Archived News for Finance Sector Professionals

Accountants and auditors should recognise that a company's culture and 'tone at the top' can have a profound impact on operational safety, risk-taking, and ultimately, financial position, according to Professor Russell Craig, Head of Victoria University's School of Accounting and Finance, and his co-researchers.

In a paper published in the New York State Society of CPAs in the CPA Journal, Professor Craig, Professor Joel Amernic (University of Toronto), and Professor Dennis Tourish (Royal Holloway, University of London), argue that a company's corporate culture – and its impact on safety operations – must be assessed and given due acknowledgement if audited financial statements are to be fair and accurate.

Using BP's 2010 Deepwater Horizon oil spill as a case in point, the researchers say that auditors should broaden the notion of what an audit is, so that operational risks generated from a company's culture and management tone are factored into potential liabilities.

The researchers present evidence to suggest that BP's 'tone at the top' and corporate culture (and consequently its management and operational systems) were dysfunctional. Not only did the company have a poor safety record, but another disaster appeared almost inevitable.

"A close examination of BP's tone at the top and consequent culture reveals a h­igh likelihood that a major man-made safety-related disaster would befall BP every few years...[Yet] no acknowledgement of the company's susceptibility to disaster was included in the company's financial reports or was identified by conventional auditing procedures," the paper notes.

"In such circumstances, in the interests of fairness of presentation, we submit that a provision for disaster should have in fact been made in the accounts."

The absence of a "provision for disaster" in BP's financial statements – one that would take into account the array of environmental and legal costs that would follow a future major disaster – meant that BP's audited financial statements did not comply with the  "fairness of "presentation" objective outlined in International Financial Reporting Standards (IFRS), the researchers argue.

Professor Craig said that while it would have been impossible for BP to predict which of its operations would be the site of a future disaster, "there was a strong case that a liability existed and was growing by the year".

If financial statements are to be the fair presentations that they claim to be, he said, auditors needed to take a more holistic approach and scrutinise more than just the numbers.

"These things have an impact -- a corporate culture that over-values cost-cutting to the detriment of safety will more than likely have financial consequences down the line -- so they should be taken into account by auditors if the provision of fair and accurate financial statements is the goal," Professor Craig said.

The Federal Government has introduced legislation before parliament that will amend the income tax law which contain the first two elements of the Investment Manager Regime (IMR).

The Federal Government has passed legislation containing key tax measures through Parliament, including the Tax Laws Amendment (2012 Measures No. 1) Bill 2012, Tax Laws Amendment (2012 Measures No. 3) Bill 2012 and Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2012.

Westpac banking group has announced that Carolyn Hewson will be stepping down from the Board at the end of the month following an eight-year tenure with the bank.

The Federal Government has announced changes to the proposed tax of managed investment fund, with the alteration being considered in Parliament in the coming days.

Australians are developing ‘healthier savings habits’ in response to increasing global uncertainty according to the fourth Bankwest Taxing Times Report.

The numbers of mortgage brokers expelled from the Mortgage & Finance Association of Australia (MFAA), rising from four to eight during the 2011/12 financial year.

The Commonwealth Bank has tracked an ongoing lift in consumer spending, sparking hope for a return to retail growth. The bank tracked a 1.9 per cent increase in spending in May, the third increase in sales in the past four months.

Some of the country’s major credit card providers have been ratcheting up efforts to offset the impact of the federal Government’s credit reforms, which come into effect at the start of July, according to financial comparison specialist RateCity.

The Federal Government has passed an amendment to the Corporations Amendment Act 2011 that will clarify how the chair of an annual general meeting may direct proxy votes.

The Queensland Commission of Audit has published its Interim Report into the state of Queensland's finances, finding that the state's return to surplus within two years is increasingly unlikey.

The Bank of New Zealand (BNZ) has wrapped up the successful trial of its near field communications (NFC) trial that saw dozens of customers trial technology that enabled them to make payments using their mobile phone.

ANZ has announced it will lower its interest rate for variable rate mortgages and small businesses by 0.25 per cent P/A following its monthly interest rate view. The cut sees last Tuesday’s cut to the official cash rate passed on in full.

International credit rating Moody’s has announced the outlook for Australia’s Aaa foreign and local currency rating ‘remains stable’. 

Aurora Oil & Gas’s takeover bid of Eureka Energy is inching closer to reality after estimates show that Aurora already owns some 33 per cent of the company.

Paul Ingleby, the former Chief Financial Officer of the Australian Wheat Board (AWB), has admitted to breaching his duties as on officer surrounding the Oil-for-Food Programme.

The Reserve Bank has announced plans to crack down in excessive surge costs on credit and some debit cards in a bid to ensure merchants don’t seek to bolster their profits through chargeing excessive amounts on card transactions.

The Westpac Melbourne Institute Index of Consumer Sentiment has found that the country’s consumer confidence has increased by 0.3 per cent from 95.3 to 95.6 in June.

The Grattan Institute has published a report into what it considers key reform areas for stimulating economic growth. The Game-changers: reform priorities for economic growth in Australia report found that governments must reform the tax mix and move to increase participation rates of women and the older generation.

The April 2012 Housing Finance figures released by the Australian Bureau of Statistics (ABS) shows the second consecutive monthly rise in new home lending, after figures showed a 1.2 per cent increase in financing.