In brief

Joe Pickard 1 July 2021

The Accounting & Finance Show Hong Kong will return for its third edition in July to bring together accountants and finance professionals in Hong Kong.

The event on 28 and 29 July will feature over 80 expert speakers, offering insights through engaging and interactive panel sessions and presentations. They will cover key themes such as digital innovation, accounting technology and digital practice. Visit https://bit.ly/3xS6tkZ for more information.

Joe Pickard 6 July 2021

Fraud is costing businesses and individuals in the UK £137bn ($189.8bn) each year, according to research by Crowe UK, in conjunction with the Centre for Counter Fraud Studies, published in The Financial Cost of Fraud Report.

Organisations can implement certain actions and practices to reduce the prevalence and impact of fraud losses. These measures cover internal culture change and external support provision, including:

– Changing the balance of human behaviour by educating the workforce and mobilising the honest majority;

– Deterring and shrinking the dishonest minority to reduce fraud attempts;

– Removing weaknesses in systems to reduce opportunities for fraud (prevention by design);

– Harnessing data science techniques to improve detection of fraud;

– Engaging professional investigative support if fraud has occurred and been detected;

– Invoking a range of sanctions, including criminal and civil law, disciplinary, contractual and regulatory sanctions;

– Recovering losses with the aid of professional support.

Joe Pickard 7 July 2021

The UK’s Financial Reporting Council (FRC) has outlined areas in which there are issues with ESG information if companies are to report in a way that meets the demands of stakeholders in its FRC Statement of Intent on Environmental Social and Governance Challenges paper.

The paper also looks at how to address some of these demands, and the FRC’s planned activities in this area.

In the paper, the FRC acknowledged its changing remit as it works to transition into the Audit, Reporting and Governance Authority, which is "to protect and promote the interests of investors, other users of corporate reporting and the wider public interest".

The regulator said that under this, it wants to leverage its role and responsibilities, alongside other regulators and stakeholders, to help support a framework that allows for the growth of sustainable business.

The full paper is available here.

Zoya Malik 9 July 2021

A total of 16 leading civil society organisations and academics, including Greenpeace, the Equality Trust and Tax Justice UK, are issuing a joint call for a bold and radical shake-up of company audits, as the UK government's consultation on audit reform closes.

In a joint submission to the government's consultation, they call for action in six key areas to:

– Create a duty for companies, directors and auditors to ensure climate risk is reflected in financial statements - so companies such as Shell cannot continue to over-value fossil fuels in their company accounts. This could be a real game changer for tackling the climate emergency, but the government has missed a trick by not properly integrating climate reporting into company accounts;

– Go further to tackle conflicts of interest, by backing the full structural separation so that audit and lucrative consultancy services are carried out by separate entities;

– Fix loopholes in the government's new capital maintenance rules – which would help improve the resilience of companies and prevent collapses;

– Strengthen responsibility to detect fraud – auditors should have to report on the steps they have taken to verify directors’ statements and detect potential fraud.

The full report is available here.

Zoya Malik 9 July 2021

Research from LexisNexis Risk Solutions has found that UK compliance professionals are bracing for an increase in anti-money laundering (AML) legislation as a result of Brexit.

The study based on a survey of over 875 compliance professionals found that:

– Nearly four fifths (78%) of UK compliance professionals predict more AML regulation is on the way as a direct result of leaving the EU;

– UK firms overwhelmingly support opting out of 6MLD, but are taking it as a sign the UK plans to diverge and create its own AML regulatory framework.

Zoya Malik 9 July 2021

Businesses applying for R&D tax relief need to be aware of ‘warning’ letters making false claims and offering potentially damaging advice which attempt to undermine the recipient’s relationship with their existing R&D tax adviser. 

Key things for businesses to look out for when receiving letters about R&D tax relief include:

– The sender using poor grammar and overly emotive language;

– A personal mobile phone number being provided as the best contact number, rather than an office or landline number;

– The letter being labelled as ‘urgent’ or ‘important’;

– The recipient being requested to book in a call or meeting ‘in confidence’ or without anyone else knowing;

– The sender stating that they work or operate ‘on behalf’ of the industry, without providing any specific details;

– Any mention of regulatory bodies – or lack thereof. Spurious advisers will likely not make reference to regulation, as they are likely unregulated.

James Dudbridge, director and head of the advisory practice at ForrestBrown, said: “Over the years, we’ve witnessed a variety of different approaches that pray on the concerns of businesses and capitalise on the generosity of the R&D tax incentive, but this latest set of letters are not just grossly misleading – they have all the hallmarks of a scam.”

Zoya Malik 9 July 2021

The number of company directors that have been disqualified by the Insolvency Service fell by 24% in the last year, from 1,280 the year before to 972 in 2020-21, UHY Hacker Young has reported.

The fall in disqualifications of directors last year is an unusual result given the scale of last year’s record-breaking recession in 2020. 

Peter Kubik, partner at UHY Hacker Young, explained that the low number of directors being disqualified in the last year is partly due to government measures to artificially reduce the number of corporate insolvencies. Misconduct by directors is often only discovered once a business has become insolvent and an insolvency practitioner looks at what has happened.

A total of 8,784 whistleblower reports were made by insolvency practitioners against directors in 2019-20, showing that only a small percentage of whistleblowing reports against directors led to action against those directors.

Zoya Malik 9 July 2021

WorkLife’s latest Small Business Monitor reveals that 29% of SMEs have been forced to furlough staff since November 2020, with a quarter (25%) cutting staff hours. More than a fifth (22%) have reduced pay, while 20% have been unable to offer an annual salary increase.

The Bank of England predicts that unemployment will peak at 5.5% when the furlough scheme eventually comes to end. WorkLife’s analysis finds that a mix of both permanent (14%) and temporary (9%) SME jobs are potentially at risk.

While almost a third (31%) of firms are taking a positive outlook and expecting revenue to increase, 45% think their income will remain subdued over the next year, indicating why the future for some workers might be looking so uncertain.

Against this backdrop, employees are clearly feeling the strain. Some 90% of firms say employees have approached them with worries since November last year, with concerns about losing their jobs (32%), the impact of the pandemic on their personal finances (28%) and their salary reducing (21%) high on the list.

Zoya Malik 9 July 2021

A white paper commissioned by GRI has investigated the application of materiality in sustainability reporting, highlighting why disclosing impacts that go beyond those that are financially material benefits organisations while supporting sustainable development.

Key findings in the paper include:

– The identification of financially materiality issues are incomplete if companies do not first assess their impacts on sustainable development;
– Reporting material sustainable development issues can enhance financial performance, improve stakeholder engagement and enable more robust disclosure;
– Focusing on the impacts of organisations on people and planet, rather than financial materiality, increases engagement with the Sustainable Development Goals.

Double-materiality is central to the European Commission’s proposed Corporate Sustainability Reporting Directive, and also closely aligns with the materiality approach in the GRI Standards.

The GRI paper seeks to inform the debate around how this concept drives sustainability and supports better decision-making by investors and other stakeholders.

Zoya Malik 9 July 2021

With Initial Public Offerings on the rise, Maxim Manturov, head of investment Research at Freedom Finance Europe, has said that for investors to capitalise on the IPO craze, it is imperative that they utilise the platforms that already offer them on the market.

“With over 480 Initial Public Offerings (IPOs) hitting the US stock exchange already in 2021, it’s safe to say that this year will be a record breaker for IPO investment.

“Trading platforms have historically allowed users to invest in a plethora of stocks, and for the most part this has kept investors happy. But with the surge in IPOs hitting the market, investors now feel like they are missing out on a golden opportunity. By investing in an IPO, users are able to invest directly into a company at the issue price before the stock begins to circulate on the open stock market. In some cases, this can lead to the stock’s value increasing enormously in only the first few hours.

“As a result, trading apps like Robinhood have begun to look into offering IPOs to its users, but such an offer is not new in the market. Freedom Finance Europe already allows its users to invest in IPOs through its Freedom24 trading app, and has recently offered the UiPath IPO, Coursera IPO and Procore IPO in the last few months."

Manturov continued: "The average profit on all IPOs traded through Freedom24 over the last three months is a respectable 78% (as of April 2021), with recent star performers including Airbnb (189% increase), Snowflake (171%), Unity Software (203%) and Corsair Gaming (141%)."