Small Cap Value Report (Thu 7 Feb 2019) - FDEV, IRV, ACSO, DPP, SDRY, GATC, OTB

So really what auditors do is to look at the accounts and say "yeah, s'pose they might be right". And then walk off with a fat bulge in their trouser pockets.

In reply to post #445018

Given that statement by the Grant Thornton chief you would have to ask what the point is of the audit and why on earth there should be any requirement for companies to have one.
Better to impose an equivalent levy on business and spend the money on actually prosecuting and punishing white collar crime.

In reply to post #444883

https://www.tweaktown.com/news/57475/ea-earns-1-68-billion-microtransactions-fy2017/index.html

My pennyworth on accesso Technology (LON:ACSO). I held and had a nice paper profit at 60% at it’s high before selling for a 30% loss but thank god I did.

In case other readers have missed (like I did)

The is a very deeply researched short case on accesso Technology (LON:ACSO) by Tom Winnifreth at:

https://www.shareprophets.com/views/38588/accesso-technology-a-big-autumn-short-part-1

Whether if I read it back in October I would have sold is moot but it would have certainly made me think. It would have been the perfect time to do so but in any event I think it is an article than needs to be read.

I am not sure I will reinvest. I am becoming more and more annoyed at management who use what I would call weasel words or PR speak in their RNS’s to the owners of the company:

“the Board has recently initiated a review of the Group's investment priorities in the context of the significant future opportunities available to it and the current areas of business momentum.

The Board expects to provide an update on this review and the Group's outlook as part of the full year results announcement on 27 March 2019, which will also set out a number of new enhanced disclosures relating to the Group's operational and financial performance.”

And

“expected to be broadly in line with market expectations for FY18.”

Broadly could mean almost anything and I have no idea what the markets expectations are/were. Why can they not be more specific/straight talking.

It is a shame because I think that this should be a good business.

In reply to post #444988

We are talking about DP Poland (LON:DPP) @herbie47 - big difference. This Domino's franchise sells pizzas in Poland, the clue is in the name :-)

In reply to post #445028

It does indeed pose a question. Auditors do in fact sometimes raise issues over accounting practices, or outstanding debtors days etc with the auditor committee report, and with the FD,

However, basically the baseline seems to be, given the accounts presented to us, do we believe in our professional opinion that they represent a true and fair view?

We either need to move the baseline, or there ought to be level(s) of more forensic review as part of the auditor package. This could be parcelled into levels of review that represent a more thorough review of Company practices. The outcomes of that might come out as recommendations in the report and accounts.

Let's face it the auditors won' want to be on the hook for missing something, when its the management who are fraudulent, not them. The audit committee could be accountable in some way, to show they have interacted with the auditors.

Quite often you will find the Audit Committee chairman will sit in the same meeting with the rest of the board as the audit committee business is performed. So they have to be a little bit bloody minded to wake the auditors up (and the board) as basically this will tend to happen when the accounts are already virtually signed by the FD, and ready to be approved for release by the board. So, putting your oar in too much at a late stage could be seen as disruptive.

Of course the additional costs and relevance may be questioned by boards and shareholders, especially on AIM which is meant to be lightly regulated.

In reply to post #444888

B.P. Marsh & Partners (LON:BPM) I think the markets didn't like the following statement tapped on the end of the update

"The Group notes the reduction in the number of new enquiries received and
attributes this to uncertainties in recent months surrounding Brexit and other
geo-political pressures. The Board does not view this as a lasting cause for
concern, however, and anticipates deal volumes to pick up once there is more
clarity on the domestic political situation."

(I hold)

Lloyd

In reply to post #445033

Whatever happened to "True and fair view". Surely If a fraud on a massive scale has occurred then the accounts are not true or fair. Surely one does transactional testing to detect irregularities in systems, procedures.

In reply to post #445123

Yes sorry must have clicked on the uk link.

Thanks Paul. Excellent analysis & fine humour with it !

Another top-quality article today.

Good analysis of Accesso (Acso) Paul. Very difficult to value without more info.

In reply to post #445028

It’s an interesting question. What sorts of occurrences are likely to make a set of accounts misleading? Careless bookkeeping? Maybe but not often and unlikely to cause major problems. A failure to apply commonly agreed accounting standards? The previous auditors at Utilitywise (LON:UTW) didn’t seem to be too bothered by that. Or fraud!
If the auditors were appointed by an audit committee that reported directly to shareholders now maybe they would have an incentive to look for things that might harm shareholders’ interests. But as it is the audit committee is effectively a proxy for the board of directors. And, as they say, the customer (in this case the board of directors) is always right.
So what point an audit?

In reply to post #445018

Checkout this if you have the time. There is a repudiation of then view that auditors should not be detecting fraudulent activity.
https://www.parliamentlive.tv/Event/Index/f603b413-8e8b-4b6c-80d5-9359e408971a

When I was an auditor, and I must admit it was a few decades ago, the view was that we were not responsible for detecting fraudulent activity BUT we were expected to find material fraud.

This always seemed logical to me at the time - we were expected to state the accounts gave a true and fair view - this is not the same as finding fraud - however if the the fraud was material the accounts would not give a true and fair view.

On this basis I disagree with the public announcement made by the auditor concerned.

However, in the case of management fraud, basically, in all honesty, if they are good, the auditor will not find it until it blows up and that's a risk the auditor takes (and has insurance to cover) and the financial community have to understand.

Phil

Auditors, where something is clearly wrong, because whatever arguments they come up with, massive long term fraud, needs a better response than ‘not our fault’. So rather than saying, ‘yes something is clearly wrong here, we need to look at it’, the absence of that approach is usually from a body with vested interests, outdated thinking, and plain old arrogance. Just like most old institutions in the uk seem to respond before someone in government eventually takes aim. What really needs to happen, and is just obvious, is the consequences to those committing the fraud must be much much worse than it currently is.

I took a loss on pat val, so quite annoyed, but probably not as annoyed as for Luke, who must be apoplectic!

You are assuming he is not involved and an innocent party then?

In reply to post #445343

The big difference between you and Luke is that he had a responsibility to protect you from fraud, which he failed miserably on. If he has lost a little of his cash (and I'm not at all clear that's true overall) then that's frankly a small compensation for those shareholders without an influential seat on the board (and who get paid to lecture people on how to spot fraud!)

In reply to post #444948

Hi brucepackard,

Re what a crap company DP Poland (LON:DPP) is, you said;

Thank you stocko stock ranks!

Errrrr, hello!!! It's actually been ME who has told everyone what a rubbish share DPP has been for millions of years - acres of negative articles, for years, here.

I thank you! Credit where credit is due.

I'm not having those johnny come lately algorithms trying to claim all the glory!!!

PP.

Belatedly, another really useful article Paul. Your balanced review of Accesso is much appreciated. I am a big fan of TB and suspect he will not let go until he has this one back on track..........let's see.