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PREM SIKKA Water debacle has to end now Water companies are the unacceptable face of capitalism. In 1989, the government sold off water in England and Wales for £6.1bn. The Water Services Regulation Authority (Ofwat) became its regulator. Since then, water charges have increased by 40% in real terms. Companies have paid £72bn in dividends; financed by debts of £60bn. About 20% of income is used to service debt. Water companies lose around 2.4bn litres of water to leaks a day and tons of raw sewage is dumped in rivers. About 70% of the water industry is owned by foreign shareholders who seem to treat the industry as a cash cow. About two-thirds of water company executives are former Ofwat executives, heightening concerns about regulatory capture. Thames Water is England’s biggest water company. Since privatisation it has paid £7.2bn in dividends. It has £14.3bn of debt, a leverage ratio of around 80%, well above the 60% limit suggested by Ofwat. The regulator does not seem to have taken any action to address concerns about high debt and leverage. The company has always received an unqualified audit report from its auditors PwC and no red flags have been raised about the company’s ability to remain a going concern. Now with rising interest rates, Thames is struggling to meet its debt and investment obligations. It is looking for help from shareholders, lenders and the government. Financial restructuring might stabilise Thames, but water company practices are unsustainable and will fuel calls for renationalisation. Prem Sikka is Emeritus Professor of Accounting at the University of Essex
AAT pass rates are in Pass rates for the AQ2016 Advanced Diploma Synoptic Assessment (ADSY) have slipped below 50% to 48.2%, according to AAT stats for 2022.
New CIMA president elected In another first for CIMA, Sarah Ghosh becomes the second successive women to become President and Co-chair of the Association, following on from Melanie J Kanaka. Ghosh became a CIMA member in 1995 and fellow in 2013. She current works for the UK Civil Service, with a focus on sustainability and technology. Earlier this year Ghosh was named among the 2023 Top 50 Women in
Sarah Ghosh
Accounting. She said: “I will be using my term to promote sustainability, innovation, and inclusion within the profession. I firmly believe that now is the time to seize the future and make progress in these areas. By doing so, we will make a real difference today, and secure a brighter future for ourselves, for those who count on us and those that follow us.”
Which June 2023 ACCA exam was the hardest? So, which ACCA exam was the hardest this June? The answer is clearly SBR, according to the Open Tuition Instant Poll! Other papers on the naughty list were APM, FM and PM. The next PQ magazine will have top exam tips for the September sitting. Read our feature on SBL changes on page 27
Labour taking staff from Big 4 again The Labour Party has been criticised for using more than £230,000 worth of free staff from the Big 4 firms PwC and EY since Keir Starmer took over the leadership in 2020. The story from openDemocracy points out that Shadow Chancellor Rachel Reeves recommended the accounting giants be broken up and a new independent regulator be established. openDemocracy said: “The government notionally accepted the suggestions but neither was acted on.” In the past Labour has used PwC extensively, 8
Two sets of pass rates ago the pass rate for ADSY was 54.6%. The Personal Tax assessment pass rates also remain at 62.8%, when they were 70%.
On the good news side, the Professional Diploma Synoptic Assessment pass rate went up slightly to 56.9%. The pass rates for Cash and Treasury Management (74%) and External Auditing (73.7%) are also on the rise. When it comes to distinctions these are becoming harder to get for sitters. Just 2% of those completing the Professional Diploma in Accounting achieved a distinction, with merits also down to 43%. Just 8% of those finishing their Foundation Diploma in Accounting and Business were awarded a distinction, but some 68% did receive a merit. Overall CBA worldwide pass rates for the professional stage was 65.1%. This rises to 72.5% for the Advanced level and 80.2% for Foundation. See next month’s issue for the pass rates in full.
but the tie was broken in 2015 after the chair of the Public Accounts Committee, Margaret Hodge, said the firm had been “selling tax avoidance on an industrial scale”. Large firms continue to ‘improve’ audit quality The FRC has published its annual inspection and supervision results of the largest audit firms (BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC). Overall, 77% of audits inspected were deemed good or required limited improvement. This, says the FRC, reflects a year-on-year improvement spanning four years, with a 10 percentage points increase compared with the
67% recorded in 2020.That still leaves nearly one in four (23%) of inspected audits that require significant improvement. Sanctions for PwC and KPMG PwC has been fined just under £2m by the FRC and received a severe reprimand for its audit of Eddie Stobart plc for the financial year ended 30 November 2018. Audit engaged partner Philip Storer was fined £51,000 and received a severe reprimand. KPMG has also been sanctioned for its earlier audit (for the financial year ended 30 November 2017) of the same company. KPMG was fined £877,500, with the Big 4 firm’s poor disciplinary record noted as an aggravating factor. PQ Magazine August 2023