PT 1: ABSTRACT ANSWERS NO.1 (PAPER P3)

- released answers for industrious P3 candidates only. But good fun for T5 and F1 candidates

Lecturer’s comments: with the new syllabus emphasis on professional marks, presentation that is concise and succinct becomes crucial. A babbling about approach will risk it all. Notice the report has an ‘Executive Summary’ section making it easier for readers (your panel of markers) to gain an overview picture. Part b is quite simple as you need to distinguish between corporate mission from mission statement. Its helpful to put a sample ‘strategic intent’ to illustrative its effectiveness over mission statement. You can choose any companies that have a huge success in that like Kohmatsu, Honda, Canon and even Southwest Airlines. The big risk here is students simply spent too much time here. Mathematically and probability wise, you cannot NEVER pass if you only attempt 50% of paper. At 75% total attempt of questions, the probability is notably very slim.

Disclaimer of liability: answers are for candidates to evaluate and compare them with their own answers. The author is not necessarily recommending that the topics will be examined again in the next test.



ANSWERS TO QUESTION 1: A)
REPORT
TO : Sam, Managing Director
FROM : Accountant
SUBJECT : Current Position and future developments
DATE : 12th December, 2008

THIS reports highlight Sam & Annabelle business position.

EXECUTIVE SUMMARY
1 SA in strong competitive position as it possess exclusive rights to distribute high quality hair dryer and good wide product range to offer that rivals couldn’t match
2 SA has weak threshold competence with high fixed cost maintaining warehouse.
3 SA still has core competence like good relationship with hair salons to ensure stable demand for hair-products
4 Resource Position audit reveal SA in weak financial position, vulnerable if profits declined due to losing out hair salons segment to stronger consumer manufacturers who may decide to supply to them.
5 Worrisome future development because ...

Note: I have been advised by experts that posting full answers on my blog is unwise as it allows many free-riders. I did, nevertheless, because I am confident that the people I care so much [my students] will check for exam tips. Now that PT2 is over, i only put abstract answers as 'teasers'. If you require a full answer, please do get from me personally in class.

Do visit this blog for more updates in future. More interesting articles coming soon. And of course, your thoughts praises or otherwise are welcome. Don't hesitate, Google gave me an unbelievable storage space. Just be wary of your language i.e. have human decency and tact please. Vulgarities are definitely out for Chartered Accountants professionals [to be]. You all are above that as in not being Barbarians or cavemen. Spam as much as you like on 'chat box' or at the bottom of articles under "xx comments"

PS: the answers above are definitely achievable in exam conditions. However, as your imperfect but otherwise dedicated, hard-working and underpaid lecturer, there are bound to have human errors like grammar, past participle tense, past perfect participle tense, use of predicate nouns and others in which I have admittedly are areas to improve on. Still, they are excellent answers to sharpen your exam skills and practice.

PT 1: ABSTRACT ANSWERS NO. 2 (PAPER P3)

-extremely relevant to P3 but good for T5 and F1

Lecturer’s comments: overall the students performance are quite disappointing. There are easy marks available in part (a) explaining the GE-McKinsey model which was used numerous times in my tutorials but this was not evident in the answer scripts. Part (b) is very straightforward question in that reading the lecture notes would suffice



Pic 01: Giant conglomerate : Diversified Portfolio of Businesses
Pic 2: Power generator business
Pic 3: NBC Entertainment that gave you infamous CSI series
Pic 4: Home electronics and 'white goods' and 12 other industries
Pic 5: Jet engines for Boeing and Airbus [Yep! they are the WORLD's biggest supplier]

ANSWERS TO QUESTION 2
A) PRODUCT PORTFOLIO
Boston Matrix:
Mc George to treat the following:
1. cash users as ‘star’ product have promising growth opportunities market share and already possess high market share. Company seek to retain its market lead by INVESTING to expand production and distribution.
2. cash generators are ‘cash cow’ where geographic segments have ‘mature’ stage in the industry life cycle. Makes little sense to invest when there are very low growth opportunities. Company to HARVEST by have minimal operation costs to maximise returns.
3. cash traps are dog product where company sees little value in retaining such products. Company advised to DIVEST by discontinue operations.
4. problem child is when opportunity to grow is ...

PLEASE OBTAIN FULL ANSWERS FROM ME IN CLASS.

PT 1: ABSTRACT ANSWERS NO. 3 (PAPER P3)

- relevant to P3

Lecturer’s comments: Part (a) is extremely popular question with examiner. Note that Steve Skidmore even put one question in the P3 pilot paper. Its easy to write and score. I am pleased that many candidates obtained a pass for this question. Others who didn’t attempt this question is simply due to poor time management in the test. Part (b) requires the integration of external analytical studies and internal evaluation. Admittedly this is not an easy question but if you link both topics, you can obtain sufficient pass marks.









ANSWERS TO QUESTION 3 - A:
EXPORT
Advantages:
1. Expansion overseas with minimal investment in capacity as likely it means to extend production time to night shifts or 7 day-week. A “staged international expansion” style of cautiously export using minimal investment in physical resources.
2. Many choices of export markets are opened. Ashkol needn’t limit itself to just one country as it could easily re-direct export target countries.

Disadvantages:
3. Incur high transport costs involving ‘bulky furniture’ as this will put Ashkol in ...

Please obtain full answers from me in class.

Thank you

F8: Illustrative case study

- relevant to F8

Arnold Scwarzenegger was blur (just about everything) about how to explain to his nephew Donald Duck on audit of payroll section in his Californian government departments. The muscle man has asked you:

a) ummmm... duh* what should auditors look to achieve in audit assertion work relating to payroll? [4]

b) Descibe the procedures that can be used to ensure for a better payroll system. Demonstrate situations on improving the system. [4]

SUGGESTED ANSWER GUIDELINES
a) auditors seek to :
- wages are properly calculated
- employees are paid ensuring no phantom employees
-proper recordings are made and accounted for in the ledger payroll and correct classification
- proper deductions that are authorised and approved by employees and required by government

b) Exam approach : state on controls systems can be improved looking at Control Environment

state on control objectives / procedures to have stronger internal operations that is correct, accurate, appropriate, segregation of duties, authorised.

Demonstrations:

Control environment :
Competence match to employees salary

Application to PAYMENT : compare specific employee salary to industry average by enquiring of managers or industry expert for reasonableness test.

Control objectives :

Correct amount are paid to the respective employees.

Application to SETTING SALARIES & WAGES: check that all amount paid to employees that are banked in correspond with the payroll summary sheet generated from payroll department.

ISA 315 : Understanding Control Environment and Control Activities

- relevant to F8 (ACCA)





WARRIOR :
Macro approach (Control Culture) : Alert to dangers. Suspicious of enemies
Micro approach (Control activities) : He puts many guard soldiers, spies and dispatchers to secure his army

ISA 315 Understanding the entity and its environment and assessing the risks of material misstatement deals with the whole area of controls. It requires that auditors 'obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures'.
The ISA states that internal control has five elements:
1. The control environment
2. The control activities
3. The entity's risk assessment process
4. The information system
5. Monitoring of controls

control environment above looks at the management "CULTURE" as to controls assessing management's toleration level of poor controls

contrasts with

control activities are "PROCEDURES" which are micro managing internal controls

CONTROL ENVIRONMENT – management’s attitude and firm’s culture toward controls

Control environment is governance and management functions and the attitudes, awareness and actions of those charged with governance and management concerning the entity's internal control and its importance in the entity.
The ISA requires auditors to 'obtain an understanding of the control environment'.

CONTROL ENVIRONMENT

COMMUNICATION ENFORCEMENT - ethical values
Essential elements which influence the effectiveness of the design, administration and monitoring of controls
COMMITMENT COMPETENCE
Management's consideration of the competence levels for particular jobs and how those levels translate into requisite skills and knowledge
GOVERNANCE
Independence from management, their experience and stature, the extent of their involvement and scrutiny of activities, the information which they receive, the degree to which difficult questions are raised and pursued with management and their interaction with internal and external auditors
MANAGEMENT'S PHILOSOPHY
Management's approach to taking and managing business risks, and management's attitudes and actions toward financial reporting, information processing and accounting functions and personnel
ORGANISATIONAL STRUCTURE
The framework within which an entity's activities for achieving its objectives are planned, executed, controlled and reviewed
AUTHORITY AND RESPONSIBILITY
How authority and responsibility for operating activities are assigned and how reporting relationships and authorisation hierarchies are established
POLICIES AND PRACTICES
Recruitment, orientation, training, evaluating, counselling, promoting, compensating and remedial actions


CONTROL ACTIVITIES - POLICIES AND PROCEDURES
PURPOSE : Control activities include those designed to prevent or to detect and correct errors. Examples include activities relating to authorisation, performance reviews, information processing, physical controls, segregation of duties.

CONTROL
Transactions should be approved by an appropriate person.
For example, overtime should be approved by departmental managers.
CONTROLS
The ISA requires the auditor to 'obtain an understanding of how the entity has responded to risks arising from IT'. We shall look at computer controls
CHECKING & ACCURACY
checking to see if individual invoices have been added up correctly.
MAINTAINING REVIEWING
Control accounts bring together transactions in individual ledgers. Trial balances bring together unusual transactions for the organisation as a whole. Preparing these can highlight unusual transactions or accounts.
RECONCILIATIONS
Reconciliations involve comparison of a specific balance in the
accounting records with what another source says the balance should be, for example, a bank reconciliation. Differences between the two figures should only be reconciling items.
COMPARING the results of cash, security and inventory counts with accounting records
in a physical count of petty cash, the balance shown in the cash book should be the same as the amount in the tin.
COMPARING internal data with external sources of information
For example, comparing records of goods dispatched to customers with customers' acknowledgement of goods that have been received.
AUTHORISED physical access to assets and records
Only authorised personnel should have access to certain assets
(particularly valuable or portable ones).
-ensuring that the inventory store is only open when the store personnel are there and is otherwise locked.
This can be a particular problem in computerised systems.
SEGREGATION OF DUTIES
(a) Segregation of function. The key functions that should be segregated are the carrying out of a transaction, recording that transaction in the accounting records and maintaining custody of assets that arise from the transaction.
(b) Segregation of various steps in carrying out the transaction should also be segregated.
(c) Segregation of accounting operations - the same staff should not record transactions and carry out the reconciliations at the period-end.

the above are crucial to APPLY say in a payroll environment :
1. auditors need to assess if the control [culture] is appropriate when handling cash payment for wages
2. auditors need to assess if the control policies of say in
(i) PAYMENT OF WAGES : all total hourly wages paid are verified by supervisors, hours claimed overtime are authorised, time sheets reviewed and reasonable hours claimed.
(ii) DEDUCTIONS : review of pay deductions printouts and checked and casted for accurate deductions

Note that the control activities are applied in the context of the 4 boxes of logical payroll sequence. Alan Lewin can easily apply the same control environment and control activities in other scenarios like client's receivables and payables sections .

CONCLUSION
exam could test you on what AUDIT PROCEDURES i need to take as in "TESTING OF CONTROLS" ensuring that you are satisfied that wages processes are adequately carried out like you are satisfied with degree of authorisation and segregation of duties to reduce fraud and minimise errors. In short, what steps should an auditor do to assert the payroll system adequacy?

However, another question style is "Can you investigate if you are satisfied with its current internal controls which is this case tell me what is the management culture and the type of policies they use?" examiner takes a step further as "Now you found so many weaknesses in the (lazy and lousy) management, can you suggest improvements?" This type of question is on test of controls based on ISA 315. (please see notes 9 & 10).

Please practice questions on Test of Controls on Payroll, Purchases and Sales system that we have done in our tutorials

AUDITORS' PROCEDURES : TESTS OF CONTROLS ON PAYROLL

-relevant to F8 (ACCA)



If you are asked as to what steps you would take to ensure that payroll system is adequately installed of its internal controls, as an AUDITOR you could systematically take following steps. Remember, use key items like payroll lists, bank statements and specific documents to tailor made in your "application". merely regurgitating the following carries little or no marks.



STEP 1 : SETTING SALARIES & WAGES
AGREEING calculation of gross pay with:
· Authorised rates of pay
· Production records. See that production bonuses have been authorised and properly calculated
· Clock cards, time sheets or other evidence of hours worked.
·Verify that overtime has been authorised

VERIFY that gross salaries and bonuses are in accordance with
· personnel records,
· letters of engagement and
· increases in pay have been properly authorised.

STEP 2 : PAYMENTS
wages paid in cash
• Arrange to attend the pay-out of wages to confirm that the official procedures are being followed
• Examine receipts given by employees: check unclaimed wages are recorded in unclaimed wages book
• Check that unclaimed wages are banked regularly by inspection of bank statements and supporting documentation
• Inspect that unclaimed wages books to check it shows reasons why wages are unclaimed
• Review pattern of unclaimed wages in unclaimed wages book; variations may indicate failure to record
Holiday pay
• Verify a sample of payments with the underlying records and check the calculation of the amounts paid

For salaries, auditors should test that comparisons are being made between payment records and they should themselves examine paid cheques or a certified copy of the bank list for employees paid by cheque of banks transfer.

STEP 3: RECORDING
WAGES, reconciliations with:
· The previous week's payroll
· Clock cards/time sheets/job cards
· Costing analyses, production budgets

POINTS TO NOTE:
üThe total of salaries should be reconciled with the previous week/month or the standard payroll.
üconfirm that important calculations have been checked by the clients and re-perform those calculations.

REVIEW wages for a number of weeks:
· Additions of payroll sheets
· Totals of wages sheets selected to summary
· Additions and cross casts of summary
· Postings of summary to general ledger (including control accounts)
· Casts of net cash column to cash book

STEP 4: DEDUCTIONS
RE-PERFORM the calculations of taxation and non-statutory deductions. For income tax they should carry out the following tests.
· Scrutinize the control accounts maintained to see appropriate deductions have been made
· Agree that the payments to the taxation bodies are correct

POINTS TO NOTE
üThey hould agree other deductions to appropriate records.
üFor voluntary deductions, they should inspect the authority completed by the relevant employees.

WEALTH – AN ENVIABLE AMBITION? LEARN FROM THE TYCOONS

GREED IS GOOD? - Michael Douglas in movie "Wall Street"



"WEALTH is like drinking sea water, the more you drink the thirstier you get."

Wealth does not create individual happiness and it doesn't build a strong country, either.
A study in the recent issue of Psychological Science in the Public Interest addresses how economic status is no longer a sufficient gauge of a nation's well-being. The authors argue that the psychological well-being of its citizens is the greatest measure of a nation-- not the well-being of its economy. "While wealth has trebled over the past 50 years…well-being has been flat, mental illness has increased at an even more rapid rate, and data, not just nostalgic reminiscences, indicate that the social fabric is more frayed than it was in leaner times," the authors state. Prosperity is neither the answer nor the cause of satisfaction. The study calls for an ongoing systematic set of national indicators of well-being to report on a society and aid in its policy-making.

It has been assumed that money increases well-being and, although money can be measured with exactitude, it is an inexact surrogate to the actual well-being of a nation. In a 1985 survey, respondents from the Forbes list of the 400 richest Americans and the Maasai of East Africa were almost equally satisfied and ranked relatively high in well-being. The Maasai are a traditional herding people who have no electricity or running water and live in huts made of dung. It follows, that economic development and personal income must not account for the happiness that they are so often linked to.

"Scientists are now in the position to assess well-being directly, and therefore should establish a system... to supplement the economic measures," encouraged the report authors, Ed Diener, University of Illinois, and Martin E.P. Seligman, University of Pennsylvania.

The variables measured would include engagement, purpose and meaning, optimism and trust, and positive and negative emotions in specific areas such as work life and social relationships. The periodic assessment of a sample of the population would provide policymakers with a much stronger basis to gauge the well-being of the nation. It would allow them to refocus. "After all, if economic and other polices are important because they will in the end increase well-being, why not assess well-being more directly" the authors ask?

Becoming a financial success can be all-consuming.

SHOCKING STATEMENTS!
The Billionaire Aristotle Onassis once commented: “After you reach a certain point, money becomes unimportant. What matters is success. The sensible thing would be for me to stop now. But I can’t. I have to keep aiming higher and higher—just for the thrill.”

A pioneer of the steel industry, Andrew Carnegie, has long been admired by many. He was one of the richest men of his time. As a philanthropist he gave away millions. Was he happy? Once when a reporter told Mr. Carnegie how much he envied him, the reporter was surprised by this reply: “I am not to be envied. How can my wealth help me? I am sixty years old, and cannot digest my food. I would give all my millions if I could have youth and health.” Then, in a bitter tone he continued, “I would gladly sell anything to have my life over again.”

Another tycoon, J. Paul Getty, an oil magnate, echoed this thought when he said: “Money doesn’t necessarily have any connection with happiness. Maybe with unhappiness.”




THE LATE AUGUSTUS CAESAR

Our Local Scene - Tycoons that came and went




From left to right:
PIC 01 : MONOPOLIST CASINO FOUNDER : THE LATE LIM GOH TONG [with walking stick]
PIC 02: ICONIC 'BUMIPUTERA' ENTREPRENEUR - FOUNDER OF NAZA : THE LATE NASIMMUDIN
PIC 03: FAMED SINGAPOREAN TYCOON - OWNS [estm]15% OF STANDARD CHARTERED BANK : THE LATE KHOO TECK PHUAT

Ancient writings on wealth and true happiness:

1 Timothy Chapter 6 verses 9,10: “But those who desire to be rich fall into temptation, into a snare, into many senseless and hurtful desires that plunge men into ruin and destruction. For the love of money is the root of all evils; it is through this craving that some have wandered away from the faith and pierced their hearts with many pangs.”
Comment : Notice the remarkable semblance of tycoon’s experience that wealth is related more with ‘unhappiness’.

Mark Chapter 9 verses 36, 37 : “For what doth it profit a man, to gain the whole world, and forfeit his life? For what should a man give in exchange for his life?” (American Version)
Comment: LIFE IS more valuable than all the wealth in the world.

Ecclesiastes chapter 9 verses 4,5: “For to him that is joined to all the living there is hope: for a living dog is better than a dead lion. For the living know that they shall die: but the dead know not any thing, neither have they any more a reward; for the memory of them is forgotten.” (King James Version)
Comment: Death brings everything we do to a nought.

Matthew Chapter 5 verse 5a, “Happy are those conscious of their spiritual need…” (New World Version)
Comment: Creator promises everlasting happiness, if we keep searching for Him.

VERDICT : We recommend that we live responsibly by loving our family and extended families (parents, siblings, cousins, neighbors), search meaningful answers to life (Why are we here? Is this Life of 80 years all to it? Is there a super-being Creator? If yes, what does he want from us?) AND get a job with a decent income.

SOURCES :

Anonymous, 2008, Bible versions, http://www.biblelookup.com/lookup.html, visited on : 11th September.

Ed Diener, 2004, Wealth does not create individual happiness and it doesn't build a strong country, either,
http://www.eurekalert.org/pub_releases/2004-09/aps-wdn092404.php, 24th September

MALAYSIANS - CALM DOWN!

- relevant to all CAT & ACCA candidates. (by extension the world)

“ISA invoked! Police detained 3 individuals who reported the truth as messengers but left the perpetrator scott free…” so the report goes. (The Star A, 2008; The Star B, 2008 )

Malaysians (especially CAT and ACCA candidates)! Calm Down! Change is the only constant. The political landscape is shifting. But beware, when the earth opens and shift as if an earthquake, it can swallow (many) victims.

You may not believe this, but Malaysia has good corporate governance with:
1. The Royalty family having ultimate military powers. They can invoke powers of intervention to restore peace. I meant in a good way. If you apply “Game Theory” it makes no sense for such powerful dignitaries to not want peace and order in the country they rule.

2.The police force is merely doing their job. They said racial tension is a biggest threat. That is true! Look at Rwanda where 800,000 lost their lives, World War II saw 6 million Jews snuffed out. That is nothing compared to 6.6 million Poles (Poland) systematically executed.

Police is ethically doing their job. Apply Utilitarianism (Jeremy Bentham) ethics and you will see letting minority suffer for the greater majority well being. What about the perpetrators of racism? I can’t say more as I don’t have the facts to the whole picture. Maybe actions done is unfair, have you considered the possibility “maybe not”.

3.Opposition parties are merely doing their job to oppose, rightly or wrongly, its left to individuals to decide.

There are bigger threats:
x USA is stumbling economically with potential default in US$8trillion in real estate sector. They are our biggest customer. They catch a (economic) flu, we catch pneumonia. Mind you, the twin power house UK, has announced a double digit percentage fall in real estate prices in which Gordon Brown is so nervous. In fact announced that UK faced worst economic prospects in 60 years.

x Commodities rose as fast and fall as fast. The latter is reflected by weak demand in world. China has completed infrastructure development for the Olympics. This means they will not have the heyday frenzy of development that translates to lower demand for steel, oil to name a few.

x Globalization is forcing Malaysian economy to open up to competition. The days of political-commerce ties are almost over. Compete or die. Opposition parties claimed we lost a multi-billion dollar Korean investment because of refusal of federal government to construct certain bridge linking to an island. But do we have all the facts? Could it be the bridge is just a “necessary resource” (Prahalad & Hamel)? Could it be that Philippines have cheaper labour, tax free zones, skilled labour in other words the subsidiary there is a “Contributor” (Bartlett & Ghoshal)? Craig Barrett of Intel founder said that we are losing our “advance factor” of skilled labour.

x THE BIGGEST THREAT : Your future! EXAMS are coming. Have you been putting energy and time studying, grasping concepts and practicing questions? Your career is at stake.

I have frequently openly state I am politically neutral, but when I observed the mass media and blogs, I notice the unease, unrest, anger and even frustration (such as the quote above). Well don’t be. This is change. For better or worse, but stay on sidelines and focus on your future, your studies and pursuit of excellence. President John F. Kennedy: "Ask not what your country can do for you; ask what you can do for your country." Do your bit as law abiding citizens. Life is unfair due to political stakeholders (Mendelow model) strife. Remember “Keep Inform” and “Secondary” quadrants? I know you will say that in P1, you are taught that when “Keep Informed” stakeholders will to combine forces, they can push up to “concentrate” stakeholders. Even so, that is a risk as this is only an “if” they unite. Apply risk management in F8 and P1 (ACCA). But hey, wait a minute, aren’t you arguing so well? See what I mean as to how well educated you are when applying concepts you learnt in ACCA?

I hope you all have the maturity and insight to see the bigger picture. ACCA has already in process of equipping you with such wisdom. You studied corporate governance in P1 (Public Accountant), well guess what, its at play now in this country. Should be shocked? No, it’s a progress. The future is always a hope for the better. Why not build your own future for starters?

So please don’t dwell on politics that incite hatred, unease and worse civil unrest. Spread this message of peace. I know some of you will disagree and say stuff like - “We are the ones who are change agents, if you don’t voice out, who will?” Or equivalent rebuttals. Don’t get me wrong. I am saying "be peaceful (verbally, emotionally, definitely physically)". Don’t add kerosene to fire. Say in civilized manner but don’t cause ill-will to one another. We are ALL world’s citizens. If we are attacked by aliens (good possibility that will happen), humans will set aside differences and unite. Well, why not now?!

Conclusion : CALM DOWN! Our job is study hard, graduate and contribute positively to our own future, as globalisation is indiscriminatory. If you don’t invest intellectually, you will be marginalized by this global force. Example: You don’t want to buy a Proton cars just as much as the (former) East Germans who abhor their Skodas. Both marques famed for poor quality and only sells due to government unsustainable protectionists measures. Will you as a person be another “Proton”?

References:
The Star A, 2008, Raja Petra, Teresa Kok and Sin Chew reporter arrested under ISA, http://thestar.com.my/news/story.asp?file=/2008/9/13/nation/2022362&sec=nation), 13th September.


The Star B, 2008, MCA shocked by arrest of reporter and not perpetrator, http://thestar.com.my/news/story.asp?file=/2008/9/13/nation/2022800&sec=nation, 13th September.

Please visit : http://marcusong88.blogspot.com/2008/08/life-as-student.html for motivational article to study.

EMPIRE BUILDER - MOST POWERFUL MAN

-relevant to CAT : T5 & ACCA : F1, P3, P5

(please note that the article should be read in conjunction with my lecture class on Chandler's model on corporate growth)

EXECUTIVE SUMMARY
John Davison Rockefeller (July 8, 1839 – May 23, 1937) was an American industrialist and philanthropist. Rockefeller revolutionized the petroleum industry and defined the structure of modern philanthropy. In 1870, he founded the Standard Oil Company and ran it until he officially retired in 1897.[1] Standard Oil began as an Ohio partnership formed by John D. Rockefeller and partners. Rockefeller kept his stock and as gasoline grew in importance, his wealth soared and he became the world's richest man and first American billionaire, and is often regarded as the richest person in history.

THE MOST POWERFUL INDUSTRIALIST IN HUMAN HISTORY
John D Rockefeller began as a humble oil business book-keeper in Cleveland, Ohio and in just seven years rose to control a tenth of the entire US oil business.
In the late 19th century the oil industry was a free-for-all, the law of the jungle ruled. Rockefeller used this 'individual freedom' to pursue several extremely successful and deceitful tactics to accumulate capital.

EMPIRE BUILDER
He would secretly buy up or create new oil related companies such as engineering and pipeline firms. These seemed to be independent operators. Rockefeller and his close colleagues secretly controlled the firms and gave Standard Oil, Rockefeller's main oil company, hidden rebates.

Another tactic was to buy up a competing oil company, again secretly. Officials from this company could then be used very effectively to spy on, and give advanced warning of, deals being hatched by his real competitors.
Almost certainly the most lucrative secret deals done by Rockefeller and his partners were with the railroads. These 'in harmony' deals meant those refineries and oil traders not 'in harmony' with standard would find that railroads would refuse point blank to move their oil, whatever the price.

Oil, of course, is free at source, so once the investment in refining and extraction plant has been made the only really important cost was transportation. Rockefeller's secret railroad rebates on the transportation of his oil kept his competitors guessing for years. None of them could understand how he kept pump prices so low. They were all bemused that Standard Oil had being growing at such a rate. How he managed to persuade the railroads to give him rebates and keep the deals secret is still not clear.

Allun Nevins has produced an official biography¹ of the Rockefeller empire but even he cannot help but question its morality. Of a railroad contract signed on 17 October 1877 he says, "The commission was excessive for the services performed. It was ethically indefensible." "Today," he says, "we must condemn the misuse of power not only as a crushing blow to the company's competitors but as an indirect tax on the public."

Old film of John Rockefeller shows him moving in a curiously stiff and wooden fashion, expressionless. He proffessed to being a Baptist and went to church regularly, but did he enjoy it? Anthony Sampson in his book 'The Seven Sisters' quotes John Rockefeller as having a favourite maxim; 'Don't let good fellowship get the least hold of you'. Jerome Greene called him, "the most unemotional man I have ever known".

COLLABORATION STRATEGIES
One shadowy deal that Standard Oil of California (or SOCAL) struck back in the 1930's changed the face of urban America for ever. The Firestone Tire and Rubber Company, Phillips Petroleum Co., Mack Truck and General Motors collaborated on a project with SOCAL called National City Lines. The tram systems in the urban US were suffering from under-investment and often crippling debt repayments so National City Lines stepped in across the States to liberate the populous from their cheap and cheerful old 'streetcar' systems. They were replaced with motor buses or they were gradually closed down completely.
The demand for motor cars soared returning massive profits for all involved in the deal. By 1940 General Motors alone had been responsible for the disposal of more than 100 urban streetcar operations. In the late forties the consortium was found guilty by the federal grand jury under anti-trust (anti-competitive) legislation but the $5,000 fine was laughable. It did not even amount to the annual profit returned from the conversion of a single streetcar.

National City Lines sold the dream of the bus and the car to businessmen and politicians right across the continent. In Detroit, even the chairman of the rapid transit company declared the car as the 'magic carpet of transportation for all mankind'. Mayor LeGuardia in NYC said the car represented the best of modern civilisation, whereas the tram was simply an old-fashioned obstacle to progress.

So where are the Rockefellers now? The current head of the family is David Rockefeller, Chairman of the Chase Manhattan Bank and prime mover in the secret 'Bilderberg' and 'Trilateral Commission' elite groups.

GROWTH THROUGH DIVERSIFICATION
They may have moved the core of their interests from Oil to Banking and branched out considerably but the Rockefeller family have not given up the fascination of clandestine operations to keep their business empire beating at the heart of the capitalist machine.
So much for present organisation, and now as to how far through this organisation the Standard Oil Company is able to realise the purpose for which it was organised - the control of the output, and, through that, the price, of refined oil. That is, what per cent. of the whole oil business does Mr. Rockefeller's concern control. First as to oil production. In 1898 the Standard Oil Company reported to the Industrial Commission that it produced 35.58 per cent. of Eastern crude - the production that year was about 52,000,000 barrels...

MONOPOLISTIC CONTROLS
But while Mr. Rockefeller produces only about a third of the entire production, he controls ninety percent of total output; that is, all but about ten per cent. goes immediately into his custody on coming from the wells. It passes entirely out of the hands of the producers when the Standard pipeline takes it. The oil is in Mr. Rockefeller's hands, and he, not the producer, can decide who is to have it. The greater portion of it he takes himself, of course, for he is the chief refiner of the country. In 1898 there were about twenty-four million barrels of petroleum products made in this country. Of this amount about twenty million were made by the Standard Oil Company; fully a third of the balance was produced by the Tidewater Company, of which the Standard holds a large minority stock, and which for twenty years has had a running arrangement with the Standard. Reckoning out of the Tidewater's probable output, and we have an independent output of about 2,500,000 in twenty-four million. It is obvious that this great percentage of the business gives the Standard the control of prices.

His foundations pioneered the development of medical research, and were instrumental in the eradication of hookworm and yellow fever. He is also the founder of both University of Chicago and Rockefeller University.

Standard Oil was convicted in Federal Court of monopolistic practices and broken up in 1911. Rockefeller spent the last 40 years of his life in retirement. His fortune was mainly used to create the modern systematic approach of targeted philanthropy with foundations that had a major effect on medicine, education, and scientific research.

ROCKERFELLER’S AND BILL GATE’S WEALTH COMPARED
Bill Gates' retirement from Microsoft--the tech goliath now worth $260 billion he founded as a teenager--may not mark the end of a career, but it certainly offers a logical vantage from which to view a most remarkable one. And as do legendary sports heroes, the software king no doubt will invite endless assessments and comparisons.

To be fair, there aren't all that many people one can compare Bill Gates to. Very few entrepreneurs have made such an impact on their society, and very few have made so much money. Still, by any rough measure of the value of money and achievement over time, it seems clear that Gates remains led by at least three ghosts--those of John D. Rockefeller, Andrew Carnegie and Cornelius Vanderbilt.
Start with the oil baron. Rockefeller had accumulated (very) roughly a billion dollars by 1913, a sum that represented 1/65 of the U.S. gross national product. Gates' wealth, $58 billion, is perhaps 1/190 of the current GNP, putting Rockefeller well ahead of Gates--and, for that matter, every other American who ever lived

ADDITIONAL READINGS :
Businessweek, 1998, The Monopoly That Went Too Far , http://www.businessweek.com/archives/1998/b3578093.arc.htm,: May 18, 1998

Randall e. Stross, 2008, Bill Gates: Richest American Ever And You Thought Rockefeller Had Money, http://money.cnn.com/magazines/fortune/fortune_archive/1997/08/04/229712/index.htm, Date visited : 11th September

Richard Snow, 2008, Entrepreneurs For The Ages, http://www.forbes.com/2008/06/24/microsoft-gates-rockefeller-ent-tech-cx_rs_0624entreforagesgates.html, 24th June

WHAT BILL GATES HAS IN COMMON WITH COMEDIAN SEINFELD?

- RELEVANTLY irrelevant TO ALL

I HAVE NO IDEA. Reading the latest snippets news on Google, I found this facinating advertisement , no intriguing. Is there meaning in meaningless advert? There must be some genius message in an idiotic advert. There must be! As the actors are the brightest minds in their own trade. One a comedian which gave us "Seinfeld" (mind you he is the only 1 of 3 other billionaires comedians in USA) and the other is one who locked us in with his Windows program that conquered 95% of "World's" software market. (For more details please visit : http://marcusong88.blogspot.com/2008/09/bill-gates-bad-role-model.html )






Pic 01: SEINFELD fame. A comedy about 'nothing'. Yep! Nothing!
I need your inputs. I really am very confused. As human, when we can't find logic in something, it drives us up the wall. Watch the video advert from Youtube (by the way, its fast becoming Youtube top viewers' favourite) and tell me please, no I implore you, what does the advert mean. Is there a secret code language they trying to tell us that our planet is invaded by aliens? Has the two men reached a pre-mature senile-dementia? Come tell me, tell me.

Below is the article (watch the 90 sec video beforehand):

Seinfeld and Gates' Microsoft misfire


VID 01: THE INTRIGUING VIDEO!

The new Microsoft commercial, featuring Jerry Seinfeld and Bill Gates out discount shoe shopping, was unveiled Thursday night on TV. Today it's near the top of YouTube's most viewed list, and many of those viewers are leaving a trail of rancorous confusion all over the Web. People are asking, nay, demanding to know what the minute-and-a-half-long spot is trying to convey.
Seemingly anticipating the lack of enthusiasm, Microsoft offered an explanation for the commercial on its own site:

After seeing the new ad from Microsoft, which debuted today, some may wonder what Jerry Seinfeld helping Bill Gates pick out a new pair of shoes has to do with software. The answer, in the classic Seinfeld sense of the word, is nothing. Nevertheless, the
spot is the first and most visible sign of an ambitious effort by Microsoft's Windows business to reconnect with consumers around the globe.



Snippets, "Yes, you are (size) 10."

The post went on to explain that the campaign will show how Windows "has become an indispensable part of the lives of a billion people around the globe," not just on their PCs but also now online and via mobile devices.

But the commercial is not actually tapping into the "nothing" that Seinfeld was famously about. "Seinfeld" was about "nothing" because it showed everything that four friends did together. It was the "nothing" of, "What'd you do today?" "Nothing." But the Microsoft spot's little shoe-store vignette relies on unfunny far-fetched details: Seinfeld asking Gates if he ever takes a shower with his clothes on, for example.

The whole thing is chilly. It begins with Seinfeld walking past a discount shoe store called Shoe Circus. He is eating a churro. He reads out loud the store's name and a sign promising quality shoes at discount prices, then sees Bill Gates through the window trying on shoes and says, "Bill Gates!" and walks in to join the fun.

Let's start with the premise of these two famous rich people out discount shoe shopping. Ha, ha! They don't really have to shop at Payless like the half a million people who lost their jobs this year.

Gates and Seinfeld may both be schlumpy dressers, but their regular-guy qualities stop there. Neither is the Warren Buffett kind of rich, the frugal sort who knows the value of a dollar and doesn't put himself above the working man (or so we believe about Buffett). Instead the ad seems to be somehow making light of bargain-shopping, as if it's just a lark for these guys, or some kind of joke that we're not quite in on.

A bit into the ad, Seinfeld suddenly takes over from the salesman and is helping fit Gates' shoes, offering him the "Conquistador -- they run very tight." As Seinfeld feels around for Gates' toe he says, "Is that your toe?" Gates says no. Seinfeld asks what it is and Gates says, "leather." The camera lingers on Gates face as he says "leather," and he appears to be attempting to give a meaningful look. Are we supposed to be interpreting something naughty in that exchange? It's not unreasonable to go there, especially after we've witnessed the fondling of Gates' feet by a kneeling Seinfeld.




The most disturbing part of the commercial begins with a cut to a Latino family (picture above) standing outside the store and looking in the window as they too eat churros. "Es el Conquistador?" the woman says. The man replies in Spanish, "They run tight." There are English subtitles. These dark-skinned people stand close together and have befuddled expressions on their faces. They seem to take Shoe Circus very seriously.


Perhaps they're supposed to represent the consumers "around the globe" that Microsoft is trying to "reconnect" with, but the depiction seems condescending and borderline offensive. These are the kind of people who actually shop at a Shoe Circus, and not by choice. With their grim faces they look as if they have actual problems to deal with besides the tightness of the Conquistador, so the spectacle of them watching the two eternally boyish, care-free retired zillionaires try on shoes leaves a bad aftertaste. Jerry and Bill may well eat churros and buy cheap shoes just like the onlookers do, but Seinfeld goes home at night to his Hamptons estate and his dozen cars while Gates retires to his stadium-sized techno-mansion.

The Latinos are pressed up against the glass, fascinated by the action inside, but they do not appear to know who Gates and Seinfeld are. Are they too poor to own a TV? Do they represent the yearning Latino hordes trying to get in on the American consumerist dream?
Then back inside the clerk asks Gates if he has a Shoe Circus Clown Club card, which Gates produces, and it has the mug shot on it from Gates' juvenile arrest. This is the one comic touch that seems on the money.

As Seinfeld and Gates cross the parking lot after the purchase, the talk (finally) turns to Microsoft. Seinfeld asks Gates if they'll ever make computers "moist and chewy like cake, so we can just eat while we're working." If it's yes, Seinfeld says, "give me a signal. Adjust your shorts."
Then Bill Gates, founder of Microsoft, chairman of the Gates Foundation, one of the great technology minds of our time, shakes his booty. It's seems meant to be humanizing -- the playful side of Bill Gates -- but comes off as one more awkward choice. This commercial has a double problem. It pulls none of the emotional strings that might have helped Microsoft "reconnect" with its audience (not that I remember ever being connected to them). And its main idea is a dadaist void. A decade after "Seinfeld," "nothing" has gotten old.
--Author Maria Russo

Mini-breaks :-

Have a break. Take 5 mins for Seinfeld.

Not enough? Have another 10.

Source: Maria Russ, 2008, Seinfeld and Gates' Microsoft misfire, http://latimesblogs.latimes.com/webscout/2008/09/seinfeld-and-ga.html, 5th September

BILL GATES : A BAD ROLE MODEL

- Relevant to all CAT and ACCA undergraduates


Pic 01 : What has the child and grandfather clock has in common? [read on]


Life is just like time - it's a one-way street. There is no turning back. The past cannot be undone. Only at best be repaired, as one wisen up in future to carefully avoid a repeat of past mistakes. When a student, I observe the playfulness of my classmates. The usual likings like cafes, snooker games or plain hanging about at street corner shops. To put things in perspective, in themselves there is nothing wrong in these activities except that if one make this a primary past time or overindulgence, then one can lose focus as to why we enroll in ACCA in the first place.

Why ACCA? Without a doubt its cheaper than an ordinary degree course but better recognition in terms of getting a job in the Prestigious Big 4 namely PWC, KPMG, E&Y and Touche Deloitte (some pointed out the 4th largest firm is BDO Binder if measured in terms of revenue size) . What is the catch? Well, straight from the gut it requires tremendous discipline to be committed to cramp intense knowledge in a mere 5 months in what would normally take a freshman or sophomore one whole year to complete.

Well learn from Bill Gates – he took ages to complete his degree in Harvard. Well, he didn’t exactly resume classes as he receive an “honorary” degree which means in his working life, he has demonstrated application of theoretical knowledge. Still he took more than 20 years to complete a degree! To be exact he dropped out of school in 1975, and receiving a degree on June 8, 2007. That amounts to 22 years. He graduated at 51 years of age! If your friends graduate now and 22 years from now, you could imagine that they would have a wife, a house(s), kid(s) enrolling in ACCA, car(s), a big belly, maybe even whitening or withering hair. Then only you graduate.


Pic 02: Dad, I finally fulfill your wish! Sorry, I took 22 years to do it.


Of course one would argue that Bill Gates saw an opportunity to develop simple software programs in what today is called “Windows” program. His infamous company Microsoft made him a second richest man on earth, after Warren Bufett – see my earlier article (http://marcusong88.blogspot.com/2008/08/external-strategic-analysis-with.html ). Of course looking at history, his actions are justified considering his achievements today. But one begs the question, how many would-be Bill Gates who dropped out of Harvard to aspire like him failed? Probably 100,000 : 1 ratio. Now, P1 (Public Accountant) syllabus on risk management would tell you that if you can’t see risk in the future and thus unable to quantify it, really the matter is no longer a risk but an uncertainty! Unquantifiable risk!

What Bill Gates has done is what P3 (Business Analysis) paper term it as the “Delta Model”. Briefly this means that a company race to pioneer its technology in an emerging industry to make it the standard accepted format technology in the international market. With more clients using it the likelihood is that through time, they become dependent on it and are “locked-in”.


Pic 03: My nightmare student has returned! Never does homework, miss classes, obsessed with computer games...


So the infamous Microsoft founder is an exception to the rule to drop out of school and still be fabulously rich. For him to drop out and pursue a career and hit 'gold', only to return to complete his earlier task, is rare. We can’t say the same for us, can we? Mr. Bill really is a bad role model for us! Don’t take too long to graduate. Average time to complete is 3.5 years. Stay focus on your purpose in ACCA course and graduate soonest possible according to your personal capability. If in a scenario, we fail a paper or two (dare I say, fail all papers attempted last sitting), buck up. Convert frustration into motivation! If you get 49% for a paper, the message is clear – You are not good enough for ACCA STANDARDS. You have to work ‘doubly’ hard, not 2% more which is a large misconception. And possibly you will get 52% in the next attempt. An 8 hour study regime for 6 days a week is a norm and expected. Its comparable to an office worker working time.



Pic 04: "Break the rules" (C.K. Prahalad and Gary Hamel) : Why not dawn on a "classic" graduate outfit? Cool and differentiated.


I strongly encourage you, be strong and be mature demonstrated by your commitment to pursue your purpose in campus. Study hard, as I am confident you will. (To boost your motivation, please visit http://marcusong88.blogspot.com/2008/08/life-as-student.html)

I have posted a new linkage to ACCA website on the left side bar for your convenience. Visit the site as often as possible.

References :

ACCA, 2008, ACCA subject topics and resources, http://www.accaglobal.com/students/study_exams/qualifications/acca_choose/acca/, Visited on 3rd Spetember.

Time Magazine by Lev Grossman, 2007, Bill Gates Goes Back to School, http://www.time.com/time/health/article/0,8599,1630188,00.html, July 07