Comments are closed on Friday Footnotes and the Monday Morning Accounting News Brief by default. If you have something to say about any stories linked here you are welcome to email the editor, text us at 202-505-8885, or hit us up on Twitter @going_concern. See ya.
This Week in PCAOB Paper-Pushing
US SEC approves new audit quality benchmarks over Republican objections [Reuters]
Wall Street’s top regulator on Monday gave the nod to new accounting standards set by a watchdog agency, part of an effort to address concerns about the prevalence of poor quality audits. The five-person U.S. Securities and Exchange Commission voted 3-2, with Republican members objecting to what they said was a hasty drafting process and unnecessary burdens likely to fall on smaller audit firms.
SEC as EQCF: Statement on Public Company Accounting Oversight Board; Notice of Filing of Proposed Rules on a Firm’s System of Quality Control and Related Amendments to PCAOB Standards [Statement by SEC Commissioner Hester Peirce]
Auditors play a critical role in maintaining healthy capital markets. Comprehensive, dynamic quality control systems help audit firms fulfill their mission. Troublingly high audit deficiency rates, though likely attributable to multiple causes, suggest that the five-year-long effort by the Public Company Accounting Oversight Board (“PCAOB” or “Board”) to revamp its outdated quality control standards was warranted.[1] Getting the quality control standard right, however, would have required more time for additional pointed questions, comment, reflection, and revision. The PCAOB, now with the Commission’s assent, cut the process short and put out QC 1000, a standard that still needs work. Accordingly, I am unable to support it. Ironically, with respect to a standard that focuses on quality control, the Commission has failed to perform the external quality control function which Congress entrusted to us.
‘Surreal’ venue fight erupts in constitutional challenge to accounting oversight board [Reuters]
For the third time in the last several months, a conservative U.S. appeals court is being asked to reclaim its authority over a lawsuit against a federal regulator after the case was transferred to Washington, D.C. On Thursday, an anonymous Texas accounting firm filed a petition [PDF] at the 5th U.S. Circuit Court of Appeals, arguing that a Houston federal judge wrongly transferred its lawsuit alleging that the Public Company Accounting Oversight Board wields unconstitutional power. The plaintiff, identified in the litigation only as John Doe Corporation, contends that when U.S. District Judge Lee Rosenthal of Houston transferred its case to Washington, D.C., she disregarded a standing order in her district that requires judges to give plaintiffs 21 days to appeal before shifting their cases to courts outside of the 5th Circuit.
Technology
How AI Can Guide Introverts to Success in Professional Services [Kiplinger]
The takeaway here is to be as introverted as possible if you want to sabotage your firm’s private equity schemes.
Artificial Intelligence, or AI, might be able to help introverts sell with less social discomfort and higher effectiveness, offering help for a challenge many accounting and law firm partners suffer with. While the professional services industry remains highly fragmented — one of the telltale signs private equity investors generally look for — the growth model is dependent on a very few rainmakers at any given firm. That means growing revenue is potentially difficult, unpredictable and slow to change.
Machine learning technique predicts likely accounting fraud across supply chains [EurekAlert!]
As the perpetrators of accounting fraud become ever more sophisticated in their techniques, fraud detection needs to step up its game. Thankfully, a group of researchers have devised a new machine learning ‘detective’ that is able to analyze not just fraud at a single firm, but predict likely fraud across whole supply chains and industries. A paper describing the team’s approach was published in the journal Big Data Mining and Analytics on August 28.
Pipeline
Accounting pipeline crisis presents opportunity [Spokane Journal of Business]
Elvis Presley is credited for once stating “I have no use for bodyguards, but I have very specific use for two highly trained certified public accountants.” Today, CPAs enjoy a collective reputation as trustworthy and respected professionals, in part due to the number of regulatory agencies that oversee their work—Securities and Exchange Commission, IRS, National Association of State Boards of Accountancy, Public Company Accounting Oversight Board, and more. Continuing education also is required to maintain CPA licenses. CPAs possess technical knowledge relied upon by stakeholders throughout the business world.
Talent
HEY, EMPLOYERS! We’ve seen those online job listings, we know you’re hiring. Let Accountingfly help with your remote accounting job openings and check out this week’s top candidates for your browsing pleasure.
Sign up for Always-On Recruiting to get great candidates sent directly to you every week, FREE!
Big 4
PwC spin-off Vialto to restructure $1.5 bln debt after cost overruns, FT reports [Reuters]
Global tax and immigration consultancy firm Vialto, which used to be part of PwC, is planning to restructure $1.5 billion of debt loaded onto the business in a private equity buyout after running into financial difficulty following its separation from the Big Four firm, the Financial Times reported on Friday. PwC sold its global mobility business to U.S. private equity firm Clayton, Dubilier & Rice in 2022 in a $2.2 billion deal to raise capital to invest in faster-growing areas of its consulting business, the report said. The firm was renamed to Vialto after the buyout, it added.
Major accountancy firm says don’t blame Airbnb [The Negotiator]
A report from accountancy firm EY has claimed there is ‘little to no relationship’ between the explosion in holiday lets in the UK and the current housing crisis. The firm has said that Airbnb had instead added £5.7bn to the country’s economy in 2023 and that any Labour crack-down on holiday lets would be likely to damage the tourist industry. One of the main means of controlling the growth in holiday lets is allowing councils to double or even triple council tax for them.
LinkedIn user says what we’re all thinking:
— Going Concern (@going_concern) September 13, 2024
Related: Deloitte is Out Here Being Cringey on LinkedIn Again
The challenge of LGBTQI+ inclusion at Big Four firms [Phys.org]
The Big Four firms are eager to adopt progressive positions in support of diversity, but it doesn’t always play out in reality for staff. The experiences of LGBTQI+ people working in professional services are still heavily influenced by their clients, according to a new study from the University of Sydney Business School. The research, published in Accounting, Auditing & Accountability Journal, is based on 56 in-depth interviews between 2018 and 2019 with LGBTQI+ staff and allies in Australia across the Big Four firms: Deloitte, EY, KPMG, and PwC. The study was led by Dr. Matthew Egan, a Senior Lecturer in Accounting, Governance and Regulation at the University of Sydney, and explored the experiences of professionals during and following the legislative passing of marriage equality in 2017.
Deloitte brings back face-to-face UK graduate interviews [Financial Times]
Deloitte has reinstated in-person interviews for its UK graduate scheme, amid pressure from the accounting regulator for firms to clamp down on the potential for cheating in virtual assessments. The Big Four firm said it would return to in-person interviews from September for those applying for its graduate and apprenticeship programmes, after switching to a fully online recruitment process during the pandemic. The change comes after the Financial Reporting Council said that Deloitte’s fully online recruitment process posed potential “risks” in its annual review of audit quality at the firm, which was published in July.
Wisdom
Not sure who needs to read this but…
Comment
byu/Zobot08 from discussion
inAccounting
The Department of Defense’s $2.4 Billion “Submarine” Mistake [The Heritage Foundation]
Deloitte’s $2.4 Billion Contract to Build Submarines Shows How Badly Misaligned Defense Spending Has Become: Once again Congress is in the midst of a budget crisis that could again result in a government shutdown. Almost on cue, Defense Secretary Lloyd Austin is expressing grave concern about how a six-month continuing resolution to keep government funded will affect the military. As it stands today, Deloitte is not known as a shipbuilder, nor is it clear it could meaningfully contribute to the construction of submarines. As such, it is insightful that the Navy has been silent on this contract, as the Office of the Secretary of Defense (OSD) inked the deal.
Kansas Athletics and Deloitte Enter into First-of-its-Kind Partnership [University of Kansas]
Kansas Athletics and Deloitte’s US College Athletics practice have entered into a first-of-its-kind collaboration to best position the Jayhawks in navigating the dynamic new world of intercollegiate athletics. Deloitte will work alongside athletics administration and coaches to build upon the department’s objective of being an innovative leader in the industry, provide first-class experiences for student-athletes, and elevate the University of Kansas, the region and the state. Deloitte will examine and evaluate how Kansas Athletics can best be prepared to navigate this transformational time.
Office Space
Accounting Firm Armanino Takes 19K SF at 437 Madison [Commercial Observer]
Armanino signed a 10-year lease for 19,135 square feet on the entire 37th floor of 437 Madison Avenue, according to Sage, which co-owns the building with the Travelers Companies. Asking rent was $105 per square foot.
Placer.ai Office Index: August 2024 Recap [Placer.ai]
In August 2024, office visits nationwide were 68.8% of August 2019 levels – slightly below the post-pandemic office visit recovery level seen in July. Also in August, Miami, New York, Atlanta, and Dallas outperformed the nationwide baseline for year-over-five-year (Yo5Y) office recovery – while Los Angeles and San Francisco lagged behind. Year over year (YoY), Atlanta saw the most impressive office visit growth (7.3%).
Audit
Auditor-Hopping Is Rare, but 13 Small Companies Defy the Trend [Bloomberg Tax]
Companies switch business strategy, headquarters, or even corporate names. What they don’t often change is the outside firm that vets their books. Thirteen public companies prove the exception to this rule. These businesses hired and fired auditors more than seven times apiece in the past decade, according to an analysis of data from Ideagen Audit Analytics. They share similar characteristics: their shares all trade below $1 each and some of them are in emerging industries like cannabis. All but one trades over the counter, meaning they don’t meet the minimum financial thresholds to be listed on major exchanges like Nasdaq or the New York Stock Exchange.
The Future!
AICPA chair: Why change is good, and needed, for the profession [Journal of Accountancy podcast]
Carla McCall, CPA, CGMA, managing partner of the firm AAFCPAs, began her one-year term as AICPA chair in May. In this JofA podcast episode, she said that “whirlwind” was a good description of the first few months in the role, “but in a good way.” “If you truly love what you do, somehow it doesn’t seem so arduous and it goes by real quick,” McCall said, labeling interactions with numerous people in the profession as “rewarding.” In this episode, McCall reflects on what she’s learned about herself, why her firm has benefited from her “front-row seat,” and her message to accountants about doing their part to grow the talent pipeline.
Survey Results Are In: Charting the Future of Accounting [CPA Practice Advisor]
The accounting profession stands at the precipice of transformative change driven by rapid advancements in technology and evolving client expectations. This Canopy and CPA Practice Advisor survey asked respondents to share where they currently were and where they thought their firms would be three to five years from now on topics like automation, AI integration, workforce dynamics, remote work models, client interaction, digital transformation, security and more.