News in Brief - 7 January
James to sue DTI for #5m
Chartered accountant Gerald James, the former chairman of Astra Holdings which was at the heart of the Iraqi supergun affair, is to sue the DTI for up to #5m for malicious prosecution. The case against him collapsed when it was revealed DTI inspectors had insufficient evidence to pursue a prosecution. James has also written to all 89 members of the English ICA council appealing to them to halt the current JDS investigation into his conduct. He warned he would make the ICA a defendent to his action against the DTI unless it agreed to stop the JDS probe.
Ex-PKF man loses appeal Former Pannell Kerr Forster partner, Derek Turner, has lost his appeal against the English ICA’s refusal to take disciplinary action against the firm. Turner claims he is #80,000 out of pocket as a result of a ‘near worthless’ insurance policy signed by the firm. The institute’s investigation committee said last month there was insufficient evidence to proceed.
Chinese crackdown Chinese regulators have announced a crackdown on false accounting with a large-scale auditing campaign. Li Jinhua, China’s auditor-general, said his office would check the use of loans from 890 international financial institutions. Last year, his office investigated 88 security companies and found 45% of reported profits were fabricated.
‘Codebreaker’ under fire The Scots ICA’s ‘Breaking the Code’ paper, which set out a new approach to small company financial reporting, came under fire this week from ACCA. The association favours retaining statutory audits for companies with turnovers of more than #500,000 and warns that if the independent financial commentaries were accompanied by limited liabilities, comfort levels would be undermined.
NAO targets benefits fraud Up to #1.53bn is lost to fraudulent benefit claims every year, according to National Audit Office head Sir John Bourn. Reporting on the 1997/1998 appropriation accounts for social security benefits, Sir John said tackling fraud and abuse remained a high priority, with the Benefits Agency hoping to save #1.21bn from new fraud-prevention initiatives. Meanwhile, CIMA has set up an anti-fraud working group to increase accountants’ awareness of fraud in the workplace and develop effective means of combating fraud. It is also establishing a support group for accountants to help them tackle fraud.
Tax loophole stays open Tax practitioners are advising wealthy taxpayers on how to take advantage of an inheritance tax loophole opened up by a House of Lords ruling last month, before new laws are enacted to close it this year. The Revenue was defeated after a ten-year battle against Lady Ingram, who had entered into a complex property arrangement to avoid inheritance tax.
Insolvency stigma The government must turn its White Paper on competitiveness into action by removing the stigma associated with insolvency, said Peter Engel, corporate recovery partner at BDO Stoy Hayward, last week. ‘Creditors should look at what can be achieved from future trading, not what can be recovered from the past,’ Engel said. Business information provider Dun & Bradstreet said business failures in Britain rose by 6.2% in 1998.
Call to change insolvency law The Accounting Standards Board is seeking comments on international proposals to restrict current methods for accounting for business combinations. The G4+1 paper ‘Business Combinations’ proposes that any combination other than a group reconstruction be accounted for as acquisitions by one entity of another. The US Federal Accounting Standards Board, which currently allows greater freedom for pooling assets of acquired companies, is backing the proposal to restrict the practice. Comments are due by 15 February.