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Jewellers association financial statements raise questions

Jeweller has obtained a copy of the Jewellers Association of Australia’s (JAA) Financial Statements for the year ended 30 June 2017, which would appear to contain a number of errors or discrepancies.
Selwyn Brandt, JAA president
Selwyn Brandt, JAA president

The report has been prepared in time for the upcoming AGM on 15 November and was authorised by directors Selwyn Brandt and George Proszkowiec on 18 October 2017.

Not only does it record that 139 members resigned/quit the association this year – a 23 per cent decline in 12 months – but the financial statement also shows a very confusing result.

The JAA’s trading result (loss) for the year is given as five different figures, depending on which page one reads.

At page 1, under the heading ‘Business review’, the year-end financial report states: “The loss from ordinary activities for 2017 after providing for income tax amounted to $140,014 (2016: loss of $13,878).”

However, at page 6, under the heading ‘Statement of comprehensive income’, the ‘Loss before income taxes’ is given as ($132,819).

On the same page a third figure is recorded (ie different to the previous two): ‘Total comprehensive income for the year ($131,819)’.

While this information seems to present three different ‘losses’, a fourth and larger loss is then recorded at page 8.

Under the heading ‘Statement of changes in equity’, the report states: ‘Loss attributable to members’ ($135,819)’.

In fact, that same chart at page 8 gives two different figures (losses) – ($131,819) and ($135,819). 

Then at page 21, not only are the losses recorded incorrectly the report lists the wrong years.

Seeking clarification

The JAA’s Financial Statements were provided to an independent accountant to understand if the five different figures (losses) could be explained in accordance with Australian accounting standards or whether it was simply an error-laden set of financials.

The accountant did not understand how the JAA could present five different results in an annual report, especially given that the six board members must have ‘approved’ the accounts before being signed-off as accurate.

Australian Securities and Investments Commission (ASIC) guidelines clearly outline director obligations on financial reporting.

“Each director has a duty of skill, competence and diligence in the understanding of the financial report that is to be disclosed to the public. You must read, understand and focus on the contents of the financial report,” the ASIC website reads.

The ASIC guidelines also mandate directors to “apply your own mind to, and carry out a careful review of, the financial report and directors’ report, determine that the information they contain is consistent with your knowledge of the company’s financial position and affairs.”

It also stresses that directors should “ensure, as far as possible and reasonable, that the information included is accurate, question the accounting treatments applied and examine the adequacy of disclosures and whether any matters have not been disclosed that should be disclosed.”

Jeweller contacted Brandt, who serves as JAA president, to offer an explanation about how the financial statements that appear on the JAA website and which he signed as giving “a true and fair view” and which “comply with Australian Accounting Standards” could contain different trading results within a 12-month period.

Jeweller also sought clarification about which of the five losses was the true and correct figure.

Brandt had not responded at the time of publication.

Jeweller has subsequently raised further questions to the individual directors about matters surrounding the JAA’s financial statements, as well as advising that additional analysis by accounting experts suggests that there are a number of other important matters that warrant an independent review or investigation prior to the AGM scheduled for next month.
 

UPDATE - Monday 23 October 2017

The JAA board has now admitted that its Financial Statements for the year ended 30 June 2017 contain a number of errors, even though they were approved by the board and signed by directors Selwyn Brandt and George Proszkowiec.

In response to Jeweller’s request for clarification on a number of matters, the JAA board replied via email late Friday afternoon on 20 October – nearly 24 hours after Jeweller raised the issues.

The email read:

Dear Coleby,

Thank you for your email highlighting some errors in the JAA financial accounts that we became aware of very soon after we posted them on the JAA website. We have been in contact with our Auditors who have acknowledged some typographical errors and they are in the process of rectifying these mistakes and formerly explaining what has occurred.

As you may be aware these are audited financials and we will be notifying our members in due course.

Sincerely,

JAA Board

 

EDITOR’S NOTE - Monday 23 October 2017

The JAA’s email above raises further questions because it seems to suggest that its auditors caused the errors – “We have been in contact with our auditors who have acknowledged some typographical errors and they are in the process of rectifying these mistakes and formerly explaining what has occurred.”

It should be noted that the Contents page lists the Independent Auditor’s Review Report as being at page 27; however, it was not supplied as part of the report to members, even though the JAA records an auditing fee of $4,180 at page 15.

Jeweller contacted the JAA’s long-term auditing firm, Barry Mendel Frank & Co (now Kelly & Partners), for clarification.

A representative confirmed that while the firm had completed an Independent Review, not a formal Audit, for FY16, it had not received information from the JAA for the current year, and had not been involved in the preparation of any 30 June 2017 Financial Statements for members.

The representative was also unable to confirm at this stage who it was that the JAA proposed “acknowledged some typographical errors”.

This now calls into question many other matters. Aside from asking how six board members could overlook the glaring trading result errors, at page 2, Clause 3(a), the JAA board declared that there was “No significant changes in the company’s state of affairs during the financial year.”

Assuming the JAA’s FY17 loss was ($131,819), then that would represent an 850 per cent change in the company’s state of affairs during the past financial year compared to the previous year’s smaller loss ($13,878).

Cash at bank has been all but depleted over the past year; it recorded $38,652 at 30 June this year compared to $200,914 in FY16, an 81 per cent decline ( - $162,262).

Further, the JAA has gone into negative equity; however, interestingly the board did not deem this as a “significant change in the company’s state of affairs”.

A 23 per cent membership decline in one year was not considered a significant change either.

In addition to all the above, it would appear that the JAA’s Trade and Other Receivables (debtors) figure has doubled to $84,788 (from $39,225 in FY16) and there has been no provision for impairment (bad debts) for any of this amount. The current loss of ($131,819) would blow out even more should the JAA be unable to collect a large part of its Trade and Other Receivables.

The JAA accounts reveal that as at 30 June, the JAA had already spent $99,000 of the $137,707 in membership fees received in advance of the July to December 2017 membership period.

If the current financial statements have not been reviewed by an auditor, as legally required, then it will be interesting to see what is finally reported to members in time for the AGM on 15 November.

At the time of publication, the JAA had removed the Financial Statements from its website, stating: “Please note the 2016-2017 Financial Statements will be made available shortly.”

Coleby Nicholson

Background reading: JAA 2017 Financial Statements (PDF)

More reading: Jewellers Association needs a Brexit












ABOUT THE AUTHOR
Coleby Nicholson • Managing Editor

Managing Editor • Jeweller Magazine


Coleby Nicholson is publisher and managing editor of Jeweller magazine. He has covered the jewellery industry for more than a decade and specialises in business-to-business aspects of the industry.









Sunday, 19 November, 2017 09:17pm
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