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"Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." 

 

The Cosy Club at CPA Australia plus a Bumper Edition coming

The Cosy Club at CPA Australia

You will have received the notification last week of the appointment of the new directors to the CPA Australia board.

Let me make the following observations and you can draw your own conclusions, but you can see from the title what I think.

ONE.  The Appointments Council (which is really just the renamed Representative Council) that appoints the Directors has a tenure limit of four years. Well, just have a look at the annual reports going back to 2014, and there you have Tony Marks now serving his his fifth year (2014, 2015, 2016, 2017, 2018). But hey, what are constitutional limits to the CPA Australia board? They are just something to get around (think director fee remuneration above constitutional limits in the subsidiary CPA Australia Advice, or the extended director tenures of Graeme Wade, Richard Petty and Kerry Ryan).

And it hardly needs observing that Tony Marks has been a long serving member of the ACT division going back to 2010, being Dep Pres in 2012, and President in 2013. I’m sure a very fine member but the questions I have relate to the influential positions held at both Divisional and Appointments Council level for many when the shenanigans were going on at CPA Australia, and the seeming over the constitutional limit now.

TWO. Two of the newly appointed board members (Ric DeSanti and Dale Pinto) both have a long period of serving in influential positions at CPA Australia while all the shenanigans were going on.

i. Ric DeSanti as Div Councillor from 2005 -2014, 2017-2018 including being President and Deputy President. He also served on the Representative Council which appointed the boards in 2013 and 2014. On top of that we were told he was just serving a one year term as Director of CPA Australia from October 2017 but seemingly no other worthy candidates could be found from the 160,000 members so he was re-appointed for another three years. Has shades of Peter Wilsons long reign (16 plus years) as president of AHRI continuing because no suitable replacement could be found from their membership after a three year long search. Mmmm. I am a bit of a doubting Thomas when it comes to reasons like that being floated around. 

ii. Insofar as Dale Pinto goes he again has been  a long serving Divisional Councillor in WA (from 2015 to now) again both as President and Deputy President (almost playing tag team with Paul Tiernan from WA who happens also to be on the Appointments Council). As with Ric De Santi and Paul Tiernan, I’m sure a fine member but it just leaves one with questions as to why people who had such influential positions at CPA Australia during these years should now be appointed to even more influential positions at CPA Australia.

THREE. I look at the new board and I see four directors (Kelsall, Erskine, Pinto, De Santi) with long histories of influential ‘relationships’ with/at CPA Australia over the last decade, and two (Wilson, Scrivens) serving on the board of an organisation (AHRI) which in October 2016 had formed a partnership with CPA Australia. 

Merran Kelsall - CPA representative on the IAASB  2012-2015

Robyn Erskine -Vic Div Councillor 2016-2018, CPA representative on IFAC SMP Committee since 2015, CPA Insurance Advisory Committee 2008-2009

Ric De Santi - as per above Dale Pinto - as per above

Peter Wilson - President of AHRI which had formed a partnership in 2016 and featured Alex Malley on their October 2016 magazine

Jon Scrivens - Director of AHRI

FOUR. All of the above are very fine members I am sure with clearly impressive CV’s. But the question that I ask is how is it that Peter Wilson when speaking at the recent AGM in expressing sorrow for what had happened said they were particularly disturbed looking in from the outside. Many of them, as detailed above, had  significant positions of influence in CPA Australia over the last decade, and presumably greater inside knowledge than the vast majority of members.

My question is why the silence and seeming acquiescence for so long from people who were in positions to know a heck of a lot more than the average member? I tend to be more skeptical of the reasons why these persons are appointed to the board, and the reluctance of the new board to take action against the past leaders responsible.

What are the chances of two directors of an organisation like AHRI, which had just 12 months earlier announced a partnership with CPA Australia, being appointed to the new board of CPA Australia when we were told there were over 200 other potential candidates? The vast majority (if not all) of the members of the appointments council who appointed the new board in October 2017 were also on the Representative Council which appointed directors of the previous board.

FIVE. To me it strikes me like a reasonably cosy club with almost absolute power because there are very few checks and balances (because the new board vehemently opposed them being introduced at the AGM) to prevent what happened before being repeated, and especially when the vast majority of the members are disinterested. I think the board needs to be held to account on these matters not just given free rein.  

What sort of leaders remain acquiescent or silent in the midst of major shenanigans, and perhaps worse, plead ignorance and surprise when those matters are exposed in the media. Crikey Joe Aston started writing about these things in the AFR way back in February 2016 quoting other CPA members prepared to speak up. I may have missed them but I had not read one word from any of the new board in the public arena about these matters until they were appointed to the board in October 2017. That’s a long 18 months of convenient silence from those who were in positions of influence and leadership at CPA Australia.

As I say, it’s a nice little cosy club.

CPA Australia and the ASX Corporate Governance Principles

Many of you will be aware we are one of the 21 organisations which make up the Council that establishes these principles. They are currently undergoing a 4th revision, and one of the main issues of concern is the addition of the concept of a company requiring a ‘social license to operate’  - think Inclusivity and Diversity, Climate Change, Gender Equality on boards, Alan Joyce and Qantas, People and Culture Committees, and you will get the picture. It has been the subject of much discussion and concern of late, so it is important we understand that CPA Australia in its submission has adopted the firm position of the ‘social license to operate’ approach.

I suggest that is a concerning development.

Can I encourage members to have a look at the Centre for Independent Studies paper  by Jeremy Sammut recently published to provide a healthier and I suggest more correct perspective on this issue.

https://www.cis.org.au/publications/analysis-papers/curbing-corporate-social-responsibility-preventing-politicisation-and-preserving-pluralism-in-australian-business/

This will have significant practical impacts and especially for the accounting profession. You can bet your bottom dollar that the big four accounting firms, and also the large consulting firms are all over this, so can I encourage you to at least have a look at this paper to get a feel for this development.

And provide feedback to your division and the board. I’ve raised with my Division (NSW) but as you can guess, no response. Almost as pointless as raising issues with ASIC.

A Bumper Edition coming out in October

Attached below are details of a Bumper Edition of an alternative to InTheBlack that I am producing (in digital format only) in time for the World Congress of Accountants in November in Sydney. If you would like to contribute material please feel free to do so. I edit/censor with a light but strategic touch.

Legal Action

To date pledges totalling $198,470 have been received. Well short of the $1 million target but it is a good start. What is perhaps most telling is that close to 70% of the total has been pledged by persons who are not CPA Australia members. Many are from the corporate suite, and I suggest appreciate the issues and the importance of accountability and having a credible and professional accounting organisation perhaps more clearly than we members do. It’s a very telling indictment of CPA Australia, and perhaps of the accounting profession itself.

An important KPI

Just so you can sleep well tonight knowing our organisation is focussed on the critical things. This was highlighted in the 2017 Annual Report at page 12.

Did you know that 87% of incoming calls to CPA Australia are answered within 20 seconds?

Whew, and here I was thinking head office had lost the plot.

Cheers

Brett

Prelude to the Bumper Edition for the World Congress of Accountants in November 2018

It will be a ‘cracker-jack’ edition coming up in October

  • forget Uncle John’s Bathroom Reader,

  • forget CPA’s InThe Black (that’s not too hard given it takes about 5 minutes: one minute to take off the plastic, one minute to see if anything worthwhile, there never is apart from Neil Blackwoods Excel Yourself column which takes up the remaining 3 minutes),

  • forget the Queer Accounting putsch by Monash University (still waiting for an answer on exactly what it is. I’ve heard of equity accounting and consolidated accounting and management accounting but this queer accounting defies me). Actually just a brief segue to ask what by contrast is non-queer accounting? Is this a move to make accounting ‘inclusive’ by suggesting there is an accounting based on gender (male v female accounting) or sexual preference (queer v non-queer accounting) or perhaps height (over 6’ v under 6’ accounting) or perhaps hair colour (brunette versus red headed accounting)?

It will be called either InTheRed or _____________? (open to suggestions), and the initial draft looks promising.

Here are some of the topic that will be covered, and always open to contributions from members.

Benchmarking uncovered

How the benchmarks of an unknown and hidden group of mutual organisations overrode the benchmarks of professional membership organisations to determine the board remuneration for CPA Australia. As a bit of a teaser can I suggest members have a look at http://bccm.coop/wp/wp-content/uploads/2017/11/BCCM-2017-NME-Report.pdf

Glance at Appendix A on page 65 and ask yourself why aren’t professional membership organisations included? Then the obvious next question is just why did CPA Australia use my mutuals as a comparative to benchmark their board remuneration? Mmmm.

Little hint - we pay our directors 50% more than our main competitor CAANZ.

Oh, here is another little hint - what does CPA Australia have in common with say RACV with 2.1 million members, or a bank or health or insurance mutual?

I suggest that a big part of the answer lays in drawing any sort of synergy that results in higher directors fees. We shall publish the findings of our review.

Professional membership magazines compared

Accounting, legal and medical in particular.

You will be amazed at the contrast with our own InTheBlack. It will be laid out in ‘black and white’ (so to speak) so you can see very clearly that when we are being served up DWRRM (Doctors Waiting Room Reading Material) most of the others provide PDR (professional development reading). It really is a ‘chalk and cheese’ comparison. When I hear InTheBlack described as ‘The Accounting Womens Weekly’, I appreciate more fully what is being said.

Sad but true. Anyway you can see the comparison in all its unencumbered glory in this coming edition.

The Cosy Club of CPA Australia

More on this in this above but it is a tight elite within a profession. All the talk of member engagement is just that because those reins of ‘absolute power’ are very tightly held, and by many who have had positions of influence at CPA Australia going well back into the Malley decade.

Book Reviews

These especially have arisen from my readings from the CPA shenanigans over the last year or so to get some perspective, but I’m sure other members could submit others.

These two to foster a more realistic appraisal of the need to break up the Big Four accounting firm ‘cartel’ (which I am all for by the way)   

  • The Big Four. The Curious and Perilous Future of the Global Accounting Monopoly by Ian Gow and Stuart Kells.

  • Bean Counters. The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

This one because it touches on how as a profession we have not developed (the title overstates it a bit I reckon) but CPA Australia serves as a cameo of late in being so pathetic in advancing our profession - quite the opposite if the truth be really stated.

  • The End of Accounting. And the Path Forward for Investors and Managers by Baruch Lev and Feng Gu

Two that I have found helpful on the more ethical side of accounting and business

  • A Matter of Trust. The Practice of Ethics in Finance by Paul Kofman and Clare Payne

  • Redeeming Capitalism by Kenneth Barnes

Two that have been very helpful getting some perspective on this whole matter of Inclusivity and Diversity, and Gender matters.

  • Women vs Feminism. Why We All Need Liberating From the Gender Wars by Joanna Williams

  • The Tribe. The Liberal-Left and the System of Diversity by Ben Cobley

Hopefully this new book coming out in September will be available on kindle so it can be included also as it sounds promising

  • The Diversity Delusion. How Race and Gender Pandering Corrupt the University and Undermine Our Culture by Heather Mac Donald

Members may have some others they would recommend and perhaps write a review themselves.

Only too happy to include - make it as long or short as you wish to give an honest appraisal.

The New Draft ASX Corporate Governance Principles

Mainly to cover off on the increasing push under the Corporate Social Responsibility rubric for companies to have a social license to operate. We will look in more detail at the various views on this, and the very closely interrelated views of inclusivity, diversity, gender equality on boards and people and culture below.

CPA Australia in its submission took a very definite approach favouring the concept of a social license. I disagree strongly, but that seems to be ‘par for the course’ for me with the CPA leadership who I believe talk big but walk small.

Inclusivity and Diversity, People and Culture, and Gender Equality

A closer look at what this entails, and the practical impact for the accounting profession and the marketplace.

I regard the exceptionally good recent paper by Jeremy Sammut from The Centre For Independent Studies titled Curbing Corporate Social Responsibility: Preserving pluralism- and preventing politicisation - in Australian business as a great balance to the very one-sided push from academia and the elite on this.

There is no doubt that the vested interests of the large accounting and consulting firms (and membership organisations such as CPA Australia which are heavily influenced by an elite who just love the absolute power they now have) see it as a big revenue earner but I’m not convinced it’s a good thing. Mandatory reading for all accountants I reckon (only 24 pages but is well written though requires close reading).

We’ll look closely at some of the warnings given by some corporate leaders.

To be honest I am no fan of the Alan Joyce approach to social license, so it will entail a more critical look at he and his ilk with their views. They love to talk of company executives speaking out on social issues (social license) but really it means ‘so long as the views expressed are in agreement with their views’.

Think of the way Alan Joyce and the other CEO’s who came out pushing same sex marriage from their corporate pulpits were lauded for being socially aware yet when Roger Corbett expressed his opposition to it he was regarded as some narrow minded bigot.

Sammut’s paper touches on this very well I reckon.

Vladivostok Social Club Accounting Awards Night

This promises to be even grander and more raucuous than last year's event. That will take some bettering but all the plans are coming together well. We have booked the ice breaker for those wishing to go by boat.

We have a few new awards this year such as

  • The Ray Chambers Award (for academics prepared to put their heads above the parapet and speak openly) - have a few great contenders for this award.

  • The Gerry Mander Award (the new and old CPA boards are clearly the main contenders for this ignoble award)

  • ‘And the money keeps rolling in’ Award (I think even Evita-Eva Peron- would have blushed at some of the excesses involved here)

  • The “baby you’re a rich man’ Award (courtesy of The Beatles - no surprise with this one)

  • The No Looking Back Award (a clear winner on this I understand)

  • The ‘Let’s Keep Up the Connections’ Award (courtesy of none other than Macquarie University - it still continues)

  • The ‘Gilding the Lily’ Award (so many contenders here but I understand the Presidents Report on pages 2 - 4 of the 2017 CPA Annual Report is a front runner).    

What has happened to auditing standards?

This section will look at some of the recent academic articles in this area, and relate to the seeming drop in the public’s trust of the auditors report. Clearly we at CPA Australia saw very clearly the poor performance of our auditor (Deloitte) and our leadership for that matter in relation to the production and audit of the s202B statement. Is it perhaps time for some major changes -

  • less self regulation by the profession and

  • greater legislative action,

  • greater emphasis on fraud rather than just internal control processes in the audit,

  • a break-up of the ‘cartel like hold’ on the audit of corporations by the big four.

It has been a long time since I did auditing but I reckon it is worth having a closer look at this from the latest academic writings to see if any light can be shone on the topic.

How CPA Australia ‘gamed’ the accounting standards

This will look closely (with specific examples) at the way the talk and the actual walk of applying the standards left much to be desired. So much so that words like openness, transparency and integrity lost their meaning.

Even now I read the 2017 CPA Australia Annual Report and most of the words come across like a sales job devoid of much genuine and honest communication.

Take for example on page 2 where the President (Peter Wilson) says the board are “committed to communicating honestly and openly with all members” then refuse to tell us how much money was given to South Sydney Rugby Leagues Club (for predominantly entertainment purposes) or how many members there are in any of the divisions of Australia when he does for every other division, then you have to think what do they mean when they say ‘honestly and openly’?

Much was hidden from us by ‘abusing’ the following standards (and here we are the supposed standard setter)

  • Consolidated standards

  • Minimum disclosure rules

  • Integrated reporting

  • Financial reporting

So we shall look closely at the examples.

The 20th Anniversary of The Numbers Game Speech by Arthur Levitt (SEC Chairman)

It was a groundbreaking speech then and it is just as apropos today. Let’s look more closely at it and see if we have learned anything.  

Another episode in the Fly on the Wall Series.

Perhaps it will be from one of the board meetings of the new CPA Australia board, perhaps a meeting from The President's Council, or even from one of the Divisions. Unsure as apparently the board has made it mandatory for Mortein to be placed inside all the recent meetings following the revelations from Louie and Louise last year.

But Louie and Louise are pretty persistent little blighters so we shall see what they come back with.

I hear they were keen to fly around during the Nominations Committee, and the Appointments Council meetings.

Guessing Competition

The prize for the winner will be a Kindle Edition of Bean Counters by Richard Brooks. (no staff or board members of CPA Australia or South Sydney Rugby League Club can enter this for obvious reasons, and that includes Rusty)

How much did CPA Australia give South Sydney Rugby League Club (for predominantly entertainment purposes it needs to be added, and also that this was the club Alex Malley the recently sacked CEO of CPA Australia supported)?

Academic acquiescence

I’m going to do a short piece on the acquiescence of academia on some of the above matters (with some excellent rare exceptions), but especially in relation to their almost ‘love-in’ relationship with CPA Australia. I have some great examples (from LinkedIn especially) but if anyone comes across some other doozies please send them through. A sort of ‘so long as the CPA Australia connection gets us new students then we will not look too critically at CPA Australia.’ A sort of convenient ethical blindness because ‘it has nothing to do with us’ plea.

 

Well it will be a bumper edition freely available in digital form. If you know of anyone who might like to receive it then please pass on the email address so they can subscribe or pass it on to me and I shall invite them.

If anyone has any submissions then please feel free to add to the issue. I censor/edit with a light but strategic hand.

Why do this?

Because I do not trust my own professional organisation to provide good objective coverage on these issues.

  • I receive In The Black each month and think crikey is this the level of professionalism expected of us these days.

  • I look at the submission by CPA Australia to the ASX Corporate Governing Council (of which it is a member) and I think they have not given us any idea of the process, or implications, or issues here, yet they take this very firm pro ‘social license’ view which I surmise (but that is my opinion) would not have the backing of the majority of the members.

  • They say they will be open and transparent then will not disclose things like how much they gave South Sydney Rugby League Club for entertainment purposes.

  • They allow members to serve over constitutional limits on the Appointments Council (Tony Marks) and appoint a new director we were told would be appointed for one year (Ric DeSanti) and who has had a long long history of influential involvement in the Malley era from 2005 to now on both Divisional Council and Representative Council level.

  • They refuse to hold any of the leaders responsible for the mess we have gone through as being accountable.

  • They have actively (yes actively needs to be emphasised) resisted attempts to make the board more accountable to the membership.

  • They remunerate themselves at very generous levels based on benchmarks of unknown (refuse to tell us which organisations) organisations (mutuals) which have little comparability to a professional membership body, and then use the very qualified confirmation that it is okay from PwC to whom they just awarded a $600,000 contract to review a subsidiary to state the obvious.

  • They refuse to say anything about the legal implications in terms of action, and what it will cost us, over the CPA Australia Advice fiasco other than to say it will be closed down.

  • The new board is run like a cosy little club with many of the directors having been in significant positions of influence at CPA Australia over the last decade when the shenanigans occurred. See my separate comments re this.

I quite frankly do not think they are being kosher with us.

They know full well that the vast majority of the members are not interested so they can effectively do what they please. Well I’m sure I am not alone in saying that just doesn’t cut it for a professional accounting membership organisation.

In some ways the most damning indictment of CPA Australia is that almost 70% of the money pledged to date ($198,470) for legal action against the board for approving the three year termination contract of Alex Malley has been provided by persons who are NOT members of CPA Australia. Many of them are from the corporate executive suite who appreciate the significance of what has happened more clearly than we do I’m afraid.

Read that as you will but I’m no fan of the current leaderships approach. Even raising some of these issues with my own division (NSW) results in them just ignoring the issues so that like ASIC one has no idea whether they are discussed or raised or even considered.

I’m sure many will disagree with me, so unsubscribe, delete the email and you will hear no more from me.

For those who are sympathetic or agree pass on to others. Shrinking violets are for the garden not for a professional membership organisation.

Cheers

Brett