Pondering – Page 7 – Attestation Update

Why I am so optimistic – 1

Leave a Comment / Economics, Pondering / By Jim Ulvog

200 years ago subsistence agriculture was the norm across the planet. Photo courtesy of DollarPhotoClub.com — 200 years ago brutal poverty was the norm across the planet. Not so today. Photo courtesy of DollarPhotoClub.com

When I look at the political news or any news in general I get very pessimistic about our future.

In contrast, when I look at the amazing things happening beyond the headlines in today’s newspaper I feel incredibly optimistic.

Consider that private companies are developing the technology for space exploration. Consider the energy revolution created by hydraulic fracturing and horizontal drilling. Consider radical changes in technology that are making so many things easier, faster, and cheaper. Consider that anyone that wants to do so can publish their own book, distribute their own music, or create a feature movie.

As a tiny illustration, look at my company and pastimes. Technology allows me to run a high quality CPA practice without any staff. In my spare time I am a publisher and journalist. Anyone in Europe or North America or most of Asia could easily do the same and at minimal cost.

(Cross post from my other blog, Nonprofit Update.)

When I look at long-term economic trends I am incredibly optimistic.

For yet one more explanation of why that is the case, consider a column by Glenn Reynolds at USA Today: Actually, things are pretty good / Free markets and free inquiry have changed the historic ‘norms’ of poverty and violence.

Until relatively recently, an illness-filled short life of dirt-eating poverty was the normal condition for practically everybody on the planet. In the last 100 or 200 years life has gotten radically better for practically everyone.

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“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”

Leave a Comment / Pondering / By Jim Ulvog

Do you see a vase or two faces? Answer depends on your opinion and perspective. Image courtesy of DollarPhotoClub.com — Do you see a vase or two faces? Answer depends on your perspective. What is your opinion? Image courtesy of DollarPhotoClub.com

Philosiblog discusses this quote from the Roman Emperor Marcus Aurelius:

Everything we hear is an opinion, not a fact.

Everything we see is a perspective, not the truth.

Philosiblog ponders the quote in the context of personal relationships. (Check out the link above.) Everything a person tells you is filtered by their worldview and their perspective of what they discuss. Likewise, you filter their comments based on your worldview and your perspective of what they said. You filter everything you see through your perspective.

This quote has tremendous implication for us as accountants. More on that in a moment.

(Cross post from my other blog, Outrun Change.)

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Unintended consequences of anti-money laundering enforcement

1 Comment / Pondering / By Jim Ulvog

One of the general rules of life seems to be that when one person does something really bad, the larger group pays the penalty.

You remember the drill – one person in the school classroom misbehaves on the playground and the whole class looses recess.

Or one of your coworkers breaks etiquette of the office and there is a new restrictive rule that inconveniences everyone. One person pushes the boundary on expense reimbursement and everyone gets new reporting requirements.

Well, same thing is emerging with the tremendous effort against money laundering.

Check out Account Closed: How Bank ‘De-Risking’ Hurts Legitimate Customers / In their hunt for money launderers, regulators are forcing banks to shut down branches and reject business At the Wall Street Journal on August 13.

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What to make of the bribery investigations of hiring official’s children? It will merely require a genealogical background check before hiring any non-American.

Leave a Comment / Other stuff, Pondering / By Jim Ulvog

I don’t quite know what to make of this, but have an idea.

4/29 – Wall Street Journal – Wall Street Pushes Back on Foreign Bribery Probe – Here is a situation I don’t understand.

Several big banks have hired children of senior level government officials and managers of state-owned companies. J.P. Morgan is the one in the headlines at the moment. At some point in time said banks got permission for some deal or approval for some in-country activity.

The U.S. Department of Justice is looking at those hiring decisions to consider whether they are violations of the Foreign Corrupt Practices Act. That law prohibits paying government officials something of value in return for approving a commercial transaction. Bribery, in other words.

At issue is whether hiring children of high level officials is illegal. Until now, that has not been considered a violation of the FCPA.

So….

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What to make of the bribery investigations of hiring official’s children? It will merely require a genealogical background check before hiring any non-American.Read More »

From the dusty archives…Barings Bank. Thought to ponder: How do you prevent a rogue from taking down your business?

Leave a Comment / Accounting, Other stuff, Pondering / By Jim Ulvog

A sad anniversary – 2/24 – The Guardian – Barings collapse at 20: How rogue trader Nick Leeson broke the bank

Twenty years ago Barings Bank was taken down by one trader, Nick Leeson. The bank was founded in 1762. It was London’s oldest merchant bank.

Barings was 233 years old when it failed.

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Why I chose a gun. Evil exists.

Leave a Comment / Pondering / By Jim Ulvog

General Peter van Uhm is the Netherlands chief of defense. In the following TED presentation, he explains why he chose a gun to make the world a better place. Others choose a pen or brush.

He intentionally picked up a gun.

I’ve not talked about my military service on my blogs. His presentation is a superb proxy for why I took my turn carrying a gun, especially one that held frightening power.

Here’s the reason in one phrase: …

Why I chose a gun. Evil exists.Read More »

The change from Apps is just getting started. (Radical change #3)

Leave a Comment / Pondering / By Jim Ulvog

Another part of my effort to explain that while I see radical change on the horizon in other areas, I have a blind spot how those things will affect auditing.

(Cross-posted from my other blog, Outrun Change.)

1/19 – Mark Mills at Forbes – The Mobile Revolution Has Only Just Begun – Look again at the radical change in the last century:

Not only have radios become cheap but they’ve collapsed in size while rising in capability. A trailer-pulled radio that weighed one ton in WWI is now a chipset weighing a fraction of an ounce buried inside a smartphone that can handle one million-fold more traffic than those first Marconis.

Combine that with a computer the size of a phone and you have a smart phone.

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I get the concept of radical changes in our near future. I am blind to see how it will affect my firm. (Radical change #1)

1 Comment / Pondering / By Jim Ulvog

We are in the midst of radical change. I’m writing this blog (Outrun Change) to sort out the change around us. (cross-posted from Outrun Change, obviously.)

I get it in terms of tech change obliterating newspaper want ads, count of first class mail pieces for the Post Office, and devastation to bookstores (remember Borders?).

I totally get the concept that you can be your own book publisher with a cost of under $200 per title if you have the skill to use Adobe Acrobat along with Microsoft Excel and Word. Major publishers are dinosaurs.

Run your own digital publishing company? Been there. Done that. Three times. And publishing the Nook version is literally one extra click, one click, in the on-line production cycle.

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What’s the better description – “Audit” or Limited Review of Financial Statements

Leave a Comment / Audits, Pondering / By Jim Ulvog

A few weeks ago I had the opportunity to interview Sam Antar, previously CFO of crazy Eddie and currently convicted felon. There are several other posts from our discussion.

During our conversation he pointed out that audits are limited in terms of time and are limited in scope. An audit is not a forensic analysis.

He described our current methodology as designed to detect material unintentional errors.

(I would add to that something about looking for material intentional errors that are non collusive or are in the obvious places. Add your own paraphrase of our responsibilities to look for fraud.)

Those limits suggest to him that a better describe of what we do would be: …

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Huge fines are a tax on illegal behavior

3 Comments / Fraud, Pondering / By Jim Ulvog

Several weeks ago I listened to a continuing education class presented by Sam Antar, current felon and formerly CFO of Crazy Eddie.

In the session, he made two comments that caught my ear. First, the fines we read about as a result of various financial scandals are just a tax on illegal behavior. Second, those fiascos are, he said, a cancer destroying capitalism.

After the session, I had opportunity to interview him by phone and follow-up on both of those ideas.

Fines are a tax on illegal behavior

He indicated that essentially no one has been implicated in any of the disasters we’ve read about, which I have discussed extensively on my blog.

He said corporations don’t commit crimes. People commit crimes.

And the people who committed crimes aren’t going to jail.

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At its core, capitalism is moral

Leave a Comment / Economics, Pondering / By Jim Ulvog

At the most foundational level, capitalism is moral.

The only way to succeed in the long-term is to treat customers well and honestly. That will provide money to the company to continue paying staff and vendors as well as leaving a profit for owners.

If a company does not deliver a quality product or service that customers value with higher utility to them than the cost to provide by the company, then the company won’t be around long.

At the core level, it is moral to satisfy your customers with profit left over.

CPA Ron Baker makes this point more eloquently than me in his LinkedIn article, Are Corporations Socially Responsible?

By the way, the answer is yes.

If a corporation provides value to customers, both the company and customer will be better off after the transaction than before. That is a positive social value.

Doing so, within the framework of the law (as Milton Freidman points out) is the duty of a business and it is also highly socially responsible.

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The world’s oldest profession? Fraudster.

Leave a Comment / Fraud, Pondering / By Jim Ulvog

I listened to a CPE class by Sam Antar last week (Crazy Eddie CFO and ex-CPA Sam Antar Shows You How He Cooked the Books). Great class, in case you are looking for 2 hours of CPE. (Cross posted from my other blog, Nonprofit Update.)

He suggested that unlike what has been said for a long time, prostitution is not the world’s oldest profession.

Instead, he suggested that committing fraud is the world’s oldest profession.

How can that be?

Go back to the garden of Eden. The serpent deceived Eve through a knowing misrepresentation of the truth in order to deceive her and take something from her. His intent was to harm her.

Definition of fraud

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Mild sanctions on Penn State for covering up child molestation just got milder

2 Comments / Pondering / By Jim Ulvog

Last Monday the NCAA dialed back the already mild sanctions on Penn State for covering up years of child molestation.

The school is now eligible for post-season games after sitting out two years. The initial penalty was a four-year ban.

The school can resume its full amount of allowed scholarships instead of cutting them back just a little bit for four years. They only took a two-year reduction in scholarships.

The Wall Street Journal describes the end of sanctions: NCAA Lifts Penn State’s Postseason Ban.

This post is part of the conversation on this blog on the severity of punishment for egregious behavior. Should there be capital punishment, as with Arthur Andersen? Or should there be cost-of-doing-business punishment, as with the big banks and Penn State.

I discussed this two years ago: On capital punishment of organizations – Arthur Andersen and Penn State – corporate death versus mild sanctions

Let’s walk through the four penalties imposed on Penn State. Let me explain why this was mild and is now milder.

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More thoughts on the resurrected Andersen brand. Part 3

Leave a Comment / Audits, Pondering / By Jim Ulvog

Here are a few more articles discussing the acquisition of the Andersen brand name by a tax-only accounting firm. My previous articles here and here.

9/8 – re:The Auditors – More on My Reuters Breakingviews Column: The Andersen Tax Name Grab – Francine McKenna brings in more background and other articles on the return of the Andersen brand.

She even quotes the last part of my previous post which said that if a small portion of the worldwide CFOs think the Andersen name denotes quality then there is huge market for the formerly named WTAS firm.

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