Ever since I took up Accountancy, I've been hearing people asking me what in the world is accounting. Then after passing the board exam and being employed in a top-notch auditing firm, I'd the hear people ask me what kind of work is audit.
Accounting is an outlandish concept, they would say. Although yes, this is how embezzlements and scandals are discovered—very little drama occurs in this field.
That's what I thought before as well. Until I witnessed a client actually commit suicide in one engagement.
When I was in public auditing 2 years ago, I once audited a family-owned realty corporation. I will never forget their building—it was 6 stories high, with a broken elevator and a rosewood carved office table in the president's office. Being in the leasing industry (their main revenue function included leasing out housing and commercial building units), the transactions involving that corporation were relatively few and the inherent risk low. Which was why even though its assets largely exceeded the threshold for SME's (Small-Medium Enterprises, up to P350 million in assets), our audit procedures had been rather minimal.
Now, you might imagine that in audit, simpler companies present fewer difficulties. Wrong. If anything, these simpler companies usually have really lenient accounting organizations—causing tons and tons of internal control deficiencies. Disbursements lack official receipts, no monthly bank reconciliation is prepared, owners' withdrawals aren't recorded, so on.
We had all these problems and more with that realty corporation. Worse, since that had been a first-year audit, a lot of account titles were wrong. Remember that that particular client was in leasing...
It did not have any Investment Property in its balance sheet.
To settle this issue, we first identified which property, plant, and equipment items should be reclassified to Investment Property. This was done by identifying the purpose of each asset. Of course given that the corporation was in leasing, most of the items had turned out to need reclassification.
I then discussed the dire need with my senior and he sort of gave out a heavy sigh. Reclassifications are avoided as much as possible; it disrupts the comparative nature of the financial statements and a lot of explanations will be required. We had no choice however, so I'd begun my reclassifications. However, one problem still persisted: there is a presumption that Investment Properties' fair value is readily determinable. We had to appraise the properties.
When I explained the requirement to the president, a lady in her late-fifties, she had frowned deeply as well. Appraisals entailed expensive costs, and she asked how her corporation had been operating for decades without any SEC official telling her the corporation's books were incorrect. In the end though, she had conceded and asked her son to arrange the appraisal with the assessor.
My senior told me to come with the assessor and the son to the sites. The first property on our list had been a series of land with undetermined use—these had been untouched for almost six years that time and the son had been told by the assessor to expect a huge amount of gain from change in fair value.
Thus, imagine our surprise when we arrived at the designated site and found a cockpit established upon the lot.
We asked the guard on site to whom the property belonged to and he gave us a mobile number to call. The president's son wasted no moment and called the number. Upon hearing the son's last name, the man on the other end of the line said he wanted to meet.
And that was how we found out what happened. The president's only daughter had a boyfriend who was addicted to gambling and actually lost a fortune in the casino. You must have guessed it already: at some point the boyfriend had managed to persuade the daughter to gamble a few pieces of unused land belonging to their family. The owner of the cockpit was actually one of the beneficiaries.
I had been confident at that point that we could reclaim the land once we proceeded the issue to court. That esteem disappeared however when I saw the son weep—he explained to us that there can be no reclamation. The titles were actually in the name of the daughter, given that she was the president's favorite. So as long as the deeds were notarized, there could be no illegal transfer to fight against.
As we visited all the unused lands, we found out that of the P270 million worth of property, only a measly P35 million remained in the name of the daughter. The rest had been lost in gambling.
The son had been deliberating if he should inform their mother about the properties. The problem, according to him, was that the old woman was already frail. In fact, she had been weak and fearful enough that she had already signed her last will. Ironically, all the unused properties were in the name of the daughter, together with the largest share in the corporation.
When he called his sister to inform her that we already know of the state of the properties, she began crying. She asked if we could allow her to inform the president herself. The son decided it would be better.
You're probably guessing at this point who committed suicide.
Me and the president's son had driven back to the office as fast as we could. It had been too late though—sirens were already wailing around the body of the 22 year old daughter who jumped out of the 6th floor. The son elbowed his way against the crowd and looked at the body with steel nerves.
Then a gunshot. Six floors up.
As me and the son dashed upwards to his mother's office, I could sense him tensing. That time I had been unsure whether it was distress or guilt. When we reached the office, I saw the president's body limp against the rosewood table, her blood and brain matter splattered all over.
It was that point I had cringed.
The son had given out a wicked sigh: "That rosewood's worth half a million, you know. She should've just thrown herself out." He then sat at her late mother's chair and asked me what would happen to the estate since he was the only child left.
He had been kind of sure everything will go to him.
