Modest Proposals Will Not Make the Verification Process Tighter | Business

CBusinesses are shutting down all the time, but big business should be an exception. They have responsibilities to the communities where they operate. They employ many people and perform economically essential tasks. They must therefore be resilient and have the ability to adapt.

What role does a financial audit play in keeping such a company vessel afloat? The Competition and Markets Authority (CMA), led by former Conservative MP and Chairman of the Treasury Committee, Andrew Tyrie, attempted to answer this question in a report last week in which she asked how a increased competition could improve the quality of the audit.

It is a question that ministers have asked Sir Donald Brydon, the City's chief representative, who currently chairs the London Stock Exchange, to consider in his next review the "quality and efficiency of the 'audit". This decision followed an initial recommendation by Sir John Kingman, former treasury official and now president of Legal & General, to set up a revamped audit oversight body.

Clearly, following the collapse of Carillion last year, Parliament believes that a thorough annual audit of a company's financial accounts is essential for business continuity.

Unfortunately, most listeners approach their work as if it were to control a machine, even if it has multiple moving parts. Audits work like a medical checkup done by a private doctor who knows that his or her patient may be hiding the symptoms of what will later become a life-threatening illness – embarrbadment or, more importantly, limiting treatment costs.

An officer may want to conceal mistakes or wrongdoing for the same reason. The "doctor" must ask thorough questions before declaring the patient fit.

The CMA reviewed the subject as part of its mandate, which focused on the structure of the audit market. He required only limited reforms. The first is that companies order two audit firms to check their books if one of the firms they use is a member of the Big Four – KPMG, PwC, Deloitte or EY.

According to Tyrie, this change should encourage smaller audit firms to become more established in the market and thus offer a greater challenge to the big four. He argues that competition leads to higher quality.

Tyria also wants the auditing departments of large accounting firms to adopt Chinese walls to prevent their work from being used as a calling card for more lucrative consulting contracts.

Timid is the best description of these proposals, as only a separate audit industry, freed from tax and management consulting work, can ever be truly independent. The government must be actively involved in setting up small businesses because it is naïve to ask the auditors to deal with the idea of ​​working in collaboration with something other than disdain.

The CMA's efforts are therefore nothing more than the kind of façade that the audit industry has managed to maintain since Arthur Andersen disappeared following the failure of Enron in 2002.

From that point on, the listeners reiterated to ministers that the imposition of too many rules would only kill another accounting firm under the weight of unjustified compensation claims (Arthur Andersen had been cleared by US courts).

Should we expect better from Brydon, as his report will be presented from the point of view of shareholders and shareholder representatives, and that only Alison Hopkinson, Oxfam's Chief Operating Officer, will represent the interests of society in the broad sense? Not really.

Only a more fundamental reshuffle will prevent leaders from sinking companies, as was the case at Carillion. Business Minister Greg Clark should take note.

The gold standard for maintaining order

The price of gold has fallen in recent weeks and is currently at its lowest level since the beginning of the year. And that means that Asian families may be able to sleep a little easier this weekend.

Why? Research presented at the Royal Economic Society's annual conference indicates that burglars believe that there is a higher probability of finding gold – normally in the form of jewelery – in Asian homes, and increase their larval behavior when the price of the precious metal is high.

Researchers Nils Braakmann, Arnaud Chevalier and Tanya Wilson used the link between gold and burglary rates to test whether criminals are economically rational. In 1968, Gary Becker, a Nobel Prize winning economist, wrote that individuals would commit criminal acts only if the expected proceeds, once adjusted for the risk of being caught, outweighed the benefits of the law.

If Becker's theory is correct, districts with a high proportion of Asian households should see an increase in the burglary rate when the price of gold rises, as this changes the badumed equation between the risk and reward of potential burglars. .

And this has been corroborated by the evidence provided by England and Wales. The researchers looked at crime data at the neighborhood level and found that an increase in gold price of £ 100 an ounce resulted in a 1% increase in burglaries. , a larger proportion of Asian households being affected. In neighborhoods where the proportion of Asian households is the highest, this number has almost tripled.

Becker's initial thesis had of course two aspects: the expected returns and the risk of being caught. As the price of gold rises, the police should intensify visible patrols in districts with a high proportion of Asian households as this would deter potential burglars.

Fiat-Tesla agreement leaves them both under a cloud

The end of the age of internal combustion engines is looming – and unexpectedly soon too, as carbon limits and the prospect of a total ban put the major manufacturers on guard as they must change quickly.

The accelerated transition surprised some manufacturers. According to Jato Dynamics badysis, based on data from 2018, only Tesla and Smart-out from the 50 major manufacturers will currently avoid the heavy penalties imposed by the European Commission to manufacturers whose vehicles emit on average more than 95 g of carbon dioxide per kilometer.

The sanctions come into effect from 2021, but some of the most polluting car manufacturers selling in Europe are now fighting to avoid fines. And instead of switching to cleaner technology, they are trying to capture the legal loopholes.

According to EU rules, car manufacturers can pool emissions from all brands. But they can also collaborate with other manufacturers to create "open pools". The Japanese Toyota has teamed up with Mazda, which it owns in co-ownership, but Fiat Chrysler has teamed up with Tesla.

According to information received, Fiat would pay hundreds of millions of euros for the average of its emissions alongside the cars zero emission Tesla, thus avoiding heavy fines. Fiat insists that it is committed to reducing emissions but that it is authorized to "optimize the compliance options proposed by the regulations".

It's a dirty deal on both sides. Tesla's founder, Elon Musk, said he wanted to "accelerate the advent of sustainable transportation," and a headline counter on Tesla's website says his vehicles have saved $ 3.6 million. tons of CO until now.₂ shows. These green ambitions seem to have disappeared in the face of a pile of money.

Compromises of giving a monetary price to pollution are often difficult and sometimes necessary, but Fiat's approach leaves a harmful taste: economic waste, unfair for competitors who invest in greener plants and against the spirit of protection of the environment.