanitised version of events having been written for their Journal. What are the accounting schools teaching on this subject I wonder. Some of the tutors have been rather too close to the action to get a reasonable perspective of it I reckon.

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message 559

Professional Associations have had there day. Its too much to expect able people to dedicate themselves to quality. There are just too many temptations in the way. Hence the Institute is transforming into a power block.

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message 560

What are these "towards 2005" people up to. They were supposed to be preparing a report to give the Institute a revamp But seem to have gone dormant. What an incredible number of Company directors to be on such a committee. Co directors know how a good audit should be done - their way.

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message 561

Yes it is most important that Accountants express themselves, regardless of what their employers or major clients might think. The Institute of CA puts too much emphasis on who employs a member or how they are employed. Their professional opinions should be independent of this.

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message 562

Its strength of personality that rules the roost in the accounting world. If you have got enough of it no one will challenge you. Accounting theory has become an irrelevance.

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message 563 - page 1 of 12

You might like a scenario of typical treasury raids operating in the late 1980s.

Typically a local authority might have term debt of say $12m. Interest rates on such debt increased from about 3-5% after WWII. They rose steadily to 1984, then rose fast to a peak of about 20% in 1985-86 and then declined steadily in keeping with a proven anti-inflationary strategy. The $12m debt at the end of the eighties was likely be incurring an average interest rate of say 7-10% compared to current interest rates of 13-14%.This meant that the debt is worth a lessor amount, say $10m, to the investors who are holding it.

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message 563 page 2

"So what?" you may be justified in saying. It doesn't seem to have the makings of fireworks. And nobody worries about gangsters stealing one's debt hey what?

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message 563 page 3

But Hi Ho Silver! Into town rides a wealthy high profile businessman in his personal executive craft.

He challenges a selection of local celebrities to a game or race and in the process donates a few thousand dollars to a local project.

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message 563 page 4

The businesses of this top businessman has a history of involvement in financial restructuring in the public sector. He has on occasions told the public of the widespread waste that they are finding in carrying out such work. The perception is that his firm is doing its very best to recover as much of the waste as they can. They contract to take a small proportion of the waste so recovered by way of commission and because of the large amounts of waste involved they are doing well financially. Because of the great good that they are understood to be doing for the community it would be petty and unacceptable for anyone to question their income and they are held in the highest regard. .....The festivities go off as planned.

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message 563 page 5

Before he leaves town the businessman or his financial adviser team ask if they might have details of the debt portfolio in case they can suggest ways of reducing its size or cost.. There is no problem there. A week or two later a member of the team turns up with a plan of action which is revealed to the local authority's accountants who supervise the loans. The plan is known as a restructuring. This involves negotiating with the investors who hold the debt for the authority to buy it back at approximately current interest yields. This means that the investors get a lesser sum in repayment than what is recorded as owing. The buy back is to be funded by new replacement loans bearing current rates of interest which are arranged by the businessman hero.

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message 563 page 6

The reduction in the total recorded amount of loans (from $12m to $10m+x where x may be a few hundred thousand dollars) as a result of the restructuring is not submitted to the local authority accountants as being an advantage although no doubt it is hoped that they will see or "see" it that way. It is just presented as if the benefits are obvious.


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message 563 page 7

If any of the local authority accountants are not interested in going ahead, because they can't see the benefits and unnecessary costs are likely to be incurred, it will be necessary for the business firm to approach the councillors about the standard of its accountants. Much had already been made of the apparent fact that many local authority accountants did not have knowledge or skills to operate in the new market orientated environment which had recently evolved. The councillors are very attentive to suggestions that any accountants need to be sidelined or pensioned off for these reasons. Besides a common councillor could be propelled into an MP's seat in double quick time if the businessman was to publicly praise the councillor's business acumen or if the two were to appear to be close personal friends. Big 6 accounting partners are also lobying councilors for business and casting aspersions on the councils staff in doing so. -------pageback -------- skip rest of message----------- next page

message 563 page 8

With any dissenting accountants out of the way the next step is to help the council treasurer/accountant with a formal recommendation to the Council to go ahead with the loan restructuring. The treasurer/accountant has got to take the responsibility for the transaction, preferably without getting into trouble. The document directly suggests that the Council can make money by getting investors to accept full settlement of their entitlement on repayment of little more than the market value of their investment and borrowing the funds to effect the repayment at current interest rates. It contained much praise for the businessman and his team. But it is cast with a few grammatical mistakes here and there so that anyone reviewing the recommendation at a later date can probably be lead to the conclusion that the treasurer/accountant was confused and may not have deliberately set out to mislead the council about the benefits of the restructuring. pageback -- skip rest of message-- next page

message 563 page 9

In considering the recommendation probably few councillors believe that the transactions are actually making money for the Council. But they want to be seen as being with it, and they have a professional person making the recommendation and it is perfectly reasonable for them to rely upon professional advice given.

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message 563 page 10

So the restructuring goes ahead to extent that the businessman and his team are able to negotiate. At one level more local authority wastage has been encountered and recovered, at the other level the Council has incurred commissions and inducement fees for no good reason. In addition it is likely that more loss has incurred by the Council being "talked" into taking a long term loan for a substantial part or the borrowing. Although it might be claimed that the interest rate was at the ruling market yield for a loan of such length, in practice prudent local authorities were not borrowing for such time lengths in the situation of rapidly falling interest rates. Indeed it was hard to justify going beyond the minimum term of 2 years. The 8 year interest rate was probably only being offered by the odd local authority who was so conned into it.

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message 563 page 11

Included in the recommendation to the Council could be the reasoning that the Council needed to protect itself from higher interest rates in the future by borrowing for relatively long periods at fixed interest rates. Any reasonable study of the situation was that high interest rate were part of a successful anti-inflation strategy and that interest rates would continue to fall as had happened in Britain and other countries. The businessman well knew this even if could not be proved and by encouraging the local authority accountants to ignore it because it would be difficult for them to get into trouble over it. Large amounts have leaked into private business coffers because of such irresponsibility.

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message 563 page 12

If such an incident was brought before the Professional Conduct committee of the Institute of Chartered Accountants of NZ or its successor the attitude would be that the accountants concerned were acting within their level of competence and no action was warranted.

Policing standards are woefully inadequate to prevent such leakages of funds.

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message 564

Well the Towards 2005 team of the Institute of Chartered Accountants of NZ have produced their final report. They still continue with their theme of changing from an professional body to a franchise. They suggest that the Institute has no statutory monopoly and seem to want it that way, and work towards ways of keeping it as close to a commercial monopoly as possible. Whether the Institute has lost its statutory monopolies because the government of the day decided it deserved to on its record or because of the swing to the free enterprise philosophy is unclear. But the philosophy is on the wane now so with a promise to clean up their act they could probably get these powers back. But that it seems is not what they want. High standards is not their aim.

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message 565

The Institute's "Towards 2005" report is pretty hairy on standards. They want to be involved in standard setting. There is some status in this work apparently. But as regards seeing that their members comply with standards there isn't much doing. Under the heading "Quality Insurance (QA) paragraph 37 says that there are two elements to QA, expansion of policing procedures and tougher penalties as a deterrent. Then in para 38 they say QA is one approach to encourage members to comply with processes and standards, and a complementary approach is the imposition of penalties for non-compliance. They can't even set up some logical definitions. Possibly their objective is to confuse.

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message 566

The Institute's "Towards 2005" report has a pretty naive approach to penalties. In para 43 it is stated "The penalties are therefore to deter potential breaches rather than to simply punish culprits." Deterrence only comes from punishing culprits I would say. Those who know that the penalties are not going to be applied just laugh at penalties on the books. And if enforcement is minimal one has the problem of who one is going to pick on. It becomes quite unfair. Introducing declarations without adequate checking that they are complied with just breeds contempt for declarations. Its a way of frightening off the cautious so that there are more pickings left for the rest.

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message 567

Paragraph 48 of This "towards2005" is a good escape clause ie "but deliberate encouragement of blow by blow reports of proceedings should be avoided. They may only serve to create a negative perception of the brand, irrespective of the outcome." So much for fostering debate and keeping members in touch with what goes on. Disciplinary proceedings are not only about someone's personal behaviour, they are also about issues and what is or is not acceptable. A whole lot of contentious issues are likely to get left out of a summary of findings.


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message 568 page 1 of 2

The establishment of a College of Business Professionals is just pandering to the Big 5 Business houses who control the show. Okay there is a lot more to business than accounting, but accounting still has an important place and their is no reason why it should not have its own exclusive organisations. It is intended that it be an offence for anyone to state that they are a member of the Institute without stating what college they belong to. The trouble is when the member gets the grand long winded name of the Institute out the listener is likely to cut them short and get on to another topic. That can be a plausible story anyway.

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message 568 page 2

And if someone says that they are a member of the College of Chartered Business Professionals of the Institute of Chartered Accountants of NZ, one should be able to reasonably assume that they were a fully qualified accountant, when it can be someone with an obscure largely unrelated commerce degree. There is nothing wrong with providing these people with administration and training facilities for organisations of their own, but accounting is a most important function and must be kept pure.

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message 569 page 1 of 4

I see that a banker, Mr Denis Kirkcaldie, is challenging the attitude of New Zealanders to people with wealth. To quote: "Instead of jealously running down individuals with wealth, New Zealanders should aim to ensure their money is reinvested for the benefit of local communities."

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message 569 page 2

The very opposite would seem to true to me. Because of their fear of being labelled jealous people are most reluctant to question how wealthy people have gained their wealth, and these people have been given high appointments that they don't deserve to the detriment of all. The Consumers Institute suggestion to people considering buying into an advertised get rich schemes is to adopt the motto "if it seems too good to be true then it probably is". The corollary to that motto must be that if there appears to be no genuine reason for a person suddenly becoming wealthy then there probably isn't.

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message 569 page 3

We have a wealthy New Zealander appointed Chairman of the Bank of New Zealand in the mid 1980s. The wealth mainly came from a process of insider trading, capitalising on the inaccuracy of published accounts to reflect the true value of a company. By getting a seat on the board for himself or an associate this businessman was able to ascertain wether a company was over-valued or undervalued, information not available to the average investor. The BNZ seems to have gone on to make about $1b of inappropriate loans which eventually rendered it insolvent. When he got relieved another most wealthy New Zealander came onto the BNZ board as a director and special shareholder.
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message 569 page 4

The public had little knowledge of where this wealth came from. It was put down to tax planning services and public sector restructuring which seemed OK. But it now appears that a lot of it has come from tax "loopholes" some of which are most doubtful as to legality. Such people are operating on the fringe of legality and using some of their wealth to maintain their prestige and generally hold them on the inside. There is no guarantee that the community is going to get benefits from such peoples wealth by worshipping these people. Its best to get the message across that operating outside the spirit of the law is not a profitable exercise.

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message 570

The Law Society is always launching inquiries into the disappearance of millions of dollars from solicitors trust accounts. Why isn't the institute of Chartered accountants more involved. It is supposed to have the expertise and its accountants, as auditors to the trust accounts, are supposed to have close control over them. Each transaction is supposed to be vouched. There is too much emphasis on keeping a cosy relationship with the solicitors and so keeping the work.

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message 571

Prior to Institute of CA putting the ACA / CA distinction to the vote, all sorts of assertions were made about each college having its own representation as the rules made clear. But once these new rules came in representation for the ACA college was flatly refused despite it having some 4,500 members. Now the idea is to downgrade this college so there will be no further entry to it. Thats very tough on members who make a big sacrifice to get into the CA college and then find they can't afford the costs of "continuing education" to stay there. They're out.

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message 572

Its interesting how chartered accountants who were honest and said they couldn't meet the Continuing Education requirements got bundled into the ACA college of the institute, while those who only claim to meet the requirements are likely to be able to remain in the CA college forever and a day. Its too expensive to check up on anything so they say. Its the honest ones they want shunted out. They can cause all sorts of trouble.

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