Looking back to my ‘audit days’ I have mixed feelings: Some of the work was mind-numbing dull, especially when day after day was spent checking that transactions were correctly recorded.
It was the larger companies where this was most common, probably because the audit fee needed to be padded out. What made it so boring was that there was only the faintest chance that you would find anything amiss and, if you did, there was always an answer, accompanied by a “tut” from the accounts assistant who you had disturbed from their ‘busy’ day to find the errant entry.
I most remember working in deepest Gloucestershire at Xerox, a massive copier company. The offices were new, and quite high tech for the time, but the staff were anything but. There were acres of middle-aged ladies, each sporting a pink rubber thimble so that they could flick through piles of paper at high speed without licking their fingers.
Their average age was probably about 35 but they seemed ancient to me.
Then there was the male manager (no one had heard of Gender Gaps in those days) who we were told to approach only in the mornings as he would be intoxicated after lunch. I doubted this was true, and then learned the hard way. I had to sit in his office for an hour one afternoon while he failed to explain how the department worked.
The auditing jobs that gave the most satisfaction were often at the smaller companies. My favourite was a London stockbroker, Gilbert Elliot. Their back office was the most efficient I have ever seen.
It operated on the principle that all work must be completed each day before anyone could go home, including all filing and reconciliations, queries answered and desks cleared.
The Stock Exchange closed at 3.30 and most days the office was empty by 4.00. On settlement day, once a month, they would stay until about 8 p.m. until the books were up-to-date and all statements sent out. Every other firm would take about 3 weeks to do the same.
Unsurprisingly, we never found anything wrong. The approach they took has stayed with me throughout my career and there’s many a company that I have tried to introduce this principle to, with varying degrees of success.
Barway Mannequins was another company that taught me a lot. Their factory and office was based near Wembley in west London. They made shop window mannequins and cutaway model passenger aircraft. In 1973, believe it or not, most people had not flown and these models were for display in travel agents so that customers could get an idea of what they looked like inside.
The mannequins were very spooky when walking through an unlit factory in the evening. It was a size of business that I could get my head round, seeing the processes from end-to-end and understanding the way the finances worked.
They had hand-written ledgers and used a Kalamazoo for the payroll. Apparently the Kalamazoo system was invented in 1904 in the city of the same name in Michigan, USA. It has loose-leaf paper sheets which either slot into binders or sit on A3 sized boards. Ink is placed strategically on the back of the sheets so that it copies down onto the summary sheets placed underneath.
They are still in use in many receptions where you write your name on the tear-off slip which then goes in a see-through plastic badge with a record that stays in reception.
There’s a reason why I spelled out how it works, as it led to the discovery of a fraud.
There was a young man in the finance department who managed cash and payroll. He always dressed smartly and was very popular. Every lunchtime he would go to the dry cleaners, apparently to keep his wardrobe in tip-top condition to impress girlfriends.
When I came to audit the payroll it all looked fine and I locked the Kalamazoo system up as usual at the end of the day, as there was confidential information to be protected. The next day I found a couple of sheets missing and I could only think it was the young man who had them, as he had the only other key. He denied it. I smelled a rat and carefully checked all the papers that I could find, but it looked ok.
The only thing was that when I added the columns there was a difference to the cashbook. It was always the same difference as one of the numbers in the column.
This is clever, as it looks as if you added one in twice.
I became convinced and called my manager to tell him. To my amazement he asked me to keep quiet about it. He tried making me feel guilty. I really think he didn’t know what to do but he did go on to agree that I could tell management at the company, and the young man was challenged.
He confessed and went on to say why: He wasn’t going to the dry cleaners, but instead to the bookies.
He had a gambling addiction and in those days there was no sympathy.
He was fired.
Next time: Moving On
Mike Jones has been a Chartered Accountant since the early 1970s and has been Finance Director of many well-known brands including HMV, Argos, and Southern Water.
His full profile is here: LinkedIn Profile