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Intheblack, Mar 2008

LETTER OF THE MONTH

Experience vs "how much I know"

Perhaps we are all too familiar with the words "experience". In a fairly practical profession such as accounting, how much experience someone possesses is virtually what he/she is potentially worth in the job market

I am no different from many other people -1 went through the very difficult stage of securing my first accounting job not long ago. After changing a couple of jobs in the past few years, I discovered, with disbelief, how magical and powerful that little bit of experience is on my resume.

During the process of moving jobs - from suburban firms to CBD firms, from a small sole-trader practice to middle-sized, well-structured firms - I have been fortunate to get to know quite a few very experienced accountants. Quite often I heard an introduction to a client like this:

"I am a qualified accountant with more than 20 years' experience." Yet the experiences of working shoulder to shoulder with these accountants has been rather disappointing. Some of them are in the position of mentoring and training me, yet they've not bothered to update their knowledge for more than 10 years. They struggle to keep pace with the fast-changing regulations and rulings. And not surprisingly, they struggle to provide satisfactory answers to clients' questions, let alone to add value to clients' businesses.

I started to ponder the powerful word "experience" with unease. I wonder what the industry can do to change the preposterous trend, so that when people boast about their long professional experience, they should also ask themselves: "How much do I know?"

Jessie Brauer ASA

Brisbane

What's to be done about the skills crisis?

As a CPA with over 20 years' experience in public practice I wonder what fellow members views are of the so called "skills crisis". I am aware that there is little CPA Australia can do to rectify the problem but, nevertheless, I do think CPA Australia should sponsor some competent research into whether the concerns I am about to raise have any basis in fact. Some pointers for reflection include:

Accountancy as a career is not only becoming less attractive to school leavers, but public practice is increasingly failing to draw its share of the falling numbers.

Generation Y's work ethic is creating a dumbing down of tax knowledge in public practice. By this I mean younger graduates are much more likely to view tax as just a job, not a passion for knowledge or excellence. As a result they read less outside of work and often hold a depth of knowledge well below what was considered not only competent but the "norm" only 10 or 15 years ago.

The error rate, poor tax planning and omissions occurring In public practice is rapidly rising as firms struggle to find, recruit, train and hold competent staff.

Retiring CPAs are increasingly being forced to sell their practices to accountants with worrylngly limited public practice and/or tax experience.

Accountants with good public practice skills and a comprehensive knowledge of tax law often earn a lot more than comparably skilled accountants working for wages in commerce. Younger accountants, however, are often reluctant to wait, learn and train for these higher incomes.

The above are not comfortable issues. But they do deserve some exposure and discussion.

Robert Lopez CPA

Via email

Banks put fear of God into borrowers

Thank you for the illuminating article on the technical perspectives of Islamic banking (Asian edition of INTHEBLACK November 2007). Despite their religious name and the hype, these instruments are not fundamentally new but a mere tweaking of conventional banking. In doing this, banks are no longer clear on their roles. I believe, in most cases, the consumers are worse off.

For example, in a wadiah saving account, the return is not guaranteed; instead a gift is offered. A gift is at the bank's discretion, while interest is legally binding. The bank has taken the benefits of the risk-sharing principle but conveniently left it to competitive market forces (or maybe fear of God) to make sure a gift is offered. Further, with the investment account, the banks share the profit but take none of the losses. I fail to see any risk sharing here.

More dangerously, the tweaking of names and terms causes ambiguity. For example, in a murabaha financing for a home, the bank "sells" a $300,000 house for $500,000, to be paid over a period of 25 years. If in a few years, the "borrower" wants to repay the "loan" in full, the bank can insist that the "buyer" pay up the full sale price of $500,000. Luckily for that consumer, the judge decided that the transaction was a "loan" in spirit rather than a sale and purchase agreement.

Along the way, the concepts of debt and equity are also muddled up. By definition, debt is making money from money. Equity is sharing risks to make money. If making money from money is prohibited in Islam and risk sharing is important, then Islamic banking is an oxymoron. To follow the principles to the T, there should only be Islamic investment in halal businesses.