Accounting

Virus audit crunch can be mitigated, not averted

26 Mar 2020

Covid-19 uncertainties may force accountants to raise red flags on companies’ financial statements. Delaying reports by two months, as in Britain, provides only partial relief. Investors and banks will still have to make calls on solvency, with less help from auditors.

NMC’s Muddy Waters vaccine needs a booster shot

20 Dec 2019

The FTSE 100-listed hospital group is under siege by the short-seller, sending shares down more than 45% this week. NMC has done the right thing in providing a detailed response - within two days. But its jittery investors could still do with greater clarity in some key areas.

Under Armour is unwitting ad for good governance

4 Nov 2019

Flagging growth and federal accounting probes are bad, but in a normal company they wouldn’t knock 20% off the shares. The $7 bln apparel maker, though, is not normal. An unfireable boss and jumbled accountability make it hard to convince investors anything at all is going right.

Wirecard is becoming uninvestable

15 Oct 2019

The $15 bln payments group’s share price fell 19% after the FT said it overstated sales. The company disputes the claims. Persistent volatility makes life hard for short-term traders. Long-term investors may be put off as the latest allegations involve a bigger chunk of revenue.

Muddy Waters’ latest broadside hits AIM as well

7 Aug 2019

Litigation finance firm Burford was the largest on the London exchange for growing firms in July. An attack on its complex accounting by the short seller has vaporized half its value. Less red tape and disclosure attract listings, but reduce trust – and investor returns.

Anta outruns short-sellers at surprising pace

9 Jul 2019

The $18 bln Chinese athletic-gear maker is under attack again, this time from Muddy Waters, which accuses it of fraudulently inflating profit margins. Despite an abundance of doubters, the stock is up a third this year. Resisting scepticism may be a less challenging sport.

India hurts itself with clumsy Big Four blitz

11 Jun 2019

After punishing PwC and EY, New Delhi wants a five-year audit ban on Deloitte and KPMG’s affiliate for alleged failings at shadow bank IL&FS. The process hardly reflects the good governance India is pushing. And it’s unclear local firms can handle all the international business.

Metro Bank capital hike depends on luring new fans

13 May 2019

The troubled UK upstart is finalising a 350 mln pound equity issue. The prospect of buying in at 50% of book value should entice some investors. But to earn a decent return, Metro will have to persuade regulators it can safely boost lending while reassuring jittery depositors.

Holding: Investors ignore law of “stuff happens”

11 Apr 2019

Using fiascos like oil-well blowouts and tainted burritos to claim stock fraud is increasingly common in the United States, but misguided. Companies have a duty to disclose significant risks, not warn of unlikely mishaps. Arguing otherwise enriches lawyers at investors’ expense.

Lyft makes flattering “contribution” to accounting

14 Mar 2019

The term commonly means revenue less variable costs. The ride-hailing firm’s take on it excludes even some of those outlays and suggests healthy profit in the future. Like WeWork’s “community-adjusted EBITDA” prospective IPO investors should probably ignore the metric altogether.

UK audit cop upgrades to paper tiger

13 Mar 2019

The government has proposed a new regulator with powers to publish third-party reports into accounting disputes. Embarrassment risk should give auditors more cover to stand up to management. But a lack of sanctions means the body still lacks teeth to prevent corporate failures.

Metro Bank shoots itself in the other foot

31 Jan 2019

The UK challenger lender has admitted that regulators, not the group itself, found recently revealed accounting fudges. What was dubbed as an oversight now looks even worse. That’s a lamentable look for a bank that may well need to raise capital later this year.

Patisserie Valerie has a way out of collapse

23 Jan 2019

The cake chain called in administrators KPMG, but buyers have expressed interest. To make the numbers stack up, the acquirer would likely wipe out most of the unsecured creditors, including chairman Luke Johnson. If this happens, the battered baker could yet have a future.

UK audit reform leaves unfinished business

18 Dec 2018

Britain wants companies to use two auditors and stricter Chinese walls between consulting and book-keeping. The moves should help competition, but they won’t be as effective as radical options like breaking up groups and market-share caps, nor prevent failures like Carillion.

Fraud case reminds that bad M&A is a team effort

30 Nov 2018

U.S. prosecutors are trying to prove Autonomy CEO Mike Lynch deceived buyer HP in an $11 bln deal gone wrong. Such things tend to be a team effort. While fuzzy accounting rules that fostered this dispute are less of an issue now, the forces behind disastrous deals are evergreen.

Living wills put fresh nail in outsourcer coffin

6 Dec 2018

The UK wants the likes of Serco and Capita to show that contracts can be transferred to peers if they fail. It’s a prudent move after Carillion’s collapse, but could push up costs and make companies less aggressive when bidding for business. The state may keep more work in-house.

Guest view: Governments need more accountants

18 Oct 2018

Many states waste their resources and hide their obligations, write Ian Ball and Dag Detter. Poor accounting is partly to blame. Measuring public assets and liabilities is a first step to better financial management. That requires more accountants - and fewer economists.

UK auditor competition drive comes at a price

9 Oct 2018

The UK Competition and Markets Authority wants to break the grip of the Big Four accountants. It may duck radical measures, like forcing them to separate bookkeeping and consulting. Even simple ones, like market share caps and joint audits, will mean higher costs for companies.

Skilling could have earned stripes more usefully

31 Aug 2018

The former Enron CEO was released from prison into a halfway house. During his time behind bars, corporate malfeasance flourished but prosecutions dropped. Using high-profile arrests as a deterrent doesn’t work if prosecutors don’t catch criminals. Felons could help.

1MDB trial is just start of Malaysian war on graft

4 Jul 2018

Former Premier Najib Razak has been charged in connection with the $6 bln scandal. The swift action is commendable. Deeper change is needed to reassure investors, though. That means measures like forcing politicians to declare assets, and regulating party funding.