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The Positive Accountant Vol 2 Ed 6

Here's a bonus edition for the weekend that I teased you about on Friday.  There is no technical material in it, perhaps it's more a 'Shouldn't happen to an accountant' than a 'Positive Accountant'.   But it's a story that is worth telling, and too long to summarise in a normal blog.

For those that thought'Indecent Proposal'was just a work of fiction, this will disprove it.  It will also disprove that accountancy is a dull career choice

It is a true story, I was the auditor concerned.  The clients involved are long since departed, the business was at the other end of country, but identities are changed regardless. I'm afraid to say that the story reflects attitudes prevalent at the time, if easily offended then read no further.

Oh, you're still there....So, to continue, I was aged 22 in the early 90's (a time of deep recession), I was newly qualified.  Jobs were scarce and competition to avoid redundancy was aggressive.  

Despite the backdrop I was a bit of a rising star and keen to make my mark.  I was in the audit department of a provincial firm - and audit departments are well know for mind numbingly boring tedium.  To survive, let alone be a rising star, you needed to be seen to be able to get the job done without any problems, as quickly as possible.

The thing about audit is that the work is planned at partner/manager level, the troops have the planned tasks dispersed to them.  In those days everything was paper based, if an audit test was OK a red tick appeared on the schedule and the partner never bothered looking into that.  

All the partner needed to be bothered about were areas that were unsatisfactory - upon which judgement needed to be exercised - these matters were written in the AMOS ('Audit Manager Opinion Summary')

So, I was sent out in charge of a team auditing a small property development company, owned by a chap we'll call Bill Dem.  We were working away, staying away, I was driving the team for all they were worth to get the job done quickly.  It was a high risk assignment (those with memories that go back that far will remember that property businesses were going bust on a daily basis.)

All was going well - lots of red ticks - until I turned to verify the loans on the Balance Sheet.  

Like most property businesses at the time this one was heavily indebted, but unlike most it wasn't to a bank but was instead a wealthy individual - Ivor Bigwedge, an ageing larger than life character - who had lent £1m to the company.

In common with all well ordered transactions, this one was underpinned by something like a 70 odd page loan document  drawn up by two respected London law firms at, no doubt, immense value.  

I turned to my work programme and found that I was supposed to read and summarise that loan document, highlighting areas relevant to the accounts and making sure the accounts reflected the document. I had a time budget of 45 minutes to do so.  Exciting task, or what ?

 On page 35 - or thereabouts - I came across some interesting clauses - ones that caused the time budget to be blown in an instant.

The loan document recited the fact that Bill, the business owner, had a long term friendship with a famous, and very attractive model.  Let's call her Fleur Tee.

This part of the document named Miss Tee, and also gave a full description - in pretty non legal language - so that there could be no mistake as to who was the 'target'

The loan document provided that if Bill successfully introduced Ivor to Fleur, and that the introduction led to 'satisfactory intimate carnal relations', then the loan became a gift.  Unusually there was no attempt to define the phrase, nor to whom it had to be satisfactory.  

The document went on. to say that if, subsequently, Ivor found that Bill had experienced 'prior carnal knowledge' (presumably satisfactory or unsatisfactory - that wasn't specified) then the loan was immediately repayable with a 50% premium.

What to do ?  In the accounts should we show the money as a £1m gift ?  Or a £1m loan ?  Or - worst case - a £1.5m loan ?

Suffice it to say that a very lengthy AMOS was written in this area.  I recall I suggested a qualified audit report on the grounds of material uncertainty.

I don't recall how the partner planned to resolve the dilemma - perhaps the answer existed in the fact the business went bust before we completed the accounts...

I hope you enjoyed your weekend, and are refreshed for the week ahead - after this rain the garden is !

Until tomorrow, stay safe, stay positive


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