Angela is not happy. As a board member of Rapston Hotels, a family business, she is concerned about spending on refurbishments. She is also irritated by the behaviour of her nephew and fellow-director Sebastian, and baffled by the notion of attracting young affluent customers by creating ambiance using modern art and piggybacking on the social media following of its creator.
“Who is this Melissa, I’ve never heard of her and I can’t believe how much we’ve paid for her paintings,”says Angela Holt, in the opening scene of the ICAEW film Without Question, before going on to reveal what’s really on her mind: the negative impact she expects all this to have on her next dividend.
In Without Question, we join the bickering Holt family as they journey from private business to public company, with the help (and hindrance) of the original directors, new non-executive directors and the accountancy firms who are Rapston’s auditors and tax advisers.
Like ICAEW’s earlier film False Assurance, Without Question has been created as a training aid to help directors, senior managers and their professional advisers across many sizes of company and firm, to learn in an interesting and thoughtprovoking way by stimulating conversation and debate.
Watching it certainly got attendees talking at a recent ICAEW roundtable. Without Question begins by introducing us to the main characters. As well as grumbling Auntie Angela and her overconfident nephew Sebastian, we meet his indulgent father and chief executive (CEO) Robert Holt and Rapston’s goal-oriented CFO, Karen Walker.
We also meet tax adviser Martin Jelani at Bantons Accountants, who is selling aggressive tax advice on a contingent fee basis, to the concern of his more junior and more conservative tax manager. We get a glimpse of the audit team at AWR Accountants, with its insouciant audit partner Will Jackson, who shows signs of being his own worst enemy and everybody else’s too.
Things move apace and within 10 minutes we learn that: the CEO sees going public as an easy way to lose his interfering family; son Sebastian has been given a free hand on a Rapston expansion project overseas and more than enough rope to hang himself; the CFO wants the initial public offering (IPO) to go well so that she can cash in and head for the hills; the audit partner is buckling under pressure to complete the audit early in time for the planned IPO; the external tax adviser has not told Rapston how risky his advice is and the auditor has missed this.
Even the arrival of newly appointed non-executive directors seems unlikely to steer Rapston through its IPO and onto the sunny uplands. After watching the first of the film’s five parts, the roundtable attendees have noted all of this – and more.
“It really shows the challenges you face when you have a number of family members running a business,” says Bobby Lane, a partner in Blick Rothenberg. “It’s not unusual to have one person who is against decisions being made or a young family member coming in and working with a founder to look at new ways of doing things.”
“There were definitely some interesting family dynamics,” adds Dom Ahern, who runs an accountancy practice serving start-ups, and founded Best Suited, a network of professional specialists working with early stage technology companies. “It rang several alarm bells for me,” says Caroline Smale, technical and training partner at Bishop Fleming, who thinks the board seemed to be ratifying under pressure rather than planning ahead.
Jenny Reed, former technical and training partner at Wilkins Kennedy, adds: “I found myself focusing on the impact of deadlines on behaviour. People feel that they are backed into a corner and then end up making poor decisions because they cannot see another way out. In practice, there is always another way out, even if it isn’t very palatable. That’s something I’ve seen over the years in a number of firms and people can get themselves into very difficult circumstances.”
As the plot deepens and the film progresses, we see just how difficult those circumstances can be. The second section of the film develops a storyline around the aggressive tax advice given to Rapston and the potential consequences of using it as the basis for a tax claim. It also introduces a social media storyline: the audit manager at AWR shares a photo on social media enabling a journalist to deduce that Rapston is on the brink of an IPO. The roundtable attendees spend a long time discussing her behaviour and how the audit partner deals with the situation.
In one manipulative conversation, the audit partner takes the audit manager off the audit, tells her there will be disciplinary action by HR and then makes it seem as if any failure to question the tax advice from Bantons is her problem, and says “So there isn’t a problem, is there?” There is much debate on whether or not this is appropriate behaviour and why and whether the audit partner may be damaging the quality of the audit process by removing the audit manager from the team.
“Nothing she has done raised questions about her competence as an auditor and he is losing her knowledge at a time when it will still be very valuable,” says Duncan Wiggetts, ICAEW executive director, professional standards, the writer of Without Question (see box, right), who is facilitating the roundtable – and playing devil’s advocate.
But Ahern is unequivocal: “Her behaviour is a serious breach of confidentiality. She has to go, no matter what.” Increased use of social media and the issues it creates are challenging for all firms and everybody has a tale to tell on this, including Wiggetts. “A risk management partner at one firm told me that he’d discovered a WhatsApp group that had been set up between the audit client and the audit team back at the office so that they could exchange information. It was not properly documented and it gave the impression of a very cordial relationship – perhaps too cordial – between the people asking the questions and the people giving the answers,” he says. ICAEW is also seeing complaints related to confidentiality and social media.
Without Question deliberately focuses on behavioural themes rather than technical issues and this seems to resonate with the roundtable attendees, who voice particular concerns around younger members of the profession. “Over the time I’ve been an auditor I’ve seen a trend towards more and more audit work being done from the office. But you learn so much simply by being at the client and observing the atmosphere and the culture and how people phrase things when you put them on the spot,” says Reed.
As Smale, who is also concerned, points out: “What can you learn if you can’t see the body language or even hear the intonation on a voice when you are asking questions?” Without Question offers many opportunities to dig down into technical issues, in particular around audit, financial reporting and tax. The first part of the film alone raises questions around whether or not the audit team at AWR has adequately considered at least three International Standards on Auditing and what they may or may not have overlooked. In fact, the film is so effective at prompting questions and drawing out themes for discussion and debate that the roundtable overruns its allotted time.
Your role in without question
ICAEW members played an important role in the creation of Without Question. “We watched closely how our first film False Assurance was used by the organisations that licensed it, then learned from it and used the knowledge to enhance the usefulness of Without Question,” says Duncan Wiggetts, ICAEW executive director, professional standards, and writer of the scripts for both films.
Wiggetts also used ideas from the licensees of False Assurance when writing Without Question. “I sent out an email asking what they would like to see in the next film and invited them along to an ideas meeting. I thought there might be two or three people coming along, but 27 people turned up. They were full of ideas, many of which ended up in the film.”
This input influenced the film’s focus on behavioural issues rather than technical ones, broadening its potential appeal so that it can be used with a range of different audiences and varying levels of technical expertise. Input from members also determined some of the plot lines and topics in the film, such as challenges relating to confidentiality and the value of hot reviews by second partners.
Confidentiality and its importance looms large for professional accountants. Wiggetts says: “When I shared my understanding of what this might mean, with examples such as overhearing a conversation in the pub, I was told that what kept firms awake at night was inadvertent posting on social media.” The film had a 20-person review panel of audit partners, tax accountants and directors and the script was circulated through more than 20 iterations.