The energy sector continues its turn around with increased natural gas production and usage, slightly improved crude production and higher commodity prices according to latest data from the...
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Brian Hackett territory senior partner, PwC
1. The company is involved in many lines of business (auditing, assurance, tax, etc). Have you noticed any discernible trends, given the current economic situation, facing both businesses and the government that the company engages with?
Given our historic over reliance on energy commodities, the continued reduction in our production of oil and gas, the depressed energy prices and the extent to which successive administrations have in the past increased the level of fiscal spending (largely on transfers and subsidies), it is not surprising that our economy has been floundering and will likely continue in this vein for the foreseeable future.
The fall off in hard currency earnings from the energy sector has resulted in a chronic currency shortage of the US$ which is needed to finance our non-sustainable level of imports.
Amazingly, however, in the midst of this economic turmoil, it has also been widely reported that the overall unemployment rate has remained, on paper, at levels approaching effective full employment with some companies, particularly in the services sector, having unfilled job vacancies in excess of 20 per cent.
Against this backdrop, the most discernible trends are the implementation of head-count reduction in the public sector, wider cost cutting/control measures in the private sector and the shelving or postponement of expansion plans.
We have also started to witness consolidation via acquisition or merger in market segments where the combination of the economic downturn and technological disruption has meant that weaker players are no longer sustainable.
Another clearly discernible trend has been the increasing willingness of local companies to expand into other Caribbean and Latin American markets as a source of revenue and hard currency.
Interestingly, while certainly there have been businesses which have failed, we have not seen a marked increase in the number of insolvency mandates in a manner consistent with the level of economic fall off. I suspect many lenders have, in some instances, arrived at the conclusion that the cost of appointing an insolvency professional to liquidate the collateral or alternatively manage the entity back to financial heath outweighs that value of the collateral to be realised or would substantially diminish the ultimate liquidation proceeds.
2. In a small society like T&T, how does a firm like PwC maintain the appropriate level of independence from clients so as to not affect any elements of its credibility?
Maintaining an appropriate level of independence from our clients is very much central to PwC’s approach to driving quality, managing professional risk and the building of public trust.
While the relatively small size of our local society can occasionally result in challenges to our professional independence, the PwC approach to dealing with theses challenges, as codified in our network risk management standards, is essentially the same in all of the jurisdictions in which the independent network of PwC firms operate.
With regard to maintaining an appropriate level of independence, it is a PwC network requirement that each member firm establishes systems, policies and procedures designed to ensure that the firm as a whole and its people comply with independence laws and regulations, including PwC minimum requirements and policies.
The first building block of this independence architecture is maintaining relevant and thorough client and engagement information so that we can identify restricted entities, monitor partner and other rotation requirements and accept new clients and/or engagements (or deselect them when required).
Upon this bedrock of client data are PwC policies and procedures which are rigorously applied to identify and resolve independence threats created by partner and staff relationships, inappropriate services, business relationships, audit partner tenure on engagements and outright breaches of our independence policies and procedures.
3. Similarly, how does a firm like PwC manage real and or perceived conflicts of interest that have the potential to destroy public trust?
Conflicts of interest (COI) may arise where one or more PwC firms, partners, principals or practice staff members provide professional services to two or more clients regarding the same matter where the interests of those clients are in conflict with respect to that matter or where a partner, principal or staff member has an interest that conflicts with their firm’s (or another PwC Firm’s) responsibility or professional duty to a client. COI may also arise where local law or regulation identifies the circumstances as creating a COI (for example acting in an insolvency capacity for an audit client)
Again, given the small nature of our society real or perceived COI do occur. As with the minimisation and management of threats to our independence, each PwC member firm must have in place systems and procedures designed to ensure that the firm as a whole and its people comply with COI rules and regulations, including PwC minimum requirements and policies.
The key first step to avoiding potential or real COI is to know what individual or firm is advising on the other side of the transaction which we are contemplating working on and, accordingly, prior to undertaking an engagement, we implement a rigorous fact finding procedure to ascertain this information.
If an insurmountable threat is identified then the threat is typically eliminated by having one of the PwC firms stand down from accepting the engagement. There are, however, frequently instances where the potential conflict can be managed by its disclosure and subsequent acknowledgment to all parties.
4. The Govt is on a tax collection drive. The tax business makes up a portion of the firms portfolio. How is this drive by the government likely to affect the work PwC does?
Overall, should the collection drive or the threat thereof become real we would anticipate a general positive impact with a greater number of companies and individuals opting to comply with their obligations where they have fallen short. This, in turn, will likely drive up the demand for tax planning and compliance services including providing assistance with the filing of returns.
In instances where companies fail to comply then we would expect to see an increase in the quantum of assessments raised by the BIR with some of these assessments being based on the BIR’s best of judgment. This, in turn, will likely give rise to potential grounds for objections and BIR audits that would further drive demand for assistance from our tax team.
5. How does a company like PwC view itself in terms of corporate social responsibility?
At PwC TT, corporate responsibility represents the way we incorporate social, environmental and economic concerns into our values, culture, decision making, and operations in an accountable, transparent and sustainable manner.
The most meaningful means by which we can advance our corporate responsibility aspirations are to continually strive to promote diversity, foster a culture of inclusion and supporting a healthy work-life balance.
While we have made notable strides with regard to the overall diversity of our firm; for example women comprise 40 per cent of our local partners, there is clearly more to be accomplished.
Our CR objectives for the wider community are centred around the investment of our time, skills and experience to make a sustainable difference in areas such as education, outcome measurement and capacity building as we believe that such activities are more meaningful than merely whipping out the cheque book and making donations to worthy causes (although this is also at times appropriate).
The final pillar to our CR framework is managing or configuring our interaction with the environment in ways that reduces our impact. As a simple today, with the wide spread use of electronic work papers and overseas centralised work centres the amount of ink, paper and other consumables has been drastically reduced.
Over the next five years I have no doubt that we will become almost exclusively paperless.
St Mary’s College, Chartered Management Accountant (CIMA).
Hackett has been with PwC since July 1991. He was admitted to PwC Partnership July 2004. Prior to being elected territory senior partner, he was the advisory leader.
Hackett is an associate member of the Chartered Institute of Management Accountants and the Institute of Chartered Secretaries and Administrators.
Personal philosophy: Empathy, respect, courage, fairness
Deputy Head of News-Business
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