Accountants: Victims of their own success?

Article Abstract:

Accounting firms worldwide have increased the types of services offered to clients to include management advisory services, data processing services, executive recruiting and advice in various technical areas, such that these firms are experiencing record growth rates. Accounting as a profession is also benefiting from such statistics as: most British board members have formal accounting backgrounds, and most corporations emphasize the importance of meeting budget projections (primarily an accountant's task). However, many economists in Great Britain are beginning to theorize that some of the accountants' techniques for appraising investments (including the discounted cash flow method of accounting) have actually contributed to the increasing number of bankruptcies among British firms. Discounted cash flow methods stress short-term gains and can create underinvestment or disinvestment spirals. The emphasis on short-term gains results from the method's ways of handling growth projections, hurdle rates and financial risk. These three aspects of discounted cash flow are discussed in detail, with the conclusion that discounted cash flow indeed does cause an anti-investment sentiment to take hold within the economy.

Methods, Economic aspects, Investments, Accounting firms, Accounting services, Investment advisers, Investment analysis, Securities analysis, Discounted cash flow

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The auditor and fraud

Article Abstract:

Currently, no statutory definition of fraud exists in Great Britain, although one may come about as part of the Financial Services Act of 1986, when it is enacted. The legal aspects of auditing in Great Britain is complicated by this lack of a definition, and while defining fraud may seem easy, the definition will hinge on what may be viewed as an irregularity and what constitutes an unethical practice. Effective internal controls are deemed the best prevention for fraud and fraudulent practices; consequently, the British government may require certain internal control practices of all but the smallest of business establishments. Considerations related to fraud prevention and the reporting of fraudulent acts by auditors are discussed in light of the possible provisions to be contained in the yet to be enacted Financial Services Bill.

DEPOSITORY INSTITUTIONS, Security brokers and dealers, Laws, regulations and rules, Financial services industry, Financial services, Fraud

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Caveat auditor

Article Abstract:

The relationship between a company and its auditors can often be tense because the auditors' approach when presenting findings can often be confrontational, resulting in bitter disputes. Auditors who get caught investigating 'red herrings,' suspicious situations that end up leading nowhere, may find they may not have the time to thoroughly investigate other legitimate concerns.

Business, Corporations

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