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ICYMI
The top stories on Going Concern this week:
Turns Out The Tipster Who Said Marcum and CBIZ Are Merging Wasn’t a Troll After All
Maybe AI Will Help KPMG Finally Get Gud at Auditing
Asian-American Ex-PwC Principal Alleges White Guys at the Firm Are Hatin’ Ass Haters
BREAKING NEWS: CPA Exam Candidates Broke NASBA’s Shit Again.
PwC Associate Becomes an Olympian to Avoid Working 60-Hour Weeks
Technology
AI Use and Technology Investment Are Top Private Company Leadership Priorities: Deloitte Private Survey [PR Newswire]
A Deloitte Private survey of C-suite executives found that increasing AI use across the organization (43%) and investments in technology (37%) are the top two private company business priorities over the next 12 months. In the report, “Private Company Outlook: Governance,” survey respondents also indicate that that emerging technology/AI is the most important competency (43%) to strengthen the organization’s board.
How a cheap barcode scanner helped fix CrowdStrike’d Windows PCs in a flash [The Register]
No one is missing work due to the CrowdStrike outage at Grant Thornton Australia on Rob Woltz’s watch!
Not long after Windows PCs and servers at the Australian limb of audit and tax advisory Grant Thornton started BSODing last Friday, senior systems engineer Rob Woltz remembered a small but important fact: When PCs boot, they consider barcode scanners no differently to keyboards. That knowledge nugget became important as the firm tried to figure out how to respond to the mess CrowdStrike created, which at Grant Thornton Australia threw hundreds of PCs and no fewer than 100 servers into the doomloop that CrowdStrike’s shoddy testing software made possible. All of Grant Thornton’s machines were encrypted with Microsoft’s BitLocker tool, which meant that recovery upon restart required CrowdStrike’s multi-step fix and entry of a 48-character BitLocker key.
GenAI boom hits M&A market [CFO Dive] The generative artificial intelligence boom is already having a major impact on companies’ merger-and-acquisition dealmaking strategies, according to a recent survey by KPMG. About eight in 10 dealmakers responding to the poll said that GenAI has had some effect on their M&A activity, with nearly half saying their strategy involves buying GenAI technology or products, according to a report on the findings. Forty-two percent of respondents said their organization is focused on using GenAI to support the M&A deal process. A smaller number (21%) said they are interested in striking deals to acquire GenAI talent.
Big 4
PCAOB Inspection Reports Show Increase in Audit Deficiencies by Big Four Firms [NYSSCPA’s The Trusted Professional]
The PCAOB inspected 215 audits conducted by all Big Four accounting firms in the United States, down from 220 a year earlier. Ernst & Young, Deloitte and PwC had an average 24 percent deficiency rate in their 2021 audits of public-company financials, up from 13 percent, according to the PCAOB’s most recent data, the Journal reported. KPMG’s audit-deficiency rate was redacted from the PCAOB’s inspection report on the firm—the Journal couldn’t determine by press time why this information was redacted.
UK regulator calls out BDO and Forvis Mazars over audit quality [Financial Times]
The UK’s accounting regulator has criticised BDO and Forvis Mazars for shortcomings in their audits for the fourth straight year, and threatened to take “stronger action” against them if there was no improvement. In its annual review of audit quality published on Tuesday, the Financial Reporting Council said the gap between the Big Four — Deloitte, EY, KPMG and PwC — and the mid-tier firms had widened. “Disappointingly, BDO and Forvis Mazars’ performance has fallen significantly below our expectations,” said Sarah Rapson, executive director of supervision at the FRC. “Both firms are strategically important to the UK audit market and the wider UK economy, so it is vital that they deliver on their agreed improvement plans.”
Thai court orders class action against Deloitte over Stark fraud case [Reuters]
A Thai court will allow a class action suit against the local arm of accounting firm Deloitte over its audit of scandal-hit Stark Corporation, it said in a document on Wednesday. The case was brought by Stark’s retail bondholders, who accuse Deloitte Touche Tohmatsu Jaiyos and another individual of “acting intentionally, negligently, or in gross negligence resulting in damages”, according to a complaint seen by Reuters. The court document said class action, a rare legal procedure in the country, would be allowed and Deloitte has a week to appeal the decision. The class action alleges that Deloitte, as auditors, certified a clean financial statement without auditors’ notes or remarks to caution that it may not be up to accounting standards, according to the complaint.
PwC chief’s $1.2m bonus kept ‘secret for more than a year’, inquiry told [The Guardian]
The chief executive of PwC Australia, Kevin Burrowes, received a $1.2m payment from the consulting company’s international arm which he did not initially reveal to the parliamentary inquiry into the 2015 leaking of confidential government tax reform information. A parliamentary inquiry was told on Friday that Burrowes first told the corporations and financial services committee that he was paid an annual salary of $2.4m. That was later corrected to $2.8m. However, he did not disclose the additional $1.2m income from PwC international until a June meeting of partners this year, about 12 months after he took up the Australian role, as reported by the Australian Financial Review. Burrowes said his current annual salary was $3.2m. During a grilling of PwC on Friday, the committee chair, Senator Deborah O’Neill, told Burrowes that he had kept the extra payment “secret for more than a year … [It] looks very deceptive to me”.
PwC under pressure to name global partners linked to Australian tax leaks scandal [Financial Times]
The former chief executive of PwC Australia has said it is “difficult to accept” that international partners have not been named in the wake of the tax leaks scandal that has plagued the firm. PwC became embroiled after revelations that the consultancy’s Australian arm used confidential information about planned tax avoidance legislation to win new business. Uber and Google were among the companies to have engaged with the firm. PwC Australia named a number of partners who left the firm as a result of the scandal, but PwC International has refused to publish a report from law firm Linklaters about how the information was used by unidentified overseas partners, much to the frustration of Australian politicians and regulators who have called for full transparency.
Deloitte’s Suzanne Kounkel on Why Every Employee Is a Marketer [Adweek]
Kounkel shares how Deloitte has been bringing its brand personality to life over the past couple of years. She spotlights their inspiring WNBA finals campaign with the theme “girls who play become women who lead.” This powerful campaign not only highlighted Deloitte’s support for professional women on and off the court but also resonated deeply with their brand purpose. Through intertwining their core values with compelling storytelling, Deloitte showcases its unique identity in a vibrant and relatable way. The overall humanization of the brand through meaningful and impactful campaigns creates a lasting connection with the audience.
Inclusiveness across socio-economic backgrounds and social mobility [EY]
We all have different starting points based on our backgrounds and identities, which shape the experiences, and sometimes the barriers we face. One aspect of our identity which is often overlooked at work is our socio-economic background. Factors like our upbringing and the education and income of prior generations of our family impact the extent to which we can access resources, networks and opportunities. It can also come with social stigma, and a pressure to hide our backgrounds for fear of judgment, negative perception of capability or pressure to “fit in”. This can significantly impact career experiences and progression. Social mobility is how a person’s socio-economic situation changes over time. It plays an important role in social cohesion and economic growth. Given that it is inconsistently enabled across the globe, we’re surfacing this important topic globally as part of our broader DE&I and social equity efforts, to spark new conversations and promote action.
New Deloitte, NongHyup campaign promotes rice for breakfast [Korea JoongAng Daily]
Deloitte Korea employees pass out leaflets and cooked rice produced by the National Agricultural Cooperative Federation, better known as NongHyup, to pedestrians as part of the two firms’ collaborative campaign encouraging the consumption of rice for breakfast in Yeongdeungpo District, western Seoul, on Wednesday.
Mergers & Acquisitions
Advisor to CPA Firms Wowed by CBIZ/Marcum [INSIDE Public Accounting]
Allan D. Koltin, CEO of Koltin Consulting Group, a well-known advisor on M&A within the profession, said that if anyone had asked him a year ago whether CBIZ and Marcum would combine, he would have said, ‘Not in my lifetime.’
Axiom CPAs to join CLA on August 1 [CLA]
Axiom provides services for its clients related to tax, assurance, and general accounting, as well as specialty tax credit and incentive services, and state and local tax consulting. Located in Albuquerque, New Mexico, Axiom has four partners and 16 team members that will become part of CLA. Axiom provides services in numerous industries that align well with CLA’s focus, including construction, real-estate, manufacturing, technology, government and many more. Axiom is a natural fit within the CLA family.
Accounting firm grows Southeast Michigan presence with Bloomfield Hills acquisition [Crain’s Detroit Business]
Saginaw-headquartered accounting and advisory firm Yeo & Yeo CPAs and Advisors has acquired Bloomfield Hills-based Berger, Ghersi and LaDuke PLC.
The State of the Profession
US accounting firms rethink global networks [Financial Times]
The tier of firms beneath KPMG, Deloitte, PwC and EY are racing to meet the needs of increasingly multinational clients while at the same time seeking to make better use of their global networks to spread the cost of technology and staff. “We are no longer a capital-light profession, we’re a cap-heavy profession,” said Francesca Lagerberg, chief executive of Baker Tilly International, whose 110 member firms had $5.2bn in annual revenue. “There’s an amount of spaghetti against the wall as everybody is trying different things, but no one wants to be the network that didn’t make the moves and wasn’t able to take advantage of the opportunities.”
PE Infusions Have Accelerated Mergers, Reshuffling Fastest-Growing Firms [INSIDE Public Accounting]
Last year, the No. 1 fastest-growing IPA 100 firm, counting mergers as well as organic growth, was Atlanta-based Aprio at an eye-popping 85.7%. In 2019, it was Tulsa, Okla.-based HoganTaylor at 31.0%. The pace of mergers and acquisitions has quickened since then, driven in part by the entry of private equity into the profession. Will a PE-funded firm be named the fastest-growing for 2024?
When your firm sells out to private equity but you're in audit pic.twitter.com/fkOy9MuwHT
— Going Concern (@going_concern) July 31, 2024
Small Firms
Single-owner firms: The thrill of flying solo [Journal of Accountancy]
The JofA talked to 10 sole proprietors, most of whom are also sole practitioners. Some have been on their own for years; others got started just before the pandemic hit. One has retired after 30 years as a solo, while another is working on earning her CPA. As a group, they shared their experiences and offered their perspectives on the ups and downs of flying solo (see the sidebar, “Pros and Cons of a Solo Practice”). Their stories showcase the diversity of purpose, services, and experiences of those who have dared to go it on their own.
Small firms find success with advisory services [Journal of Accountancy]
Five years ago, T. Jayden Doyé, CPA, prepared clients’ tax returns in his employer’s Atlanta office and dreamed of doing work on a beach. Today, he runs a small accounting firm and does the work he wants anywhere he wants. “Now I live that life,” Doyé said.