CAANZ: of accountants as artists and cooks

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King George V signed the Royal Charter of The Institute in 1928. Members serve the public interest above all.

This week the crack Assurance division at michaelwest.com.au conducted an audit of the 2016 Annual Report of Chartered Accountants Australia and New Zealand. This service is being provided pro bono, and with neither fear nor favour, as is the CAANZ motto.

Last time we did our audit of CAANZ they complained so energetically that editors of the Sydney Morning Herald and Age pulled the story from Fairfax websites for two days while the website dripped with CAANZ advertising. We fought the besieged editors on every point, and as not one of their points stood up, they sheepishly reinstated the story. Here it is:

ICAA charts a mysterious course

In this story, we had covered the merger of chartered accountants across Australia and New Zealand, a merger which gave rise to the elegant appellation CAANZ. Formerly, CAANZ was known as “The Institute”, as in The Institute of Chartered Accountants Australia. Thank heavens they did away with that tacky old name The Institute, and made it CAANZ because the first thing that comes into your head when you hear the word CAANZ is beer. Uncanny branding.

In any case, the explanatory memorandum for this Trans-Tasman marriage of beancounters waxed lyrical about the future Asian expansion, an Asian expansion which had actually set-off in a south-easterly direction to New Zealand.

Should this trajectory continue, we may see another “A” appended to the name; that is, CAAANZ (Chartered Accountants Australia, Antarctica & New Zealand).

Needless to say, the keen interest which michaelwest.com.au takes in chartered accountants at the big end of town is due to their activities in shafting the community at large via their multinational tax avoidance schemes. In fact, CAANZ – although it technically has a statutory role a regulator of sorts – is more of a PR arm of the Big Four, the peak body for the global masterminds of multinational tax-chicanery: EY, Deloitte, KPMG and PwC.

Despite their protestations of professionalism and civic duty, this is effectively a cuff-linked sales-force peddling tax schemes and all things advisory which could possibly make a buck. And they cost taxpayers a lot of money.

PwC gives bludgers a lesson in corporate welfare

The 2016 CAANZ annual report unwittingly hints at this sort of rent-seeking with its focus on “the art of prosperity”. The very front cover has but one word, “Prosper”, a slogan which succinctly blurs the lines between the public duty of chartered accountants and their self-interest.

Page 19 of the report explains that prosperity means different things to different people. For some, it says deadpan, it means financial success. Duh! What the annual report does not spell out however is how accountants do their prospering. As the architects of corporate tax avoidance, they prosper at the expense of their fellow citizens.

This is especially true of the Big Four audit firms and their best clients, multinational companies, who have been having a field day denuding the government of tax revenue.

Oligarchs of the Treasure Islands

Last week, the Australian Taxation Office (ATO) published its corporate tax transparency report for 2014-15, a list of 1904 companies along with a fleck of information about the tax affairs of each.

Of these, 670 large companies paid zero tax for that year, roughly 36 per cent of all companies, down just a mite from last year’s 37 per cent when the first tranche of data from the new disclosure regime was made public.

There are a slew of big names in that 36 per cent zero tax bracket, many justifiably not paying tax – such as bombed out coal companies and other true loss makers – but others such as the US digital giants are rolling in it but simply siphon every shred of pre-tax profit to their tax havens offshore.

Hewlett Packard South Pacific Pty Ltd made $3.5 billion in income but paid no tax. No doubt it is a beneficiary of large licks of Australian government revenue too, on the IT procurement gravy train.

Others such as the ubiquitous McDonalds Asia-Pacific, Chevron Australia and Vodafone Hutchison paid no tax either.

Multinational expenses: it’s all show

According to the accounts, one group to have prospered in the year to June 30, 2016, are the directors, executives and auditors of CAANZ.

Their annual report shows compensation of directors and executives rose 7.3 per cent to $4.1 million while audit fees for Ernst & Young popped 31 per cent to $360,423.

Is this, as heralded in the glossy pages of the annual report, “the art of prosperity”? Is the concocting of ludicrously complicated tax schemes to cheat the Tax Office the art of prosperity too?

Of course, chartered accountancy ought to strive to be a profession rather than an art, a profession which owes a public duty as is enshrined in the very charter of CAANZ approved by King George V in 1928.

Or perhaps this art thing is no accident. Perhaps chartered accountants now wish to be known as artists. So they can paint pictures, sculpt alluring outcomes. No right or wrong, just art.

The mind of the artist is indeed in evidence on Page 19 where it is said there have been 23 million views of the CAANZ “Art of Prosperity” clip on YouTube (as at June 30).

In light of the improbability that a clip about accountants might draw an audience of Katy Perry dimensions, we smelt a rat. This was almost the population of Australia. So it was that the Assurance and Prudential team at michaelwest.com.au trod where few auditors ever tread, we actually checked directors’ claims.

Going to www.youtube.com and entering the words “Art of Prosperity” we found a clip uploaded by CAANZ on March 21 showing hands moulding a house. This had 61,881 views. Another clip published by CAANZ on February 21 showing a cake had 74,532 views, and another “The Art of Prosperity – Chips” had 1,666 views while a shorter version of “Art of Prosperity – Cake” has had 1,997 views.

The voiceover on these YouTube clips assures us that chartered accountants are governed by a code of ethics. Presumably old fashioned stuff like integrity and truth are part of this code.

In the old days, chartered accountants would have described this slip – 140,000 versus 23 million – as a significant error or a material misstatement.

Yet we live in the age of cake and prosperity and this 22,860,000 gap might just as well be dubbed a flourish, an artistry of whim.

It may be that other Youtube clips for the Art of Prosperity have been removed. Perhaps CAANZ is forecasting the audience as at June 30 sometime in the future, 2066 or something.

Perhaps there are unstated assumptions in the measurement basis; each actual view multiplied by 164 for distribution and audience effects.

There is though one useful takeaway from the “Art of Prosperity” YouTube experience, and that is the cake analogy. Baking, cooking a cake, cooking the books, sprinkling sugary-stuff about.

How was the CAANZ cake baked? A deficit after tax of $8.2 million is described thus: “The $14 million turnaround from surplus to deficit was anticipated in the 2016 budget and reflects a further member fee reduction”.

CAANZ has also budgeted for another deficit in 2017. This is fine art, turning a deficit into a “turnaround”, though it is not what the merger documents proposed back in 2013.

The explanatory memorandum planned for steady-state annual cost savings of $15.8 million. In 2016 however, administration expenses increased by $11.9 million or 20 per cent.

CAANZ also showcases its cooking skills with a directors’ revaluation of property for 2016 – up by $3.4 million.

Then there is the related party note to the 2016 accounts which must have been left simmering on the stove-top for too long as disclosures for director-related entities and the remuneration bands for directors and executives have entirely evaporated.

This somewhat clashes with the tasty rhetoric on the CAANZ website which includes a media release entitled “Improving disclosure of executive remuneration” under the banner of leadership and advocacy.

In this the epoch of the art of prosperity, symbolism trumps realism. CAANZ has decided to do less disclosure of its own executive remuneration while recommending that others do more.

Then there is the objet d’art on page 40 of the annual report. CAANZ has forged an alliance with the Association of Chartered Certified Accountants (ACCA) in London. There are, apparently, 788,000 persons represented by this ACCA alliance, although CAANZ has 117,000 members and ACCA 188,000.

In any case, ACCA is open access, there are no entry requirements. It would therefore make sense for CAANZ to next join forces with online wagering giant Bet365 so as to achieve an alliance of over 19 million persons.

What is to become of chartered accountancy in Australia? What has become of public duty and the CAANZ motto “Nec timens, nec favens” (without fear, without favour)? What has become of the wise birds on the coat of arms? What of the science of accounting, rather than the art and the cake?

It is all guns for hire these days and while professional standards have fallen those who control the profession have consolidated into an oligopoly more powerful than government. Too big to fail, too big to break up.

Four powerful global tribes, utterly conflicted with their tax and audit functions just a carpet-stroll away. They tell governments how to conduct their tax “reform”, and other policy, while telling their clients how to dodge tax. And here is CAANZ, their multimillion dollar PR and advocacy front: 155 policy submissions last year and 291 “key government meetings and industry roundtables.

Transparency is best tonic for multinational tax avoidance

The 679 companies on the latest ATO list which paid no income tax last year made an humungous $462 billion in revenue. Most, if not all of these, will have been audited by the Big Four, and had tax advice from the Big Four too.

Had these company directors and their advisers ensured their transactions were commercial rather than tax-driven, if they had acted in the interests of their bodies corporate in Australia, billions more in tax revenue would flow into hospitals, schools and other essential infrastructure.

Accountants institute’s annual report shows peculiar treatments in accounts