When the PwC left hand doesn’t know what the PwC right hand is doing, it’s a matter of interpretation.

When the PwC left hand doesn’t know what the PwC right hand is doing, it’s a matter of interpretation.

Michael West

Subject: Gina

Good luck to you and your fellow ALP propagandists finding new jobs! Good riddance to all the scum at Fairfax who have tried so hard to destroy this once great country. Chris Law [tha.claw@gmail.com]

FAN mail is one of the fringe benefits of this job. We showcase this offering from Chris because it is succinct, raw, but not rambling on with expletives and poor grammar as is often the case.

Chris’ supplications came when Gina Rinehart first surfaced on the share register of Fairfax Media in February. This is a Fairfax publication. By last week, the world’s richest woman had amassed a stake of almost 19 per cent, just below the 20 per cent threshold for compulsory takeover.

Chris would be elated. Naturally, we were delighted ourselves when a contact said on Thursday, “Heh mate, I’ve got a great Gina Rinehart story for you!”

It seems that a rogue PwC auditor, probably a junior acting without the knowledge of the firm’s partnership, must be at it again.

In February last year, ASIC sent Hancock a letter about the non-lodgement of its accounts. One can only speculate what might have prompted this burst of activity.

Nearly seven months later, in October 2011, Hancock requested the regulators sally forth with one of their alarmingly commonplace relief orders and excuse the company for not lodging.

Then, in March, ASIC finally decided that it couldn’t deliver its customary forgiveness for breaches of the Corporations Act and Hancock resorted to a challenge in the Administrative Appeals Tribunal.

Last week, Jeffrey Knapp, an accounting academic at the University of New South Wales and an expert on disclosure, tried to join the action but was repelled, successfully, by both ASIC and Hancock.

Now Knapp says he might have unearthed an accounting irregularity in the Hancock financials for 2008 and 2009 which claim that the Hope Downs Joint Venture does not meet the definition of a joint venture in accordance with the accounting standard AASB 131.

But Knapp believes Hancock and its auditors, PwC, have it wrong. Hancock’s 2008 and 2009 financials do not comply with accounting standards, he says. “I am unable to conceive on what grounds the Hope Downs Joint Venture does not meet the definition of a joint venture. How can it not be a ‘contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control’?”

How can it not, indeed? Knapp points to Rio Tinto’s financials for 2008. According to Rio Tinto, Hancock’s co-venturer, and its auditors – yes, the very same PwC – the Hope Downs Joint Venture does meet the definition of a joint venture.

“How is it possible for the Hope Downs Joint Venture to meet the definition of joint venture in the accounting standard for Rio Tinto but not for Hancock?” asks Knapp. “It is the same definition and the same joint venture. PricewaterhouseCoopers’ split personality on the issue is a surprise,” says Knapp. “An audit firm should apply consistent interpretations of accounting standards, otherwise we might as well not have the accounting standards or the audit.”

As Knapp puts it, Hancock’s interpretation, supported by one half of PwC, has the effect that Hancock may have avoided certain disclosures for interests in joint ventures required by AASB 131.

Or, perhaps, there is something more strange. Might this be the work of the PwC doppelganger? An evil Mr Hyde transforming the good Dr Jekyll of the audit team, perhaps; a paranoid condition arising from extreme electromagnetic stimulation to the left temporoparietal junction as a consequence of fees coming under pressure?