Challenges and Opportunities: A Qualitative Study on Tax Compliance in Pakistan
Recovering lost profits
1. Recovering lost profits Did you know there is at least £1.5 billion available for recovering?
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3. Profit recovery – the facts On average, 0.1% of a company’s turnover is overlooked For every £1 million turnover, that’s £1,000 Generally it’s a lot more In fact, there is often up to 1.5% (£15,000) Knowing how to find it can bring cash to a bottom line Auditors take a snapshot – profit recovery really digs for the treasure
4. Measuring your profit Once companies get to a certain size, they need to have auditors The auditors are monitored by the Financial Services Authority as well as the Financial Reporting Council Both these bodies reported in June 2010 that the auditors needed to be more robust and sceptical in their work as they were tending to accept the management’s view of the numbers Further analysis proved that signing off the accounts provided a false record, in some cases
5. Further great news The Audit Inspection Unit published their report in mid July 2010 showing that one in ten of the Big 4 accountancy firms’ audits was below standard They went on to show that the next tier of accountancy firms fared even worse – around 50% required improvement Between them, the two tiers audit more than 90% of the mid sized (£10-50 million turnover) companies based in London
6. Why is it great news? The auditors will have taken a snapshot and will have listened to the management The standards they have delivered are deemed to be below par Therefore there are going to be mistakes in the accounts These mistakes can be expected to go beyond the normal rounding up or down requirements in accounts
7. What can this mean for firms? Some simple maths and research has shown that if 50% of London mid sized firms have had a below standard audit, there is likely to be some unaccounted funds Working on the 0.1% proportion – this is £1,500,000,000 It could be £1,500,000,000,000 This is not cash that the companies owe, this is cash that is owed TO the companies
8. How can the firms find it? Appoint a new set of auditors and go through the audit process once more – resulting in more disruption and dilution of primary efforts normally used to run the business Accept the numbers and move on – resulting in potentially constrained cash flow and restrictions of decsions Engage a profit recovery expert – resulting in a potential recoup of lost monies and a cash boon to the bottom line
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10. What will the profit recovery team find? If they are good, potential oversights in the accounts which can be reclaimed Possible flawed procedures and processes which result in such oversights Potential errors in accounting software which leads to reconciliation errors and overpayments Possible shareholder value for the company and the potential for extra cash to ease the constraints everyone is feeling at the moment
11. Thank you Alex Boyd Dalton Byrne Limited www.daltonbyrne.com