On another, a cocktail bar leads out on to a roof terrace. They had been the watchdogs of capitalism who had exposed its excesses. Their 21st-century successors, by contrast, had been found badly wanting. They had allowed a series of US subprime mortgage companies to fuel the financial crisis from which the world was still reeling. There was certainly hubris at Number Twenty.
But by shaping the world in which they operate, the accountants have ensured that they are unlikely to face their own downfall. It will once again be the millions who lose their jobs and their livelihoods. Such is the triumph of the bean counters. T he demise of sound accounting became a critical cause of the early 21st-century financial crisis. But the bean counters now had more commercial priorities and — with limited liability of their own — less fear for the consequences of failure.
Similar failures on the other side of the Atlantic proved that balance sheets everywhere were full of dross signed off as gold. Although we had interesting discussions — they were very helpful about the business — there were never any issues raised. This insouciance typified the state auditing had reached. Subsequent investigations showed that rank-and-file auditors at KPMG had indeed questioned how much the bank was setting aside for losses.
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Galbraith could have been prophesying accountancy a few decades later, now led by men of business rather than watchdogs of business. F or centuries, accounting itself was a fairly rudimentary process of enabling the powerful and the landed to keep tabs on those managing their estates. But over time, that narrow task was transformed by commerce. In the process it has spawned a multi-billion-dollar industry and lifestyles for its leading practitioners that could hardly be more at odds with the image of a humble number-cruncher. They are the only players large enough to check the numbers for these multinational organisations, and thus enjoy effective cartel status.
There are no serious rivals to undercut them. Despite the economic risks posed by misleading accounting, the bean counters perform their duties with relative impunity. The big firms have persuaded governments that litigation against them is an existential threat to the economy. They are free to make profit without fearing serious consequences of their abuses, whether it is the exploitation of tax laws, slanted consultancy advice or overlooking financial crime. Conscious of their extreme good fortune and desperate to protect it, the accountants sometimes like to protest the harshness of their business conditions.
This is what passes for competition at the top of world accountancy.
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Some companies have been audited by the same firms for more than a century: KPMG counts General Electric as a year-old client; PwC stepped down from the Barclays audit in after a year stint. As professionals, accountants are generally trusted to self-regulate — with predictably self-indulgent outcomes. Where a degree of independent oversight does exist, such as from the regulator established in the US following the Enron scandal and the other major scandal of the time, WorldCom — in which the now-defunct firm Arthur Andersen was accused of conspiring with the companies to game accountancy rules and presenting inflated profits to the market — powers are circumscribed.
When it comes to setting the critical rules of accounting itself — how industry and finance are audited — the big four are equally dominant. Their alumni control the international and national standard-setters, ensuring that the rules of the game suit the major accountancy firms and their clients. T he long reach of the bean counters extends into the heart of governments. Mix in the routine recruitment of senior public officials through a revolving door out of government, and the big four have become a solvent dissolving the boundary between public and private interests.
There are other reasons for governments to cosset the big four. They are too few to fail. The major accountancy firms also avoid the level of public scrutiny that their importance warrants. Major scandals in which they are implicated invariably come with more colourful villains for the media to spotlight.
You may lose protection of your personal assets
When, for example, the Paradise Papers hit the headlines in November , the big news was that racing driver Lewis Hamilton had avoided VAT on buying a private jet. Left to prosper with minimal competition or accountability, the bean counters have become extremely comfortable. Partners in the big four charge their time at several hundred pounds per hour, but make their real money from selling the services of their staff.
When this happens, lending institutions can and will continue to use your personal credit when you need more funding for your business. Think that your business type LLC, for example is keeping your personal assets safe in case of a lawsuit? Unfortunately, think again. When you interact with a professional who realizes you are mixing your accounts, the professional tends to stop seeing you as a strong business owner. Instead, she begins to view you as a hobbyist. Therefore, the level of professionalism you and your business receive declines. Write an explanation on the back of the receipt about the item s purchased to reduce any confusion later about the purchase and to help if you are audited.
Never write a check for personal expenses using the business checking account, and carry both check books with you if need be. Having these accounts separated will also make it difficult for any lawyer to determine your assets are blended — which opens your personal assets up if your business is sued. Again, never mix the two. The less you have to worry about later personal vs.
Cash transactions can get confused with personal expenses and can be questioned during audits.
- Der Jungfrauensohn (German Edition).
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- Black Widow;
We understand there are times when you may need to carry business cash. When this is the case, keep the business cash separated from other cash in an envelope or separate pocket. Also, if any of your business cash is running low, do not replenish the cash with your personal cash. Go to the bank immediately and withdraw from your business account. Finally, never leave notes explaining how much money you put into the business cash from your personal cash.
Notes can get lost, and cause more confusion. However, if you keep your personal and business cash separated, you will not have to worry about leaving yourself any notes.