And on average, finance workers are more skilled in the areas that have the least positive impact on value creation.

You know how everyone likes to think they’re above average? Above average driver, above average intelligence, etc.? This is that. Finance managers believe they’re above average at their jobs, therefore those around them are likely below them, and possibly even below average. It’s OK. They’re human.

I also think there’s an element of confirmation bias at play. They’re finance managers, so they must be above average and have the skills and behaviours that the survey indicates is important.

But back to those hapless direct reports: First, who hired them? If it was those selfsame finance managers, shouldn’t that reflect poorly on their ability to assess competence and develop talent? Whose responsibility is it to put in place succession and training plans? (HR’s, they’d probably say, if surveyed about it.)

Overall, finance managers appear quite dissatisfied with the talent levels on their teams. [The CEB] acknowledges as much. “We weren’t particularly surprised that the ratings were so low,” she says. In fact, she adds, one reason CEB did a report on talent is that when it conducted its annual interviews with CFOs last year, 85 percent said talent was a major concern.

I’m not surprised either. This is never going to stop, until robots run companies completely. Even then we’ll probably sneak a “dissatisfied with direct report talent levels” easter egg into the code, just so robot CEB surveyors can have something to write about. What a chilling dystopian vision; I think the living will envy the dead.

Mercilessly, it continues:

Effective delegating is a capability many finance departments sorely need. “After the financial crisis, finance is overwhelmed with ad-hoc requests,” the report states.

If you’re delegating to staff that you don’t have (because they were all downsized during the recession), it isn’t going to be very effective. Perhaps that’s the reason they’re feeling overwhelmed?

There’s a reason why great people are hard to find: they’re scarce. And once found, smart managers do everything they can to keep them. As well, it’s highly likely those yearned-for “persuaders, strategists and builders” recognize a good situation when they have it. Perhaps that’s the most important takeaway here for finance managers. Build it, and they will come.

In one laboratory experiment, we placed participants in a dimly or well-lit room and asked them to complete 20 math problems under time pressure. The participants received a cash bonus for every correct answer. Since we were interested in whether darkness affects cheating rates, we left it up to the participants to score their own work and to pay themselves from a supply of money they had received at the beginning of the study. While there was no difference in actual performance on the math problems, almost 61 percent of the participants in the slightly dim room cheated while “only” 24 percent of those in a well-lit room did. Eight additional fluorescent lights in the room where the study took place reduced dishonesty by about 37 percent.

They also performed the test based on the perception of lighting levels using sunglasses, and had similar results.

I anxiously await the results of a combination of smell and lighting!

But why stop there? What else in the sensory-ethics world can we adjust and test? Sounds? Tastes? Should we all be chewing mint gum every day and listening to waves crashing onto the shore?

The question is: could this be taken too far? How brutally honest do we want our co-workers to be with us? At least in the interests of getting along, perhaps some things are better left in the dark.

Overall it is sending the right message to global entrepreneurs, that Canada welcomes them and their ideas in the hopes of creating jobs in here in an area of growth.

I hope it won’t create an uneven playing field against homegrown entrepreneurs, but my contacts in the industry think it’ll be a net positive. Deal flow will increase in Canada, which will benefit existing start-ups and innovators. The rising tide of more money sloshing around this part of the economy will lift all the boats, as it were.

Existing companies stand to benefit from at least one of the explicit goals of the Program, which is to bring in motivated individuals from around the world, deepening the talent pool for all companies.

What do you think?

The legacy of the “discovery” and settlement of North America by Europeans and their subsequent relationship with natives is a topic far too complex for this blog, but the story took on an element of particular interest with the “leak” of a Deloitte audit report on the administration of the community.

That report has been posted online in its entirety.

Deloitte sampled 400 transactions from the G/L across the 6⅔ years in scope. Sixty per year and 40 for the eight month period ending November 30, 2011. Slightly less than 20% of the 400 had no issues. No supporting documentation was available for just over 60% of the sample, and the other 20% was either incomplete or the occurrence of the underlying event was questionable. It should be noted though that in the most recent 20 months reviewed, only for 31 of the 100 samples was there no supporting documentation.

What the audit didn’t do (and wasn’t designed to) was determine whether $104M over that time period is adequate for the population on the reserve. It’d be an interesting analysis to look at the number of households, average people per household, repairs and maintenance funding per household and per person, and figure out whether there is enough funding to support their needs or not. That’s the heart of the issue.

Now how could accounting be doing that? Why, because senior management is preoccupied with meeting short-term quarterly earnings targets, and are cutting back on longer-term focused R&D investments!

I thought this was just an overzealous headline writer, out to get clicks (mission accomplished!) and perhaps the article itself would walk back the ridiculous premise, but instead it doubled down:

The accounting treatment of R&D as a period expense and the overemphasis many public-company executives place on EPS. Many executives pay lip service to the long term benefits of R&D. But in reality they base the size of their companies’ R&D budgets primarily on a single period’s EPS dilution. Thus, they are only looking at a tiny fraction of the value equation.

It’s gotta be up to management to teach the market how to appropriately value their company, and it’s gotta be management that shares a long-term vision of sustainable profitability to shareholders. This short-termism simply has to stop.

It isn’t the accountants who are pushing for quarterly earnings reports. I’m sure accountants would love to spread out the reporting, it would make their lives a lot easier not to have to calculate myriad accruals on a quarterly basis only to reverse them after.

Value, real lasting value, not just for shareholders but employees and communities, is built over the long haul.

Slowing down makes us more ethical. When confronted with a clear choice between right and wrong, people are five times more likely to do the right thing if they have time to think about it than if they are forced to make a snap decision. Organizations with a “fast pulse” (such as banks) are more likely to suffer from ethical problems than those that move more slowly… The authors suggest that companies should make greater use of “cooling-off periods” or introduce several levels of approval for important decisions.

Several levels of approval for important decisions sounds like a fantastic idea to me. What I find is that too many decisions are made or approvals given orally in meetings, with scant evidence to support their existence later, in case of an audit. Surely introducing more rigor around this aspect of approvals would further improve ethical behaviour!

Delay even works in fields where time might seem to be of the essence. Doctors and pilots can profit from following a checklist, even when doing things they have done many times before. A list slows them down and makes them more methodical, as Atul Gawande describes in “The Checklist Manifesto”.

Now you’re beginning to see why this article prompted me to write a blog post for the first time in umpteen weeks! Not just levels of approval, but checklists too? Be still my beating heart!

Auditors have been employing checklists to improve quality for eons. It’s great to see articles like this extolling their virtues to all people and for all tasks.

In the March issue of CA Magazine, Jays president Paul Beeston, FCA graces the cover and is featured in a great profile of his career with the Jays, MLB and Labatt. He also talks about how his CA training has helped him throughout his career.

While his ebullient personality has made him one of the most popular executives in Major League Baseball, it is Beeston’s sober accounting skills that have made him a treasure for his corporate owners at Labatt and more recently Rogers. “I would say [an accounting background] is almost critical. You have to be able to read a P&L. You can’t lose money and be successful.”

He also waxes poetic about a topic that I’ve touched on a number of times over the years: the difference between getting your CA at a smaller firm versus one of the Big Four. Turns out I’m in good company:

An accountant to the end, Beeston looks back fondly at his time with Coopers & Lybrand in London, Ont., where he received his CA in 1971 (then McDonald Currie) and worked in the tax department. Clients were smaller in London, which meant he got to work on up to 50 audits with different clients over the course of a year. “You learned and you did everything — the tax returns, the auditing — you learned what a financial statement was all about, you learned what financing was about,” Beeston says. He contrasts that with a role in a big firm where an accountant might work on just one client for the better part of a year.

Pretty cool that one of the guys responsible for the Jays back-to-back Series wins in the early 90s is a fellow CA (no pun intended). The team is looking pretty strong this year and the minors are stocked for the future. Let’s play ball!

I wrote a blog post about the service almost three years ago, claiming they made USB drives obsolete. Dropbox offers 2GB of free cloud storage that integrates seemlessly into Windows, Mac and Linux, and more storage (50GB or 100GB) for a monthly or annual fee. They also introduced a service for teams, which I could see being very useful for small businesses with remote workers in particular.

The old blog post was very successful for me, as seven people signed up for Dropbox using my referral link, netting me an extra 500MB each time!

If you haven’t yet tried it, give it a shot. The way it integrates with the operating system makes it so easy to use, and the web interface is great for those times when you don’t have administrator access to your computer but still need to get those files!

Cue Patrick Bateman: “Look at that subtle off-white coloring; the tasteful thickness of it… Oh my god, it even has a charter.”

I’m not sure why I should be worried about a brand new certification with no history and nascent prestige (to be charitable), but, … uh… hey, free magazine!

Accepting the argument that we need to meet this threat head-on by joining forces with our brethren, this might lead some to believe CMAs would be assuming the front lines in this battle, given their pedigree with management accounting. If we take these upstarts to be our challengers, this will no doubt impact the development of the merged curriculum and other requirements.

CA Magazine’s done some recon:

The hallmark of the CGMA designation is expertise in applying nonfinancial, qualitative information along with financial analysis to understand all aspects of business. According to a study done by the two institutes, this will be in increasing demand by international businesses that want integrated financial and nonfinancial information.

I think what they mean here is expertise is applying non-financial and/or qualitative information. As we all know, there are many important metrics in all businesses which are non-financial, but still quantitative. I think they’re taking that from this page which compares and contrasts financial accounting and the added value of management accounting. Where the former is concerned with the financial, the latter adds non-financial. Where the former focuses on quants, the latter includes qualitative information. (Conclusion: It’s all marketing!)

One thing is for certain, according to the pro-merger forces among us: War is coming.

(Yeah that’s right, I started this with an American Psycho reference and I’m ending it with a Game of Thrones reference. What of it?)

It also creates this false dichotomy with external audit that really doesn’t exist. Within the IA context, the audit of financial statements is supplemental and focused on only one risk: reporting risk. Granted, reporting risk holds a special place in the pantheon of enterprise risks, critical to obtaining and maintaining financing, but still.

Why is internal audit content with naming itself only in terms of where its practitioners reside in relation to the organization under audit? Seems quite narrow and vague. Given that IA concerns itself with all enterprise risks, it makes more sense to me to called it Enterprise Audit. This would also dovetail nicely with Enterprise Risk Management. ERM and EA, two sides of the governance coin.

Better branding in this manner would attract more and higher quality people to the profession as well. It sounds far more interesting and rewarding to be in the business of enterprise auditing than internal auditing.

What do you think? Is it too late in the game to make a change like this? Does it matter, so long as those in business understand the role and responsibilities of the auditors?