The Bribery? What Bribery? Act 2010

It's okay folks. The Bribery Nothing-wrong-with-the-odd-backhander Act 2010 will limp into effect on 1 July, rather than convert Twickenham rugby stadium into, say, a new experiment in social housing, as feared.

The Ministry of Justice has even produced a helpful guide to Bribery, featuring lots of placatory language and easy talk of "prosecutorial discretion".

They may as well have stood in Parliament Square with a bullhorn shouting: "Get out there and sell UK plc, damn it. We need the spondoolies."

Image from Ministry of Justice web site - no joke.

This post is written for information purposes only, and is not intended to be relied upon for any purpose whatsoever, including but not limited to participation in government or corporate procurement exercises anywhere in the universe, either as we currently understand it or as it might turn out to look like following more intensive research involving the Large Hadron Collider and an errant strip of aluminium foil that a cleaner inadvertently left in the chamber after a late night game of cards [er, that's enough disclaimer. Ed].

Ode To London Tree Pollen

Now Spring has sprung,

I am undone

By dim-witted English trees -

They blossom now,

Only t' forget how

To hold-on to their blasted leaves.

Where I come from,

(I am no Pom)

The trees are not so dim -

Being Evergreens,

They keep their leaves

And rein their pollen in.

But be patient please,

While I sneeze and sneeze,

Brief Summer will soon wane -

Then these bloody trees

Will forget their leaves,

And the process will begin again.

Analyse This

Auditors, and others interested in the nature of scepticism (feel the irony) will have been interested in recent FT coverage of stock market analysts' reluctance to write "sell" notes on the companies they cover.

In theory, the distribution of sell, hold and buy ratings should be equal. Yet Bloomberg found that 60% of analysts' ratings are "buy", and "buy"/"hold" ratings together outnumber "sell" notes by 9 to 1.

One chief of US equity strategy was brave enough to be quoted as saying, "There is clearly a lack of willingness of management to deal with analysts who are highly critical."

McKinsey research, discussed here, has also found that analysts are "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined."

It seems likely to be self-defeating to obviously exclude or limit critical analysts' participation in briefings - possibly a sell signal in itself. Or at least a signal that everyone should start asking a lot more questions. But ultimately the research highlights the fact that, for all the law on disclosure and directors duties, the stock market is just that - a sales forum.

Let the buyer beware.

Defrauding The Dodgy Dictators

Interesting post from Robert Peston, yesterday, concerning financial sunlight and despotic dollars (hat tip to nobby-Lobby). He concludes:

"You can even make the case that to guard against the propensity of any British government to waste taxpayers' money or reward friends, you would probably want every page of every outsourcing or PFI contract published on the internet.

Here's the thing. There is almost always a public interest in publishing commercial agreements with governments wherever they sit on the spectrum from parliamentary elective democracy to corrupt military junta. But against that public interest comes the national economic interest, which - whether we like it or not - is occasionally served by allowing businesses to operate under a dank fog of partial disclosure."

This is of course topical, not only because 'democracy' kicking off in the Middle East has resulted in an embarrassing mini Ice Age for assets allegedly under despotic control, but also because the implementation of our very own Bribery Act has stalled.

It's a fine mess.

But is it any surprise?

The current financial crisis and its causes tell us that the official Western attitude to financial misdeeds is fiendishly inconsistent at best. Witness the irony, for example, of Hank Paulson, as US Treasury Secretary, ramming entire financial institutions together over a weekend, but warning Congress it would take months to renegotiate bank CEOs' compensation agreements. Or the timid enforcement record when it comes to the pillars of the finance world, while the theft of some source code from Goldman Sachs gets you 8 years. No wonder Bernie's bitter. It's like he got everyone else's jail time, as well as his own. But maybe that was the idea. Hang one guy out to dry and hope that's enough for the baying mob.

It makes you wonder whether all the hand-wringing over bribery and corruption was just a Western conspiracy to fool Gaddafi and his ilk into trusting us with his loot.

Ah, £€$k 'em. They knew the risks.

The Nature of Scepticism

I've been fascinated recently by the dearth of critical thought in the financial community. I still haven't found the time to read The Big Mo, but I have suggested an official Devil's Advocate, and tried to stimulate at least a little lateral thought by suggesting we allow an independent regulatory agency to short sell. I've also been interested in proposed reforms to the role of ratings agencies and audit firms. So imagine the thrill I experienced on seeing that the Auditing Practices Board of the Financial Reporting Council has issued a "Feedback Paper" that summarises the responses to its "Discussion Paper" called... [trumpets]

"Auditor Scepticism: Raising the Bar"

The feedback? Well, surprise surprise:

“While responses to the Discussion Paper demonstrate widespread agreement on the critical importance of auditor scepticism to audit quality, there is less agreement on the nature of scepticism and its role in the audit."

In other words, the accountants aren't really sure what the word "scepticism" means.

Well, for those of you up the back, the Oxford English Dictionary defines a "sceptic" as "a person inclined to question or doubt accepted opinions." So, I'm thinking "scepticism" might be... the inclination to question or doubt accepted opinions. Surely one does not need to be more specific.

However:

"In light of the responses to the Discussion Paper, the APB has decided to distribute copies of the Oxford English Dictionary to all audit practitioners undertake work in the following areas:

* Ensuring that there is a consistent understanding of the nature of professional scepticism and its role in the conduct of an audit.
* Reviewing ISAS (UK and I) for possible ambiguities in relation to the nature and importance of professional scepticism, and proposing such changes as may be needed to make sure the position is clear.
* Reviewing ISQC (UK and I) 1 to ensure that it has sufficient requirements and guidance relating to the need for firms to have appropriate policies and procedures for promoting the competencies that underlie professional scepticism.
* Considering how the application of scepticism can be made more transparent.
* Considering, with other parts of the FRC, whether there is a need for guidance on the approach to be taken by auditors when considering the presentation in the financial statements of matters that have been the subject of significant challenge by the auditors."

The situation is so dire in the audit world, that they have to teach auditors to be sceptical.

What next - teach coppers not to believe everything suspects tell them?

You could not make this up.

Image from The Philosopher's Magazine.