MISCELLANEA

22 Boston Dynamics’ back-flipping robot shows off new ‘parkour’ routine

Boston Dynamics has said that if a robot can develop the same movement and flexibility as the average adult, then the range of potential applications will be practically limitless.

Boston Dynamics’ humanoid robot, Atlas, has been showing off its new skill, parkour or free running atop and over obstacles.

A new video shows Atlas leaping over obstacles, doing back-flips and even falling flat on its face during practice runs.

The company says that if a robot can develop the same movement and flexibility as the average adult, then the range of potential applications will be practically limitless.

‘Parkour is a useful organising activity for our team because it highlights several challenges that we believe to be important,’ said team leader Scott Kuindersma.

‘How do we connect perception to action in a way that both captures long-term goals like getting from point A to point B, and short-term dynamic goals like adjusting footsteps and applying corrective forces to maintain balance,’ Kuindersma said.

Atlas stands 5 feet (1.52 m) tall, weighs 190 pounds (86 kg.), uses hydraulics and battery-powered electric motors for movement and has three on-board computers.

It is designed to be used as a research and development tool and its Boston Dynamics team is being encouraged to push it to the limit.

‘It can be frustrating sometimes. The robots crash a lot,’ said Benjamin Stephens, control lead on the Atlas team.

‘We learn a lot from that in terms of how to build robots that can survive falling on their face and getting back up and doing it again and we also learn a lot about the behaviour, the control, the thing that puts one foot in front of the other,’ Stephens said.

(Source: indianexpress.com, dated 18th August, 2021)

II. Economy

23 Forex reserves rise by $889 million to lifetime high of $621.464 billion

The country’s foreign exchange reserves increased by $889 million to a lifetime high of $621.464 billion in the week ended 6th August, 2021, RBI data has revealed.

In the previous week ended 30th July, 2021, the reserves had surged by $9.427 billion to reach $620.576 billion.

In the reporting week, the increase in the forex kitty was due to a rise in foreign currency assets (FCAs), a major component of the overall reserves, as per weekly data issued by RBI.

FCAs rose by $1.508 billion to $577.732 billion in the reporting week. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves were down by $588 million to $37.057 billion in the reporting week, the data showed.

The special drawing rights (SDRs) with the International Monetary Fund (IMF) dipped by $1 million to $1.551 billion.

The country’s reserve position with the IMF also fell by $31 million to $5.125 billion, as per the data.

(Source: economictimes.indiatimes.com, dated 13th August, 2021)

III. Financial Reporting World

24 SEC charges Ernst & Young, three audit partners and former public company CAO with audit independence Misconduct

The Securities and Exchange Commission has charged accounting firm Ernst & Young LLP (EY), one of its partners and two of its former partners with improper professional conduct for violating auditor independence rules in connection with EY’s pursuit to serve as the independent auditor for a public company with nearly $5 billion in revenue (issuer). Separately, the Commission brought charges against the issuer’s then-Chief Accounting Officer for his role in the Misconduct. All respondents have agreed to settle the charges and will collectively pay more than $10 million in monetary relief.

The SEC’s order against the auditors finds that EY, EY partner James Herring, CPA, and former EY partners James Young, CPA and Curt Fochtmann, CPA improperly interfered with the issuer’s selection of an independent auditor by soliciting and receiving confidential competitive intelligence and confidential audit committee information from the issuer’s then-Chief Accounting Officer, William Stiehl, during the request for proposal process. EY’s misconduct in connection with the audit pursuit, the order finds, would cause a reasonable investor to conclude that EY and its partners were incapable of exercising Objectivity and Impartiality once the audit engagement began. The SEC’s separate order against Stiehl finds that, through his Misconduct during the request for proposal process, including withholding key information from the issuer’s audit committee, Stiehl caused the issuer’s reporting violations.

‘Auditor independence is not merely an obstacle to overcome, it is the bedrock foundation that supports the integrity, transparency, and reliability of financial reporting,’ said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit. ‘Auditor independence requires auditors to analyse all of the relevant facts and circumstances from the perspective of the reasonable investor. EY and its partners lost sight of this fundamental principle in their pursuit of a new client. This action further underscores that auditors must apply heightened scrutiny when making independence determinations.’

The SEC’s order against the auditors finds that EY, Herring, Young and Fochtmann violated the auditor independence provisions of the federal securities laws and that EY, Herring, and Young caused the issuer to violate its obligation to have its financial statements audited by independent public accountants. The order also finds that all respondents engaged in improper professional conduct within the meaning of Rule 102(e) of the SEC’s Rules of Practice.

EY, Herring, Young, and Fochtmann consented to the SEC’s order without admitting or denying the findings and agreed to cease and desist from future violations. EY has agreed to a censure, to pay a civil money penalty of $10 million and to comply with a detailed set of undertakings for a period of two years. Herring, Young and Fochtmann agreed to pay civil money penalties of $50,000, $25,000, and $15,000, respectively, and to be suspended from appearing or practising before the Commission, with a right to reapply for reinstatement after three, two, and one years, respectively.

The SEC’s order against Stiehl finds that he caused and wilfully aided and abetted the issuer’s reporting obligations stemming from the auditor selection process improprieties. Stiehl, who consented to the order without admitting or denying the findings, has agreed to cease and desist from future violations of the securities laws, to pay a civil money penalty of $51,000, and to be suspended from appearing or practising before the Commission, with a right to reapply for reinstatement after two years.

The SEC’s investigation was conducted by Jim Valentino, Natalie Lentz and trial counsel Sarah Heaton Concannon. The case was supervised by Tracy L. Price and Mr. Cain.

(Source: www.sec.gov, dated 2nd August, 2021)

25 Sanctions against KPMG and former partner in relation to Silentnight

The Financial Reporting Council (‘FRC’) has announced sanctions against KPMG LLP (KPMG) and David Costley-Wood, formerly a partner and Head of KPMG Manchester Restructuring. This follows a referral from The Pensions Regulator and an investigation undertaken pursuant to the Accountancy Scheme in relation to Mr. Costley-Wood’s conduct in respect of the Silentnight group of companies in the period August, 2010 to April, 2011. An independent Disciplinary Tribunal made findings of Misconduct following a four-week hearing during November and December, 2020 and sanctions were determined following a hearing in June, 2021.
Sanctions

KPMG has been:
• fined £13 million,
• severely reprimanded, and
• ordered to appoint an independent reviewer to:

(1) Conduct a Root Cause Review to establish:
a. why threats to compliance with the fundamental principle of Objectivity were not appropriately identified and safeguarded in the period prior to the appointment of office holders in the Silentnight matter; and
b. in a sample of past cases, whether threats to compliance with the fundamental principle of Objectivity were appropriately identified and safeguarded in the period prior to the appointment of office holders and if not, the reasons for such failures; and

(2) conduct a review of various policies, procedures and training programmes relating to several of KPMG’s advisory services practices in the light of the results of the Root Cause Review.

Mr. Costley-Wood has been:
• fined £500,000,
• severely reprimanded,
• excluded from membership of the ICAEW for 13 years, and
• precluded from holding an insolvency licence for the same period.

Findings of Misconduct

The Tribunal made findings of Misconduct in respect of breaches of the fundamental principles of Objectivity and Integrity. It described the history of KPMG’s involvement with Silentnight in this case as deeply troubling as KPMG failed to act solely in its client’s interests, acted in fundamental respects contrary to those interests and in those of a party whose interests were diametrically opposed to those of Silentnight. It concluded that the lack of Objectivity in this matter went to the core of the relationship between Silentnight and KPMG.

The Tribunal also held that, in addition to the lack of Objectivity in relation to his dealings with Silentnight, Mr. Costley-Wood acted dishonestly and therefore he and KPMG acted with a lack of Integrity, including in their dealings with the Pension Protection Fund (‘PPF’) and The Pensions Regulator (‘TPR’) despite Mr. Costley-Wood acknowledging that there was an obligation to act transparently in relation to a regulator.

The Tribunal commented:

‘Breaches of the principles of Integrity and Objectivity risk seriously undermining public confidence in the standard of conduct of Members and Member Firms and in the profession generally, all the more so where, as here, the professional has acted dishonestly. Dishonesty is inimical to everything that a profession stands for and especially destructive of public confidence’.

The Tribunal found that Misconduct had been established in that:

Throughout the period 16th August, 2010 to 14th January, 2011, Mr. Costley-Wood advised and / or assisted both Silentnight and HIG in relation to a proposed acquisition of Silentnight by HIG at a time when there was a conflict of interest between the interests of Silentnight and HIG, and as a result, the respondents’ judgement was compromised and Objectivity impaired.

Mr. Costley-Wood assisted with a strategy designed to drive Silentnight into an insolvency process, or to the brink of such a process (a ‘burning platform’), with a view to passing Silentnight’s Pension Scheme to the PPF at the expense of Pension Scheme members and PPF levy payers. In this context, Mr. Costley Wood provided advice and assistance to HIG so that it could acquire Silentnight as an otherwise profitable business without the burden of the Pension Scheme liabilities.

The respondents failed, in addition, to consider the self-interest and familiarity threats which arose from their relationship with HIG and from their desire to nurture that party as a client and keep them ‘onside’. Mr. Costley-Wood was conscious of the importance of the potential relationship of HIG to KPMG throughout. The respondents’ loss of Objectivity underlay or drove much of what they did in relation to Silentnight throughout the relevant period, including assisting and advising HIG in its plan to acquire Silentnight free of the Pension Scheme liability from the summer of 2010.

Mr. Costley-Wood dishonestly advanced and associated himself with untrue and misleading and / or materially incomplete statements to the PPF, TPR, Silentnight and the Trustees of the Silentnight Pension Scheme as to the causes of Silentnight’s difficulties in order to assist HIG in its efforts to enable Silentnight to shed its liability under the Pension Scheme as cheaply as possible.

KPMG is legally liable under the Accountancy Scheme for the conduct of Mr. Costley-Wood, and accordingly the findings of Misconduct by KPMG were made by the Tribunal in respect of the same matters.

One further allegation of Misconduct made by the FRC was not upheld by the Tribunal.

In determining the sanctions, the Tribunal considered the Misconduct was very serious, noting that to a professional accountant the conflicts of interest should have been obvious and that the Misconduct risked the loss of significant sums of money. It put at risk Silentnight’s ability to survive and tens of millions of pounds of creditors’ claims, potentially exceeding £100 million as the liability to the Pension Scheme would crystallise. The Misconduct potentially adversely affected a significant number of people. The majority of the membership of the Pension Scheme comprised factory workers, many of whom had worked for Silentnight and contributed to the pension scheme for much of their working life. This was a foreseeable consequence of the plan to ‘dump’ the pension scheme into the PPF.

The Tribunal considered the respondents’ Misconduct in respect of advancing or associating themselves with untrue, misleading or incomplete statements to the PPF, TPR and the Trustees to be especially egregious given that they knew they had to be open and transparent with these parties and that they intentionally sought to mislead them in order to assist HIG in its efforts to enable Silentnight to shed its liability under the Pension Scheme as cheaply as possible.

The Tribunal further commented:

‘The standards of Integrity and Objectivity are of fundamental importance. They express the most basic requirements that society expects of professional accountants. Members of the profession have a privileged and trusted role in society. In return, they are required to live up to their own professional standards. Society expects high standards from professional persons; and the professions expect high standards from their own members.’

Subsequent to the events outlined above, Silentnight went into administration on 7th May, 2011 as a result of an entity related to HIG calling in the working capital facility. This culminated in the sale of the business out of administration to HIG, with the PPF assessing whether to assume responsibility for the Pension Scheme.

Costs

The Tribunal ordered that KPMG pay £2,450,000 towards Executive Counsel’s costs of the investigation together with the costs of the Tribunal (amounting to a further £305,814).

Elizabeth Barrett, Executive Counsel, said:

‘The scale and range of the sanctions imposed by the Tribunal mark the gravity of the Misconduct in this matter. The decision serves as an important reminder of the need for all Members of the profession to act with Integrity and Objectivity and of the serious consequences when they fail to do so.’

The report of the Tribunal is not published at this time.

The Accountancy Scheme was amended from 1st January, 2021 to remove from its jurisdiction all insolvency work (including restructuring advice, preparation for formal appointments and work consequent to formal appointments) carried out by members of the professional bodies who are licensed by those bodies as insolvency practitioners.

(Source: www.frc.org.uk, dated 5th August, 2021)