Ethics clash sinks EY Business Journalism Awards

NBR’s Karyn Scherer broke the story of a major accounting scandal at EY client Fuji Xerox,

Accounting firm EY appears to have killed off its own annual Business Journalism Awards by attempting to disqualify entries from the National Business Review relating to the accounting scandals in the Australian and New Zealand operations of FujiXerox, where EY is the auditor.

NBR publicly withdrew from the awards this morning followed by journalists from Fairfax Media, NZME, and Radio New Zealand withdrawing their entries, as did freelance commentator Rod Oram. BusinessDesk did not enter the awards.

One of two independent award judges and the winner of last year's top prize, Rebecca Macfie, said in an interview with NBR that it had been clear from the outset that NBR reporter Karyn Scherer's stories on FujiXerox were a problem for the two EY judges, former managing partner Rob McLeod and the current chairman of EY in New Zealand, Alan Judge.

EY appeared paralysed by the situation, issuing no statement on why it had made its decision.

The six-year-old brainchild of veteran business newspaper founder Jenni McManus, now head of communications at EY, offered cash prizes with a first prize trip to a US journalism school for training in video story-telling.

Scherer's investigation into large losses declared in Companies Office filings from the New Zealand arm of FujiXerox was the top of an iceberg of malfeasance by key New Zealand and Australian managers, who have since resigned.

Japanese parent Fujifilm Holdings last month revealed $355 million of “inappropriate accounting” in operations in New Zealand and Australia between 2011 and 2016, according to a report by an independent investigation committee. Fuji Xerox’s chairman Tadahito Yamamoto, deputy president Haruhiko Yoshida and two Fuji Xerox directors, Katsuhiko Yanagawa and Jun Takagi, have all resigned.

The report triggered a suspension of FujiXerox as an all-of-government supplier with the New Zealand government while the Ministry of Business, Innovation and Employment examines an English version of the report, due shortly.

An international investigation continues into the issues.

New Zealand First leader Winston Peters, who was a source for one of McManus's most celebrated investigations into the so-called 'wine box' transactions in the 1990s, said EY's behaviour had been "inept, as inept as an auditor who misses up to $500 million of transactions that have all the appearance of fraud".

NZ First had lodged a complaint on the issue with Chartered Accountants Australia New Zealand.

EY had not responded to requests for comment at time of publication.


Respected journalist and former EY business journalism awards judge Rebecca Macfie talks to NBR View about why she resigned from the judging panel

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Auditors are chosen by the companies they audit. It's very competitive and the audit companies often have to submit tenders to win the job. 

Medium size companies generally pay about $50k for an audit. They do NOT expect the auditors to give them grief. If there is grief the auditing company wouldn't expect any repeat business. 

Certain auditors have a reputation for being "Friendly". CEOS and Directors know which ones to approach.  

Usually if there's trouble the auditors have a quiet chat with the company rather than go public. If the issue isn't resolved they just record certain parts of the accounts are not signed off. All very courteous. 

Most of the actual audit work is conducted by young, junior, inexperienced staff. It's the boot camp of the Big Four. The work, of course, is always signed off by a partner which gives the process a respectability. 

The whole process is akin to sending the goat to guard the cabbage patch. 

It's time to reform the current system. Companies requiring an audit should have to draw from an anonymous pool of qualified accountants whose identities are not known till after the draw. The audit cost should be based on the turnover/profit of the company. Simple. 

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