Oh, well done Ritchie!

But some of their solutions are too timid. Asking for a review of the audits is not good enough: these audits were grossly deficient by not referring to the payment of dividends when there were no funds to pay them.

When were the BHS dividends paid?

When did the pensions hole blow out?

Which happened some years before the other?

38 thoughts on “Oh, well done Ritchie!”

  1. Tim

    Some real corkers there:

    ‘Asking for a review of the pension when the company collapsed is not good enough: that should have happened when the deficit was developing’

    One would almost think he is working for the big four auditors based on the complete collapse of private sector pension funds, largely due to stipulations from him and his ilk about what type of assets they should invest in, as well as the damage wrought by the 1997 to 2010 administration which he enthusiastically supported. They will be super busy in the current climate, certainly with more than 60% of Private sector schemes (as far as I;m aware) in deficit.

    ‘It should have said what it expects of auditors and their regulators, what it expects of corporate behaviour when pension funds are in deficit and how company should be required to protect pension interests long before a situation like this could arise.’

    That’s an impressive remit for a Select Committee – seems similar to a medieval Star Chamber – but then lest we forget the maxim by which much of ‘The Curajus State’ operates, based on one of TRUK’s Star Commentators (at least until Larry the Lamb exposed him) Lavrenti Beria:

    ‘You find me the man, I’ll find the crime’

    What an absolute blowhard – I thought he was in favour of complete nationalisation of all pension obligations anyway (which would admittedly solve the problem while creating one on a magnitude that makes BHS look like loose change)

  2. Once again, Murphy proves his grasp of auditing and IFRS are simply nonexistent.

    Ritchie: There’s this thing called “going concern”. There’s another thing called “material uncertainty”. Auditors pay attention to both. Take some time off from dicking around on Twitter and read up on them.

    Then connect the fucking dots.

  3. Also – Have you seen the early morning, bowl clearing bowel evacuation that is the post prior to that on TRUK – entitled ‘political principles’ in the wake of the Ashdown Centrist group launching – a few choice nuggets there methinks….

  4. Firstly it is illegal to pay dividends unless there are sufficient after-tax profits to pay them so that would be a matter for the police.
    Secondly 99% of the pension fund deficits were created by Mervyn King’s panic cuts in bank rate and would be halved or better overnight if Mark Carney announced that interest rates would go up to 3% in 2017.

  5. “Firstly it is illegal to pay dividends unless there are sufficient after-tax profits to pay them…”

    Probably showing my accounting ignorance here, but isn’t it mathematically impossible to pay dividends unless there are sufficient after-tax profits to pay them? Nothing to do with human law, just plain physical law.

  6. isn’t it mathematically impossible to pay dividends unless there are sufficient after-tax profits to pay them?

    You could technically pay them out of shareholders’ funds – retained profits in other words.

  7. Post-tax profit is not necessarily the same amount as you have available as cash/borrowings. Paying out all your cash reserves as dividends would be illegal, unless you have an equivalent amount of profit.

  8. jgh said:
    “Probably showing my accounting ignorance here, but isn’t it mathematically impossible to pay dividends unless there are sufficient after-tax profits to pay them? Nothing to do with human law, just plain physical law.”

    No.

    For example, a company could have cash but no profits if its customers pay it more quickly than it pays its suppliers. Then the company would have cash, but it would be owed to its suppliers for goods already delivered and sold.

    Similarly, on the 29th of the month the company will probably have lots of cash, but it needs it to pay its staff on the 30th for the work they’ve already done.

    That’s why we have the rule that a company can only pay dividends if it’s got profits to do so. It’s not perfect, because the accounting calculation of profit isn’t perfect, but it’s generally a better test than cash.

  9. Company law – Companies Act s830 – requires that dividends may only be paid (in simple terms) from accumulated profits. So you can’t just look at one year. A company could make profits 4 years in a row and not pay dividends then pay a bumper dividend in year 5 which far exceeded year 5 profits.

  10. @SJW. Yes. Shareholders’ funds. Funds of the shareholders. The shareholders took all of their funds. Not anyone elses’ funds. Not the pensions’ funds. Not your funds or my funds. The shareholders’ funds.

  11. “After-tax profits including those retained from previous years” for all those pendants insisting on splitting hairs in order to misunderstand what a meaning I thought was perfectly clear.

  12. He has skirted around accusing the big firms of negligence and corruption on a few occasions, and I recall one hasty apology ‘I didn’t mean etc….’
    As he is himself a member of the accounting bodies at some point you think he’d be facing professional disciplinary action over these comments

  13. @ BniC
    Is he a practising member or just someone who passed the exams a couple of decades ago? If he is a practising member he should be doing CPD and be less ignorant.

  14. J77…however, as, I presume, a member of the ICAEW he should be cautious about accusing fellow members of bad practice and bringing the Institute into bad repute. Sanctions might be sought.

  15. Isn’t his membership of these bodies lapsed anyway – Diogenes – I am amused at the notion that Murphy indulges in CPD at any point (or indeed has at any point in his career) – he already has more knowledge of Politics than anyone else alive, his economic knowledge is greater than 200 years of accumulated wisdom in the subject, and his historical understanding is great enough to know that everything prior to 1979 (the Neoliberal era) was wonderful and everything since then has been disastrous. To argue anything else is candidly, trolling and further comments will be deleted……

  16. Hmmm.

    Prof Murphaloon is trolling his followers re PWC rather than having the courage to express his own opinions.

    Personally I wonder if the MPs are on a sticky wicket here. Did Green actually do anything illegal with the pension contributions (fund managed by Trustees) or dividends? Or is the basic claim that he didn’t see the crash coming?

    So what happens to Crash Gordon’s future Honour?

    It has a Margaret Hodge outrage-made-up-over-breakfast feel in some respects.

  17. It’s also worth noting that competent, ethical audit firms go to great pains to avoid substituting their own judgment for that of management’s judgment in matters that are the sole responsibility of management. Given that Murphy goes to great lengths to substitute his own judgment for everyone else’s on everything under the sun, you should have an idea of just how much he understands the external auditor’s role in the internal affairs of their client.

    There’s this thing called “independence”…

    Were Murphy a little less ignorant of his profession, he’d know full well that BHS had both their audit and legal firms review both the decision and the documentation relating to the decision prior to the public announcement of the dividend. That’s standard operating procedure for publicly held companies, in no small part because there would be paperwork that would be needed to be filed with regulatory bodies (in the States, that would be the SEC).

    Moron.

  18. About time he was stood up in court. Unlikely the legality of the dividends was not considered, and he is clearly questioning a firms competence. That they don’t sue shows how little they care about what he says

  19. He claims to still have some clients and people with a designation are usually very reluctant to let it lapse if they are still dong work in the field

  20. Bloke in North Dorset

    Apparently Green is suing, or threatening to sue, Frank Field so Murphy better watch out.

  21. I’m a Chartered Accountant now retired. I don’t really mind if you report me because I feel that as a member of the profession I’m entitled to criticise it.

    Most accountants are, quite frankly, bloody useless. I worked for myself for over 20 years (not as an accountant!) and have always maintained that no qualified accountant should ever be allowed to run a company. Their training makes them fundamentally unsuitable. Here’s an example :

    Q: How do we increase profits?
    A from businessman: Buy stuff cheaper, sell more of it at a better margin.
    A from accountant: Revalue the buildings

    That’s why I was the company secretary, my wife was the sole director and was the only one allowed to sign a contract committing the company to anything.

    And that’s how I managed to retire at the age of 52…

  22. @Dioclese

    I can only assume you met the wrong accountants. I’ve worked for two firms just about in the UK top 50, each with around a dozen partners. They are multi-million pound successful businesses and I’ve seen them help, improve and rescue hundreds of companies taking some to listings and making their owners and themselves very well off. I have not once in 20 years in practice heard anything as trite as suggesting re-valuing a building as a way to increase profits. The current owners of the firm I work for are in their mid-forties and could retire but just like their jobs too much to do so.

  23. Mr Bean

    Frank Field only has parliamentary priviledge for things said in the house and he’s been pursued for statements on BBC radio 4. Hmm the comparison with Maxwell is interesting – FF appears to be saying that Green has the cash to make it up, whilst Maxwell didnt.

  24. Most accountants are, quite frankly, bloody useless. I worked for myself for over 20 years (not as an accountant!) and have always maintained that no qualified accountant should ever be allowed to run a company. Their training makes them fundamentally unsuitable.

    That’s positively Murphyesque in its overarching stupidity.

    The fact that you couldn’t trust yourself to sign a business contract doesn’t say much about Chartered Accountants as a whole, but I’m afraid it says quite a bit about you…

    And yes, I watched a CPA friend of mine become a multi-millionaire businessman before he turned 35. Some CPAs make excellent entrepreneurs, some don’t. And the reasons for success and failure usually have very little to do with their professional training.

    Moron.

  25. To be honest, I was always dumb – founded by the commercial ignorance of CIMA, and ACCA folks. No wonder UK industry is in such a shit state. Compromise and profit shares were off – the-wall concepts to them. I felt like a Vulcan amongst earthlings.

  26. Ken, that might amount to the law taking the stance that Mrs Gs assets are owned joint and severally with Mr G. Might not work out as hoped for.

  27. Ken, re Frank Field, he seems to have jumped the shark. Unless Bhs is the worst placed pension scheme in the UK. Is this yet another thing that Blair and Brown failed to rectify?

  28. @Ken. I was baffled by Frank Field’s defence of Maxwell. Almost as if Maxwell did what he did accidently.

    Can anyone think of a reason for this?

  29. SE. Parliamentary Priviledge protects reportage of what is said in parliament (including iirc reports) but not other statements. FF said far more in the R4 interview.

    Mr B. I certainly think that the case is overegged.

    AC. It seems that FF thought that while Maxwell was a crook, he was really an incompetent who was finding money wherever he could, whilst he thought that PG knew what he was doing and chose not to cough up. I see that as more like deciding that Bhs is no longer viable and closing it down. Of course, he did engage in the bizarre “sale” first.

    There were some shenanigans over guarantees on the pension fund to the pension regulator that were legal, but ethically iffy iirc. Still all above board unlike Maxwell.

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