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The Big Story
PwC scandal triggers big split risk for consulting giants [Sydney Morning Herald]
The global consulting firms that dominate Australia’s corporate and government sector could be forced to operationally separate their audit business to avoid conflicts and open up to greater financial scrutiny under proposals recommended by a parliamentary inquiry triggered by the PwC tax scandal. The report also recommends that these private firms be limited to 400 partners, and that they be prevented from offering both audit and non-audit work – like consulting services – to the same client. This would be a big blow for firms such as PwC which, in 2022, received more than $79 million in fees from Macquarie Group alone. “This report is the legacy of the PwC tax leaks scandal, and the sector-wide misconduct that was uncovered in the aftermath,” Senator Deborah O’Neill, chair of the parliamentary joint committee on corporations and financial services, said after the report was released.
PwC accused of interfering in Australian tax leaks probe [Financial Times]
PwC has been accused of interfering in Australia’s political and regulatory affairs after documents revealed the Big Four accounting group warned its local firm against co-operating with investigations into a damaging tax leaks scandal without permission. The Australian Senate published documents on Friday that included a letter from Diana Weiss, PwC’s global counsel, sent to PwC Australia last year. She wrote that the local firm needed to comply with a set of remedial actions or face suspension, or expulsion, from the global network.
Firm Watch
National accounting firm quadruples Boca Raton office size [South Florida Business Journal]
“As we expand our presence in the South Florida market, the new office allows us to better support our growing client base, which generates more than $15 million in local revenue,” said Russell Goldberg, partner-in-charge of Withum’s Florida regional offices. “The expanded space also lets us bring together a dedicated Withum team who are committed to serving the community and building connections within it.” The new office will employ a team of 15 by the end of the year, with all positions in the Boca office staffed by accounting professionals, Goldberg said. “Our team will continue to grow as we strengthen our South Florida operations,” he added.
Fruci & Associates embraces flexible schedules as recruiting tool [Spokane Journal of Business]
To support a flexible workforce, Fruci & Associates has allowed current and potential employees to set their own hours. Many accountants at Fruci work between 40 and 45 hours per week even during the busy season, which is known to demand upward of 70 to 80 hours from accountants. Others work 50 hours per week and some even as low as 30 hours, MP Kemper Rojas says. “It made recruiting a lot easier,” Rojas says. “We’re still getting a lot of recruits who are remote and coming from the big firms who are just burnt out. They don’t even have time to sit for their CPA exam because they’re working so many hours.”
Experienced technology and digital transformation leader Michael Kempe joins Grant Thornton as CIO [Business Wire]
Prior to his new role with Grant Thornton, Kempe spent 12 years at KPMG LLP in various senior technology leadership roles, including regional and international CIO. In these roles, he focused on driving revenue growth and increasing operational efficiencies through large-scale digital transformation programs leveraging innovative Cloud and AI solutions.
Talent
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Municipal Messes
Delayed audit finds ‘material weaknesses’ in Elton’s finances and procedures [KPLC (Louisiana)]
The town agreed to address such deficiencies including timely adopting an operating budget, hiring someone qualified to prepare financial statements, and submitting required paperwork to the Legislative Auditor’s Office by the due date. However, the town claims it is not able to act on one of the recommendations by auditors. According to the report, the town does not appropriately segregate accounting duties. In response to this finding, the town writes, “It is not cost-effective to achieve complete segregation of duties within the accounting department.”
Law & Order
Clark Hill Wins for Accounting Firm in Tax Dispute With Rock Band Member [Clark Hill]
The Clark Hill trio convinced the court that the accounting firm was not liable for an employee’s business management and tax preparation services she provided on the side for a member of a rock band. The musician filed a complaint because the accounting firm’s employee failed to timely file tax returns from 2014-2018. The musician, his wife, and his businesses sued the accounting firm and the employee for over $3 million in penalties and interest and then $2-4 million in emotional distress damages. “Our client’s employee had been working with the musician as a side job,” Diehl said. “We submitted evidence to the court that Plaintiffs’ names didn’t show up on the firm’s conflict checks, there was no retainer, no payment, and no knowledge by the firm of the relationship.”
Deloitte Unable to Defeat ERISA Lawsuit From Spinal Specialist [Bloomberg Law]
Deloitte LLP remains on the hook to face a spinal surgery clinic’s allegation that the insurer failed to reimburse the specialist for its medical services, according to a district court. Deloitte LLP remains on the hook to face a spinal surgery clinic’s allegation that the insurer failed to reimburse the specialist for its medical services, according to a district court. Atlantic Spine Center LLC plausibly alleged that Deloitte LLP Group Insurance Plan violated the Employee Retirement Income Security Act by failing to comply with the terms of their benefit plan, according to an opinion. Judge Brian R. Martinotti denied Deloitte’s motion to dismiss the lawsuit on Tuesday in the US District Court for the District of New Jersey.
Rules and Regs
PCAOB Revokes Registration of Chinese Firm for Repeatedly Violating PCAOB Rules and Failing To Cooperate with Board Investigation [PCAOB]
The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order(PDF) sanctioning JTC Fair Song CPA Firm (“the firm”), a public accounting firm located in Shenzhen, the People’s Republic of China, for repeated violations of PCAOB rules and for failing to cooperate with an investigation into those violations. The PCAOB found that, over a multiyear period, the firm repeatedly failed to make required filings in accordance with PCAOB rules. First, on multiple occasions, the firm failed to timely report the participants in its issuer audits on PCAOB Form AP, in violation of PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants. Second, the firm failed to timely file its annual reports on PCAOB Form 2 for 2021, 2022, and 2023, in violation of PCAOB Rule 2201, Time for Filing of Annual Report.
Lovesac to settle accounting violation suit brought by SEC for $1.5 million [Furniture Today]
The SEC complaint, filed in the U.S. District Court for the district of Connecticut on Oct. 29, alleged that former CFO Donna Dellomo and former controller Yoon Um, both CPAs, failed to properly record the cost of shipping finished products from Lovesac’s distribution center to its end customers.
Academia
Deloitte Foundation Honors a Legacy in Accounting [The Local Voice (Mississippi)]
To honor the life and 40-year career of the late Guy Moore, of Pascagoula, the Deloitte Foundation has renamed an endowment it established in 2022 with a $1.5 million gift to the Patterson School of Accountancy at the University of Mississippi.
AI
EU’s Exploration of an AI Tax Shows an Anti-Innovation Mindset [Bloomberg Tax]
Recent AI advancements come at a time when the EU is claiming to move away from overregulation to focus on competitiveness. If the EU is serious about this mission, its answer to the AI-tax question matters. Broad-based improvements to corporate taxation would better support an innovative Europe than narrow carveouts or punitive tax hikes. As with any innovation, its fragilities take time to iron out, and taxes will play only one part of governments’ approach to AI. But how policymakers contend with those fragilities through the tax code can make or break new economies. But you wouldn’t know that if you listened to the European Parliament. Last month, the newly elected chairman of the tax subcommittee claimed “there is no evidence” that taxation discourages innovation.
Tax
Steps companies should take now to prepare for major tax legislation in 2025 [EY]
Whether you call it the “Super Bowl of Tax” or “Taxmageddon,” one thing is clear: Congress is all but certain to consider major tax legislation in 2025. That’s because essentially all of the individual income tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) expire at the end of next year, setting up tax increases on nearly every American taxpayer.