Monday, October 11, 2010

Costings aftermath: Joe Hockey is to truth as....

He is the would-be Treasurer

Shadow Treasurer Joe Hockey was not telling the truth when he claimed days ahead of the election the Coalition's costings had been "audited" by a big Australian accountancy firm.

His claim that "we have the fifth-biggest accounting firm in Australia auditing our books and certifying in law that our numbers are accurate" helped shield the Coalition from criticism about its decision not to submit costings to Treasury.

Documents seen by The Herald show the federal directors of both the Liberal Party and National Party would have known the claim to be untrue.

Brian Loughnane and Brad Henderson signed a letter on the day the costings were released addressed to the Perth accountancy firm WHK Horwath confirming that its work for the Coalition was primarily "not of an audit nature".

Loughnane also countersigned a letter from two of the firm's principals which reminded the Coalition their work would "not constitute an audit in accordance with Australian auditing standards or a review in accordance with Australian auditing standards".

Within hours of the release of the work Hockey inflated it to a legally watertight endorsement telling ABC TV "they have certified our numbers based on all the information we have provided them, they have legal obligations and legal risks"...

Challenged as to whether the Coalition's numbers made sense he told ABC radio, "you know what, if the fifth-biggest accounting firm in Australia signs off on our numbers it is a brave person to start saying there are accounting tricks. I tell you it is audited. This is an audited statement.’’

Opposition finance spokesman Andrew Robb backed up Mr Hockey saying if Horwath made "a mistake with the auditing of accounts for companies or prospectuses or mislead, they are at risk of being punished and going to jail".

In fact the letter from Horwath principals Geoff Kidd and Cyrus Patell dated 13 July and countersigned by Loughnane makes clear that the work was little more than a spreadsheet exercise designed to "review the arithmetic accuracy of the Liberal Party of Australia's costing estimates".

Asked to explain the discrepancy between the letters he had signed and the claims made by his Treasury spokesman, Mr Loughnane said yesterday "you'll have to ask Joe why he said what he said".

Through a spokesman Mr Hockey said he had used the word 'audited' "as would be understood in laymen's terms".

"A technical audit would have obviously been impossible as there are no mandated standards for audits of election costings," the statement read. The costings had been "independently reviewed and verified".

A Treasury analysis conducted at the request of the independents found the costings out by $11 billion as a result of errors including double counting and failing to account for the loss of dividends following a privatisation.

Horwath is the second organisation to have distanced itself from the Coalition over costings. The National Centre for Economic Modelling said it had never worked for the Coalition although might have indirectly through the Parliamentary Library despite claims by Mr Robb that Coalition policies had been "carefully modelled by NATSEM".

Published in today's SMH and Age

Statement from the Institute of Chartered Accountants in Australia

26 August 2010

The Institute of Chartered Accountants in Australia (the Institute) has received a complaint about a matter that involves publicly raised allegations regarding the conduct of two members with accountancy firm, WHK Horwath, Perth.

The Institute has commenced an investigation which involves an opportunity for the members to respond to the allegations.

Professional Conduct Process

As a professional organisation, membership of the Institute is based on meeting the highest standards of professional conduct and performance. The Institute treats matters that bring the profession into disrepute very seriously.

Issues arising from members’ conduct are investigated under the Institute’s By-laws and relevant cases are referred to the Professional Conduct Tribunal for determination.

Based on legal advice, specific commentary cannot be provided while matters are considered for investigation or for the duration of any subsequent Tribunal hearings. All information relating to complaints lodged with the Institute and produced during the investigation process is confidential.

To ensure the privilege of professional membership is upheld the Professional Conduct Tribunal has the power to impose sanctions on individual members who act inappropriately.

The ultimate sanction that can be imposed is exclusion from membership and withdrawal of the right to use the Chartered Accountants designation. Other sanctions include suspension, reprimand, fines or the requirement to undertake additional professional training.

For further information about the Institute's disciplinary process please visit

APES 110 Code of Ethics for Professional Accountants

Section 130.6: Where appropriate, a Member should make Clients, employers or other users of their services aware of limitations inherent in the services to avoid the misinterpretation of an expression of opinion as an assertion of fact.

Related Posts

. Coalition costings: The inexcusable, the inexplicable...

. Coaliton "too dim" to stop its own rules being used against it

. This will strike terror into the hearts of Abbott and Hockey

. Thursday Column: Could Costingsgate widen?

. The Coalition costings as presented

. Robb says Perth auditor "as good as Treasury" as investigation begins