Footnotes is a collection of stories from around the accounting profession curated by actual humans and published every Friday at 5pm Eastern. While you’re here, subscribe to our newsletter to get the week’s top stories in your inbox every Tuesday and Friday. And take our 2024 Predictions for the Accounting Profession survey!
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Big 4
Big Four Reshape Consulting Workforce, Strategy With Rare Layoffs [Bloomberg Tax]
The Big Four accounting firms have leaned into their tech advisory work and data analytics services—areas ripe for revenue growth—as interest rates and the artificial intelligence boom reshaped demand for consulting services. But the pivot hasn’t been without pain as demand for lucrative deals advisory work dried up last year. The firms collectively shed thousands of jobs in 2023—mostly consultants based in the US and UK—realigning their workforces to areas with higher demand. “It’s a repositioning,” said Mark Masson, managing partner and head of professional services advisory at Lotis Blue Consulting, of the steady stream of layoff announcements. “Let’s pull back from the frontlines, let’s assess where things are going and let’s reapply our resources.” Since last February, Deloitte, Ernst & Young, KPMG, and PwC shed more than 9,000 jobs through multiple rounds of layoffs across the firms’ largest markets in the US and UK, including reductions in Australia and Canada.
We need a regulator with teeth to control the ‘Big Four’ accountancy firms [The Independent]
They mop up a whopping 98 per cent of lucrative industry fees, make a killing on auditing the UK’s largest companies, and offer consulting as well – a combination that compromises their willingness to give clients the hard financial truths they need to hear. It’s time the ‘Big Four’ were given what for, says Chris Blackhurst.
The year that rocked foundations of big 4 [Accountants Daily]
If there were enduring images from 2023 that sum up the year in professional services, then it’s hard to go past the CEOs from the accounting big four squirming awkwardly under questioning before the Senate inquiry into consulting. Who – outside the leadership teams of PwC, KPMG, EY or Deloitte – could fail to enjoy the sight of Greens senator Barbara Pocock or Labor senator Deborah O’Neill training a spotlight on their manoeuvres in the dark? The parliamentary scrutiny made household names of high-fliers who had become used to operating under the radar of public opinion or corporate accountability. The big four partnerships lack the reporting strictures of a listed company, yet operate as trusted assessors of their financial probity. No-one votes them into power, yet they are relied upon to help steer public policy. They had become used to operating with a latitude they would be unlikely to sanction in anyone else.
Imagine the dirty looks PwC partners get from the other Big 4 partners at the country club now https://t.co/DNBvx8K0nM
— Going Concern (@going_concern) January 4, 2024
Office Space
Armada Hoffler Finalizes Lease with KPMG LLP at Town Center of Virginia Beach [Yahoo! Finance] Beginning January 2024, KPMG will occupy 13,044 square feet in Virginia Beach. “Our new office at Town Center of Virginia Beach will allow our more than 160 KPMG professionals to collaborate, work, and meet as a team in a new modern space in the heart of our business district,” said Jason Kies, KPMG Norfolk office managing partner. “We have a longstanding commitment to the region, and this is the exciting next phase. This is an amazing opportunity for our people to work and collaborate in a vibrant neighborhood. I’m looking forward to moving into this modern, efficient, and flexible space that will allow our teams to continue to grow and thrive as we are surrounded by an energetic business community.”
KPMG Expands Seattle Office At Rainier Square Tower [The Registry] Global accounting giant KPMG is set to expand its presence in downtown Seattle by adding a third floor to its current offices in the Rainier Square tower. The firm’s decision to secure an additional 21,044 square feet of space is a strategic response to high occupancy levels on its existing floors, highlighting KPMG’s continued growth in its Seattle operations. KPMG, which currently occupies the 27th and 28th floors of the iconic 58-story office and residential tower located at 401 Union St., will now have a total space of 57,163 square feet within the building, according to a report in the Puget Sound Business Journal.
Feel Good Stories
‘Don’t count yourself out’ Knoxville mother overcomes obstacles to achieve dreams [WATE]
Cynthia Nance found herself in a predicament at 16, which some young women experience. She learned during her sophomore year at Anderson County High School that she was pregnant. At the time, Nance was on track to be a salutatorian with a 4.0 GPA. However, given her new circumstances, she had to shift her priorities to prepare for a new baby. As her children began thinking of their futures, she said she almost felt like a hypocrite encouraging them to choose to pursue college when she had not completed a degree. After her second child graduated high school, she contacted a counselor at Pellissippi Community College, asking for advice on the adult learner program. When asked what degree she wanted to pursue, Nance said she didn’t know. She mentioned enjoying accounting classes when she first attended the school and thought maybe that could be a good direction.
CPA Tom Janney Announces Retirement [WJLE]
Local stories like these are so cute. Happy trails, Tom!
Longtime local CPA Tom Janney has announced his retirement from the tax and accounting side of Janney & Associates, CPAs, PC, a business he started in 1992 but sold to another firm fourteen months ago. A farewell reception in honor of Tom will be held at the office of Janney & Associates on Thursday, January 11th from 2pm-6pm. Everyone is invited. Janney and his family have been part of the Smithville community since moving here in 1974. Tom graduated from DeKalb County High in 1980 and was Co-Valedictorian of his class. He furthered his education at the University of Tennessee at Knoxville and was a member of the UT Pride of the Southland Marching Band. Janney graduated with high honors from UT Knoxville in 1985 and began his career working with Arthur Anderson in Nashville. He obtained his CPA certification in 1987 and then returned to Smithville to work with Ed Fuqua at his local CPA firm.
Feel Bad Stories
Half of workers feel pressured to work late. Here’s why they shouldn’t [The Hill]
In spite of modern-day corporate messaging about getting behind employee work-life balance and mental health advocacy, more than half of employees still feel pressured into working late. Last month’s Workforce Index by Slack, the workplace communications app, shows that two workers in five take on additional hours outside of the set eight-hour day, either by starting early or finishing late. And of those who do this regularly, an astonishing 54% do so because they feel pressured into it by various factors. It’s not great news for harried workers, but the bad news for firms is that these employees are 20% less productive than the ones you can set your watch by being gone at 5pm. They also experience work-related stress that is more than twice that of their colleagues, and report 1.7 times lower job satisfaction––and they are twice as likely to report burnout.
The Profession
Public interest should be at the centre of accounting, says Professor Atul K. Shah [City, University of London]
Protecting the public interest needs to be at the centre of accounting, believes Professor Atul K. Shah, Visiting Lecturer at City, University of London. An expert in ethical finance in City’s Department for International Politics, Atul’s research focuses on finance, accounting, corporate governance and regulation. His work is informed by both Jain and Hindu Dharmic traditions and he is the author of the book ‘Inclusive and Sustainable Finance’ (Routledge, 2022). “I am fortunate to have been raised in a tradition and culture of ethical accounting,” he says. “There are thousands of Jain accountants in the world today.” Racial diversity in accounting has been treated as a “box-ticking exercise”, Atul said to The Mail on Sunday in December, even when professions are a magnet for minorities. These comments came as a response to the lack of people of colour appointed as directors to the board of the Institute of Chartered Accountants in England and Wales (ICAEW), which is the UK’s leading professional body for accounting. The lack of racial diversity in upper management is not reflective of the workforce, as a third of staff members in the Big Four accounting groups are Black, Brown or Mixed, but most are filtered out on the way to the top.
Long Island leaders reveal their predictions for the year ahead [Long Island Business News]
A prediction from Louis Grassi, CEO/Managing Partner at Grassi Advisors & Accountants
The accounting landscape has changed drastically over the last few years and will continue to transform throughout 2024. As CPA firms respond to increased demand for advisory services, shrinking talent pools, baby-boomer retirements and economic challenges, succession plans will continue to be accelerated. Strategies that were once unheard of in the industry, including many CPAs selling their firms to private equity, will remain prevalent. Many Long Island CPAs have already done this. Firms choosing to remain independent without PE or upward mergers will explore strategies such as employee stock ownership plans, like Grassi did. ESOPs can address all these challenges while leaving ownership control within the organization. I wouldn’t be surprised to see ESOPs gain popularity across accounting and other industries. Employees want to have greater impact in an organization, and an ESOP accomplishes that while allowing them to share directly in firm growth and profitability. More than ever, these developments will give clients and accounting professionals distinct choices when deciding on a CPA firm based on their preferred service approach, business model and culture. Firm success will highly depend on the execution and effectiveness of these strategies, as well as the adoption of lightning-fast advances in technology that have quickly turned robotic process automation, artificial intelligence, big data and other digital tools into major competitive advantages. As the accounting industry continues to move away from commoditized audit and tax services to value-based delivery of holistic business solutions, technology is key to enhancing this value through increased efficiencies and heightened support of our role as trusted business advisors.
News
Stamford City Controller to Retire in Wake of Delayed Audit [Connecticut Examiner]
David Yanik, the city controller whose office is at the center of a year-long delay in financial reporting to the state, is retiring. Yanik’s boss, Director of Administration Ben Barnes, confirmed Tuesday that the chief accounting executive, who controls Stamford’s financial records, has announced his retirement effective March 1. Barnes said Yanik “is undertaking transition of his work to others.” Barnes did not say whether the retirement of Yanik, who is in his late 60s, is related to the 2022 audit report that was due to the Connecticut Office of Policy & Management in December 2022.
Trump business got at least $7.8 million in foreign payments during presidency -report [Reuters]
Shortly after Trump was elected to the presidency in 2016, Congress began probing conflicts of interests and Trump’s potential violations of the emoluments clause of the U.S. Constitution, which bars the acceptance of presents from foreign states by a person holding federal elected office without congressional consent. The investigation led to a lengthy court dispute, which ended in a settlement in 2022, at which point Trump’s accounting firm began producing the requested documents. When Republicans took control of the House early last year, the committee stopped requiring Trump’s accounting firm to produce documents and a U.S. District Court ended the litigation.
Law & Order
From the Crime Desk, December 2023 [Thomson Reuters]
Just one of the many cases listed here:
Former Illinois resident, Erica Early, a postal worker who also worked as a tax preparer, was sentenced to 14 months in prison for willfully preparing false tax returns on behalf of her clients. Based on court documents, Early was a “ghost preparer,” who falsely inflated her clients’ income to maximize the Earned Income Tax Credit and falsely claimed education-related credits on their behalf. She also falsified her own tax returns, claiming education credits she knew she was not eligible to receive. Initially, Early directed her fees and client refunds to her personal bank account that was then closed by the bank after detecting fraudulent activity. Early then began requiring her clients to obtain prepaid debit cards in their names that Early would use to deposit her clients’ refunds as well as receive her preparation fee, avoiding the use of traditional banks.
Wichita accounting firm to pay penalty for unfiled tax returns [KFDI]
The Sedgwick County District Attorney’s Office has announced a consent judgment with a Wichita accounting services business that was investigated for failing to file tax returns for its clients. The DA’s Office investigated Bookkeeping N Beyond LLC and Nicole Clem over complaints that they failed to file 2021 tax returns as promised, and failed to disclosed to consumers that they could not electronically file taxes at the time services were provided. The business was also accused of misleading customers about delays with expected tax refunds.
Over $59,000 in municipal fines unaccounted in Jones, state audit leads to arrest [KOKH]
Oklahoma State Auditor & Inspector Cindy Byrd released the audit for the Town of Jones and found that between January 2016 and December 2019, the town failed to deposit over $59,000 worth of municipal fines and fees. The Town Board of Trustees originally requested that the State Auditor and Inspector’s Office perform an investigative audit of municipal court transactions. The audit uncovered that the Jones Court Clerk’s Office received $59,683 worth of municipal fines and fees but did not deposit the funds and record the collections to the Offender Data Information System (ODIS), which is required by law. Court Clerk Tammy Wallace and former Deputy Clerks Pam Lucas and Brenda Rowlett collected court fines and fees for citations issued by the Jones Police Department.